CB issues direction on Integrated Risk Management Framework in licensed banks

Wednesday, 12 October 2011 00:01 - - {{hitsCtrl.values.hits}}

Central Bank has issued new directions on integrated risk management framework in licensed banks.

It said banks are exposed to various risks inherent to their business operations and they are often heavily interdependent. Therefore, the management of such risks in an integrated manner is essential to promote the soundness of the banking system.

At the same time, international best practices mandates that banks should have a comprehensive Integrated Risk Management (IRM) Framework to identify, control and mitigate such risks.

Considering the above, the Central Bank has issued a Direction along with Guidelines on IRM framework as a set of minimum guiding principles and standards for licensed banks to adopt. This is in addition to the risk management principles and rules required in regulatory and supervisory procedures and other market best practices of banks’ risk management.

The Guidelines broadly cover the management of credit, market, operational, liquidity and interest rate risks, stress testing and disclosure requirements in an IRM Framework, based on standard market practices.

The Direction has been issued to the banks after a consultative process with all stakeholders and it will be effective in six months’ time.