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ISS Orientation 1

Introduction:

Supervision on banks and NBFIs is one of the most important tasks of Bangladesh Bank. Nature of
banking operations has changed many times in accordance with the pace of technological innovation/up
gradation. Keeping it in mind, central bank also adopts new measures, philosophy and mechanism to
combat the up coming challenges lay with the financial activities.
To ensure stability and compliance environment of the financial sector Bangladesh Bank, the central
bank of Bangladesh, has taken a good number of information and technology bases initiatives.
Introducing Online CIB Reporting, BACH, Core Banking Solution, Online EXP, IBP, IMP & Remittance
Reporting system and establishment of EDW (introduced for the first time in Bangladesh) are some
success history. As a part of this expedition BB is now going to introduce the Integrated Supervision
System.

Context:
Bangladesh Bank is aimed to establish a digitized work environment in the banking system to alien the
national philosophy of the country. Bangladesh Bank has initiated automation at early eighty decades
and then after the process gradually improving. BB achieved a major success in automation during last
seven years. Bangladesh Bank has developed various monitoring tools to strength the supervision
system as a whole. Automated Clearing House, Enterprise Data Management and Foreign Exchange
Monitoring Dash Board were the primary success history of BB. Considering these experiences BB has
started a comprehensive supervision research in late 2012 to develop an effective supervision and
monitoring model to strengthen the existing supervision system just after some bitter experience with
financial scam took place in the banking industries. Integrated Supervision System (ISS) is the outcome
of that thought.

Development History:
Primary thought generated by the honorable Governor of Bangladesh Bank.
A 07 (Seven) Member Development Committee was formed in 09th December, 2012.
Primary assessment report of the committee was approved by Governor on 25th February, 2013.
Primary software development work finished on 31 July, 2013.
Data testing started on August, 2013.
The Software was inaugurated by honorable Governor on 8th October, 2013
Mandatory reporting of banks head office and branches stated on March, 2014.
ISS Orientation 2

Few wards on the study


Bangladesh Bank the central bank of Bangladesh has carried out a Comprehensive study on
contemporary supervision regime and deigned an Inclusive Supervision Model aiming to
engage all supervision forces working at different supervision level, to meet the present
supervision gap. To implement the model a monitoring tool namely Integrated Supervision
System has been developed and implemented.

Major consideration of this model


Ensure financial safety through supervision frame work
Establish good governance with ethical standard.
Active participation of all level supervisors viz.
1. Level- 1 : Banks Branch Office.
2. Level-2 : Banks Head Office.
3. Level-3 : Central Bank
Define an effective supervision tool for all level of supervisors.

Goals:
To develop a micro effective macro prudential supervision structure.
To ensure the supervision effectively at all level of supervision structure.
Streamline the supervision efficiency of all supervision forces including the branch management
of a bank.
To integrate the supervision information
To ensure effective supervision
To adopt riskbased supervision approach
To minimize the supervision frequency

Strategic Objectives:

Effective use of resources


Enhancement of supervisors capacity
Ensure timely and prompt supervision surveillance.
Enlarge supervision coverage
Proper analysis of supervision concerns
Improvement of existing MIS, in Bangladesh bank, scheduled banks and NBFIs
Ensure a smooth and timely decision making process
ISS Orientation 3

Salient features of ISS


1. Web based data collection and OBIEE based user friendly system solution.
2. Data accuracy has been certified by the top management of the bank.
3. Ensure accountability of bank and branch management.
4. Monitoring coverage on overall banks and NBFIs activities related to their head office to root
level branch operation. At present 56 banks HO and 9403 branch of all banks & 33 financial
institutes HO and their 35 branches are bought under Integrated Supervision coverage.
5. Data collection monthly.
6. Data collection dependency external (from banks, FIs HO and branch directly) and internal form
other system of Bangladesh Bank.
7. Total 267 data field under 32 data segment has been incorporated in the data collection RIT for
banks head office and Total 235 data field under 29 data segment has been incorporated in the
data collection RIT for banks branch and Total 104 data field under 13 data segment has been
incorporated in the data collection RIT for Non bank financial institute and Total 83 data field
under 10 data segment has been incorporated in the data collection RIT for FIs branch.
8. Borrower wise detailed credit information of all banks and branches has been collected
quarterly basis.
9. Integrated the information of a banks overall activities i.e. balance sheet exposure, offbalance
sheet exposure, credit operation, foreign exchange business, cash management, money market
operation and regulatory compliance.
10. Integrated the information related to BBs supervision activities.
11. Graphically present the banks information with necessary trend analysis in dashboard.
12. Focus the supervision concerns automatically.
13. Individual bank and bank branch wise dynamic information pages.
14. Highly informative dynamic Data Tables and Graphs.
15. Analytical option of macro and micro level supervision issues.
16. Data interpretation flexibility and open end developing/incorporating option.

Utility of ISS
1. This monitoring tool enables BB to ensure dynamic supervision on root level activities of banks
and NBFIs.
2. Integrated Supervision System boostups the existing supervision technique and philosophy;
3. Enable BB to identify the supervision concerns and take action thereof more quickly than ever.
4. Risk focusing supervision has been started.
5. Integrated Supervision Management Cell has already developed a Pre-inspection Assessment
Report to point out the most important examining issues of a bank or branch. Furthermore the
ISS Orientation 4

system enables onsite supervisors to gather huge ready information what is useful for
inspection analysis and prepare quality inspection report.
6. Multi departmental information dependency has been reduce which will save time and help the
higher authority to get prompt decision.
7. Supervision control and responsibility fixation for supervision lapses will become easier for the
higher authority.
8. Discussion in various forums will become more informative.
9. Enable BB to find the policy gap and take necessary action thereto.
10. Reduce traditional data preparation workload and provide them huge opportunity for data
analyzing.
11. As a stakeholder of this system all banks and NBFIs will have to strengthen their own MIS, which
in fact develop their internal control environment.
12. Increase the analytical ability of supervision staff.

Supervision and monitoring process of Integrated Supervision Management Cell


Integrated Supervision Management Cell has been vested with the responsibilities to manage the
Integrated Supervision System of Bangladesh Bank.
The cell continuously observes various dashboards and data table of Integrated Supervision System. If
there is any risk issues observed the banks and branches are instantly called explanation and advised to
mitigate the risk primarily. These activities convey the massages to the bank management that the
issues is under observation that stop the recurring effect of risk intensification.
After getting the explanation the cell meticulously examine the cause and if any deviation found further
investigation started.
Furthermore, the on-site supervision departments are also the user of ISS. Even though the supervision
departments are often requested to conduct special inspection on the basis of risk gravity observed by
ISM cell.
This is mentionable here that risk issues are categorize as high, medium, low and default as per the risk
thresholds table of Integrated Supervision System risk study paper.