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

information. Similarly, a risk committee was advised to form at the management level comprising heads of all functional departments under the chair of the CRO, and the Head of RMD was instructed to act as a member secretary of this committee. Consequently, the architecture of ERM based self-regulation became visible in the banks following this regulation. After three years, the BB further revised the risk management guideline in 2018, superseding the previous guideline issued in 2012 and the circular issued in 2015 to upgrade the risk management practice of the banks. A few revisions have made in the guideline; nevertheless, the spirit of the previous guideline and the circular prevails in this revised guideline. In the revised guideline, banks are instructed to reconstruct the risk management organogram, although the responsibility of risk management is entrusted to a dedicated and independent department (i.e., RMD) as like before headed by the CRO. In the revised guideline, it is instructed as: […] banks shall reconstruct its risk management organogram and appoint Chief Risk Officer (CRO) as the head of Risk Management Department (RMD) following the instructions of the revised risk management guidelines issued by BB. (Bangladesh Bank 2018). Besides, the CRO is advised to be an independent senior executive whose position should be equal to or at least one grade higher than the other departmental heads. However, the position “Head of RMD” has been removed from the organogram of the RMD. Despite this, banks are given the flexibility to enhance the organogram of the RMD considering the size and complexity of the bank, keeping at least five dedicated desks. In addition, a BASEL implementation unit is advised to establish. Further, banks are instructed to form an “Executive Risk Management Committee (ERMC)” comprising the CRO as a Chairman and all the departmental heads as members, where RMD will act as the secretariat of this committee. Similarly, the RMD is instructed to communicate the risk reports directly to the BRMC with a copy to the MD/CEO for information. Moreover, the board's oversight role and the top management have also been redefined in the revised guideline, including the role and responsibilities of the BRMC, ERMC, RMD, the CRO, and all functional desks under the RMD. Currently, this guideline is effective in the banking sector for the management of risks. d) Functional Reform – Integration of Risks from Bottom to the Top In line with the structural reform, a number of risk reports and documents are operationalized as a part of functional reform of risk management that integrates risk management functions from the bottom to the top in the banks. Part of this reform, the BB provides a detailed guideline to banks in 2018 to submit a “Risk Appetite Statement (RAS)” on a yearly basis within February for each year in advance with an option of interim revision if required, although the concept of “risk appetite” was first introduced in the risk management guideline issued in 2012 and was also included in the subsequent circular issued in 2015. In the guideline, it is mentioned as: Banks are instructed to submit Board approved Risk Appetite Statement (RAS) on yearly basis within first two months of the year […] the risk appetite must reflect strategic planning of the bank which includes shareholder aspirations within the constraints of regulatory requirements, creditor and legal obligations. (Bangladesh Bank 2018, p.16). Further analysis revealed that the RAS is a strategic paper of a bank that reflects vision, mission and strategic goals. Diverse areas are considered in its preparation, for example, an analysis of external and internal environment, SWOT analysis, strategic goals, corporate governance, compliance with laws and regulation, internal control system and its evaluation system, investment portfolio, loan growth, last three years’ performance, sector-wise loan concentration, non-performing loan, loan recovery, loan written-off, loan classification, profitability, capital maintenance, liquidity position, risk management culture, risk profile, risk tolerance, risk limit/threshold, management action trigger point, credit rating, CAMELS rating, core risk rating and many more including a provision to include other areas if the bank thinks fit. However, following the RAS, the development of “Comprehensive Risk Management Report (CRMR)” and “Monthly Risk Management Report (MRMR)” is a breakthrough for formal integration of bank-wide risks for management with a holistic view. It is found that the BB has developed a template of CRMR and prescribed the banks to fill it up. The CRMR was instructed to prepare through the circular issued in 2015; nevertheless, it is still effective following the revised circular issued in 2018. Banks are instructed to prepare the CRMR according to the prescribed format on a half- yearly basis and asked to submit both soft and hard copies of this report to the BB by successive month with a signature of the CRO. This risk management template is prescribed as a minimum to provide the banks’ information with the flexibility to include additional information depending on the nature, size and complexity of the business. It is mentioned in the guideline as: Banks shall prepare Monthly Risk Management Report (MRMR) and Comprehensive Risk Management Report (CRMR) according to the formats provided by BB as a minimum requirement. They can also include additional information related to the concerned risk areas depending on the Enterprise Risk Management in Designing Meta-Regulation under Risk-based Regulatory Strategy: An Empirical Evidence from Financial Regulation nature, complexity and size of business (Bangladesh Bank 2018, p.37). 42 Global Journal of Management and Business Research Volume XXIII Issue II Version I Year 2023 ( ) A © 2023 Global Journals