Global Journal of Management and Business Research, A: Administration and Management, Volume 23 Issue 2

Figure 1: Conceptual Framework for Designing Meta-Regulatory Approach under Risk-based Regulation II. R esearch M ethods This study focused on the banking sector of Bangladesh to discern the implementation of ERM as a meta-regulatory toolkit under the framework of risk- based regulation. Regulators in financial industry in different countries experiment with different regulatory tools that best suit to archive their regulatory aims. Therefore, this context provides a typical case (41) to understand the gradual development of the meta- regulatory approach and the risk-based regulatory framework mainly for three reasons. Firstly, the central bank of Bangladesh i.e., the Bangladesh Bank (BB) has initiated a strategic shift for its supervisory approach from the “compliance-based” supervision to the forward-looking “risk-based” regulation since 2011. To pursue this risk-based supervisory approach, the BB hastaken meta-regulatory approach and developed diverse tools and techniques to achieve the risk-based regulatory goals. Secondly, the BB has made it mandatory for regulated banks to implement ERM based self-regulation. Therefore, it becomes an “enforced self-regulation”. Finally, the BB has enrolled such enforced self-regulation into the regulatory process to oversee the self-regulation and discharge the regulatory responsibility relying on it. Therefore, the contextual background provided a unique research setting to explore an evolving dynamic of ERM as a meta-regulatory toolkit to achieve the risk-based regulatory goals. This study analyzed BB’s annual report from 2009 to 2019 to capture the gradual development of the meta-regulation under the risk-based regulatory framework in the banking industry. “Chapter Five” from the annual reports was mainly examined as the banking sector’s performance, including the BB’s regulatory and supervisory measures are disclosed only in this chapter. Although the initiative for risk-based regulation began in 2011, the annual reports before the initiative were also considered to draw a holistic picture of the development. In addition, data were extracted from the BB’s risk management guidelines, circulars, risk management templates, statutory laws, and sectoral assessment reports that were issued during those eleven years. Furthermore, the study examined the annual report of ten regulated banks for the year 2019, selected randomly, ranging from the first-generation to the fourth- generation banks for understanding firm level implementation of ERM based self-regulation. Risk management disclosures of the banks were read several times through close reading to examine the implementation and practice of self-regulation following the BB’s risk management reform. The qualitative content analysis (42) technique was followed to analyze the data. The content analysis technique is useful for analyzing text units, narratives, short sentences, and single paragraphs to identify a specific theme and common theme (43). Three phases were followed for systematic data analysis using the content analysis technique: data familiarization, data extraction and coding, and theme development and refinement. Following these steps, two broad themes mainly emerged from the data to demonstrate the gradual development of the meta-regulation using ERM under risk-based regulatory philosophy namely, “sectoral risk management reform” and “institutional capacity building”. a) The Trajectory of Meta-Regulation under Risk-based Regulatory Strategy using ERM The evidence shows that the BB has made a strategic change to supervise and regulate the banking sector by shifting from the “compliance-based” approach to the “risk-based” approach. In its annual report for 2013-2014, the BB explicitly disclosed this shift, although such strategic change began in 2011 when the Basel-II implementation pressure was mounting in the industry. The BB disclosed: […] in particular, BB is shifting its strategy from the compliance-based approach to the forward-looking Enterprise Risk Management in Designing Meta-Regulation under Risk-based Regulatory Strategy: An Empirical Evidence from Financial Regulation 40 Global Journal of Management and Business Research Volume XXIII Issue II Version I Year 2023 ( ) A © 2023 Global Journals