Executive Summary

A bank is a establishment which trades in money, an stabilisement for deposit custody, issue of money, lending loan, discounting of bills and facilitating transmission of remittances from one place to another, nay, from one country to another. Trust Bank Limited is one of the leading private commercial banks having a spread network of 45 branches and 5 SME center across Bangladesh and plans to open few more branches to cover the important commercial areas in Dhaka, Chittagong, Sylhet and other areas in 2010. The bank, sponsored by the Army Welfare Trust (AWT), is first of its kind in the country. Economic Value Addition Report Trust Bank Limited, at its core, works to enhance the interest of all stakeholders and meet their expectation. A shareholder must get his/her wealth increased via increasing cash flow from dividends and capital gain through price appreciation of shares held by him/her; a depositor must get risk free custody of deposits simultaneously a competitive return on funds; and an employee must get a justified share of income earned by the Bank. They look after their every client to make him/her a development partner through addressing needs and wants by providing best services at affordable prices. We put a client in the ladder where he/she climbs customer-supporter advocate phases and finally becomes development partner of the Bank. Our mission is customer focused and we consider it as the customers right to get modern, online and full range of banking services at an affordable price anytime and anywhere. Trust Bank aims to facilitate corporate customers by providing customer focused products to its valued corporate clients to meet up the individual corporate requirement. Corporate clients include sole proprietors, partnerships, incorporated businesses and publicly listed companies. So, corporate credit is the central focus of all lending operations of the Bank. The Bank has been providing comprehensive services to corporate and institutional clients by way of commercial lending in the form of working capital and/or industrial loans (both large and medium scale industries) The Bank is in the activity of managing risks while still adhering to the main principles of building a profitable business. The ultimate goal of risk management is not to eliminate risk but to control risk in such a way that long term profitability is sustained. Intelligent risk taking is the core principle of risk management at TBL. The assessment of risk is one of the major tasks of banks and other financial institutions. Many risk factors can affect the Bank. The policy of Board of Directors is to constantly monitor and manage various risks the Bank faces in its business

Chapter - 1
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BACKGROUND OF THE STUDY

Introduction
A bank is a establishment which trades in money, an stabilisement for deposit custody, issue of money, lending loan, discounting of bills and facilitating transmission of remittances from one place to another, nay, from one country to another. In other words bank is an organization chartered by the state, the principal functions of which are 1. to receive demand deposit and pay customers cheque draw against; 2. to receive time deposit and pay interest thereon; 3. to discount bills make loans available and investment in govt. and other securities; 4.to collect cheques, drafts, notes; 5. to issue drafts and cheques; 6. To certify depositors cheques. But there are different types of banks like central bank, savings bank, investment bank, industrial bank, co-operative bank etc. But whenever we use the term bank without any suffix or restriction, it refers to the commercial bank. commercial banks are a profit making institution that collects the dposit from the surplus unit of the society and then lend the deposits collected to the deficit society. So the people of the society and the govt. are very much dependent on the commercial banks as the financial intermediary. Banking sector is expanding its hand in different financial events in everyday. At the same time banking process is becoming faster, easier and wider. As the demand for the better service increases day by day they are coming with different innovative ideas and products. In order service in in the competitive field of banking sector, all the banking organizations are looking for better service opportunities to provide their fellow clients. As a result it has become essential for every person to have some knowledge on the bank and banking procedure.

1.2 Origin of the Report:

Internship is an integral part of BBA program. The students get the chance to work closely with the people of an organization and learn about the functions, responsibility and corporate culture of that organization. This program enables a student to develop their analytical skills and scholastic aptitudes and to have a real-life orientation of the academic knowledge. For coordinating my internship I have placed to Trust Bank Limited Gulshan Corporate Branch, one of the third generation banks in Bangladesh for 2 months. I have worked in different departments as such account opening, local remittance, financial control & evaluation, foreign exchange and credit. After completion of my internship I have decided to prepare a report on the risk management of Trust Bank. It operates its business activities in a fast changing business environment with diversified risks and it has to manage its risk efficiently to sustain in the pace. This report has been prepared under the guidance, supervision and inspiration of Abbas Ali Khan, Professor, Department of Management Studies, University of Dhaka. Moreover, while preparing the report I was under the supervision and guidance of Barkat Ullah, Operation Manager, Dhanmondi (DMN) branch of Trust Bank Limited.
1.1

Rationale of the Report:

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Credit is one of the most important sources of income of a bank. It includes loan and advances both retail and corporate. A bank earns money from the difference of the interests of loans and deposits. Sanctioning of loan is like selection of life partner. Once it is made and any default is made then it can not be replenished. So sanctioning loan to the right person is very important. The existence and success of a bank depends on strong loan scheme and selection of right borrower. Risk is inevitable for every organization. They have to face diversified risks as such economic risk, operational risk, market risk, reputation risk etc. the acceleration of the organization depends on the process of optimization of these risks. The more an organization can manage its risks the more it will grow. Banks are one of the most important financial institutions in the economy of any country. They are the principle source of credit for millions of individuals and families and for many units of government. But they have to operate their activities in a competitive environment with diversified risks. For this reason every bank tries to focus on managing these risks in an efficient and effective way. The growth of bank depends on how well it can manage its risk. Risk management process involves analysis, evaluation, acceptance and management of certain risks or combination of such risks. Risk management system of the bank is geared to addressing financial and operational losses besides being compliant on regulatory aspects. Management of risks involves a process through which business initiatives are taken with the ultimate objective of safeguarding the capital and protecting the flow of profit generation and growth financing. As risk management is vital for any organization, I decide to prepare my internship on Credit and risk management of Trust Bank Limited to know about the different facets of risk and process of managing these risks.

1.3 Objective of the Report:

General Objective
To get practical exposure to organizational environment To present the system and methodology adopted in conducting day to day banking by TRUST Bank To get an overall idea of banking from bankers point of view Fulfill the requirement of BBA program.

Specific Objective
To review the techniques used by the bank to make it lucrative. To evaluate the present performance of the bank Aware of different types of risk intervening the bank operations To get a crystal and crisp idea how Trust Bank manage these risks effectively.
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1.5

Limitations of the Report

The limitations of the study are defined by the extensive of the facts covered by the study and those that left out. However, these limitations can be presented in the following: The first limitation is the lack of intellectual thought and analytical ability to make it the most perfect one. We have to offset with the quality due to time constraint. The analysis is based on some limited data, so it has become difficult to draw a complete figure. Some of the information needed to explore the current marker scenario of the company was not disclosed. There was time limitation. I carried out such a study for first time so inexperience is one of the main constraints of of the study. Every organization has their own secrecy that is not revealed to others. While collecting data through interviewing the employees, they did not disclose much information for the sake of confidentiality of the organization.

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Chapter -2 Methodology
2.1 Sources of Data

Both primary and secondary data are used in this report. There are many tables and figures in this report which are based on both primary and secondary data. Primary data are emphasized than the secondary data in this report.

2.2

Methods of collecting Data:

The techniques of collecting primary data are not same as the techniques of collecting secondary data. The different methods and tools of collecting primary data and secondary data used in this report are described as follows: Collection of Primary Data: Various types of the data and information were collected from my practical experience and queries from the executives while doing my internship at The TRUST bank Ltd. Information and data regarding Overview of the TRUST bank Limited, various stages of export activities, performance measurement in of export activities, significance and importance of various small segments of export process etc. were collected from these sources. Collection of Secondary Data: Data regarding the clearing process and performance evaluation of The TRUST Bank Ltd. were collected from secondary sources like: Annual Reports, Brochures, Manuals and Publication of The TRUST Bank Ltd., Bangladesh Bank Library, News paper etc. were the major sources of secondary data.

2.3

Instruments Used in Analysis:

There are some tools which are used in analysis. There are various figures, tables, charts, which are easier to understand.

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Chapter -3 A PROFILE OF TRUST BANK

3.1 Historical Background

Trust Bank Limited is one of the leading private commercial banks having a spread network of 45 branches and 5 SME center across Bangladesh and plans to open few more branches to cover the important commercial areas in Dhaka, Chittagong, Sylhet and other areas in 2010. The bank, sponsored by the Army Welfare Trust (AWT), is first of its kind in the country. With a wide range of modern corporate and consumer financial products Trust Bank has been operating in Bangladesh since 1999 and has achieved public confidence as a sound and stable bank. In 2001, the bank introduced automated branch banking system to increase efficiency and improve customer service. In the year 2005, the bank moved one step further and introduced ATM services for its customers. Since banks business volume increased over the years and the demands of the customers enlarged in manifold, our technology has been upgraded to manage the growth of the bank and meet the demands of our customers. In January 2007, Trust Bank successfully launched Online Banking Services which facilitate Any Branch Banking, ATM Banking, Phone Banking, SMS Banking, & Internet Banking to all customers. Customers can now deposit or withdraw money from any Branch of Trust Bank nationwide without needing to open multiple accounts in multiple Branches. Via Online Services and Visa Electron (Debit Card), ATMs now allow customers to retrieve 24x7 hours Account information such as account balance checkup through mini-statements and cash withdrawals. Trust Bank has sucessfully introduced Visa Credit Cards to serve its existing and potential valued customers. Credits cards can now be used at shops & restaurants all around Bangladesh and even internationally. Trust Bank is a customer oriented financial institution. It remains dedicated to meet up with the ever growing expectations of the customer because at Trust Bank, customer is always at the center.

3.2

Mission

Trust Banks mission is to make banking easy for our customers by implementing one-stop service concept and provide innovative and attractive products & services through our skilled and qualified human resources. We always look forward to benefi t the local community through supporting entrepreneurship, social responsibility and economic development the country.

3.3 Vision
They aim to provide fi nancial services to meet customer expectations so that customers feel we are always there when they need us, and can refer us to their friends with confi dence. We want to be a preferred bank of choice with a distinctive identity.
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3.4 Values

MOTTO of Trust Bank Growing Together

3.5 positioning Statement

Trust Bank is a contemporary, upbeat brand of distinctive quality of service and solution that offers a rewarding banking experience as preferred choice of banking partner every time, every where.

3.6 Corporate Culture

Trust Bank Limited is one of the most disciplined banks with distinctive corporate culture. They believe in shared meaning, shared understanding, shared sense making. Their people can see and understand events, activities, objects and situations in a distinctive way. They mould their mould their manners and etiquette character individually to suit the purpose of the bank
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and the needs of the customers whose are of paramount importance to the bank. The people of the bank see themselves as a tight knit team/family that believes in working together for growth. The corporate culture they belong has not been imposed ; it has rather been achieved through their corporate conduct.

3.7 Organizational Structure of Trust Bank Ltd.

Managing Director (MD)

Deputy Managing Director (DMD)
Senior Vice-President (SVP) Vice-President (VP) Senior Assistant VicePresident (SAVP) Assistant Vice-President (AVP) Senior Executive Officer (SEO) Executive Officer (EO) Principal Officer (PO) Senior Officer (SO) Management Trainee Officer(MTO) (MTO) Officer (O) Junior Officer (JO)

Executive Vice-President (EVP)

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3.7Board of directors
Chairman

General Md Abdul Mubeen, ndc, psc

Vice Chairman

Maj Gen A T M Shahidul Islam , ndu, psc

Directors

Brig Gen Md Nazrul Hasan Brig Gen K A R M Mostafa Kamal, ndc, psc. Brig Gen Tushar Kanti Chakma, ndc, psc Mrs. Begum Rokeya Din Mr. Helal Uddin Ahmed (Depositor Director) Brig Gen Md Imamul Huda, psc
Managing Director

Mr. M Shah Alam Sarwar

3.6 Shariah Based Islamic Banking

Islamic Banking operation of Trust Bank Ltd. primarily started its function through 02 (two) windows in Principal Branch and CDA Branch. Subsequently, with the permission of Bangladesh Bank we have opened 03 (three) more windows. As per instruction of the Board of Directors, the prime emphasis has been given on the Shariah Compliance of our products & operations. Trust Islamic Banking (TIB) operations, guidelines and different types of products are duly approved by the Shariah Council of the Bank. In the year 2009, TIB mainly concentrated on the introduction and development of different products. The total deposit and investment of TIB was Tk.816.13 million and Tk.490.77 million respectively in 2009. Initiatives have been taken to run Islamic Banking Operations of Bank according to theGuidelines for Islamic Banking issued by Bangladesh Bank. Appropriate measures have been taken to open Islamic Banking Branchof the Bank as early as possible. Through investment in different retail, corporate and agriculture sectors under investment modes such as Murabaha, Bai-Salam, Bai-Muajjal, HPSM and Istisna, TIB is actively working for the development of both depositors and investors.

3.7 Products and Schemes

The main Products & Schemes of Trust Islamic Banking (TIB) are Deposit Products Current Deposit Account 9| Page

Savings Deposit Account Special Notice Deposit Fixed Deposit Account Trust Money Double Scheme Trust Money Making Scheme Trust Educare Scheme Monthly Benefit Deposit Lakhopati Savings Scheme Retail Products Car Loan House Hold Durable Loan Doctor's Loan Advance Against Salary Education Loan Travel Loan Hospitalization Loan Any Purpose Loan Apon Nibash Loan CNG Conversion Loan Marriage Loan Loan Against TMDS Credit Cards Visa Gold Local Visa Classic Local Visa Classic International Visa Gold International Visa Dual Card SME Financing Trust Agri-Business Loan Entrepreneurship Loan Loan for Light Engineering Loan for Poultry Farm Loan for Shopkeepers Peak Seasons Loan Women Entrepreneur Loan Automated Banking Internet Banking Debit Card Phone Banking SMS Banking Trust Locker Service Online Services

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Chapter - 4 BUSINESS REVIEW OF TRUST BAMK

4.1 Economic Value addition Report
Economic Value Addition Report Trust Bank Limited, at its core, works to enhance the interest of all stakeholders and meet their expectation. A shareholder must get his/her wealth increased via increasing cash flow from dividends and capital gain through price appreciation of shares held by him/her; a depositor must get risk free custody of deposits simultaneously a competitive return on funds; and an employee must get a justified share of income earned by the Bank. Thus, the Banks overall mission is to deliver optimum value to our customers, employees, shareholders and the nation. Our business strategy is geared towards achieving all of these. The Banks policy is to deliver optimum value in a manner that is consistent with the highest level of fairness and transparency. Interest of one stakeholder has not been scarifiedced on the altar of maximizing interest of another. For the Bank, it has been a case of building financial value and enhancing the bottom line through fair and ethical means. Building sustainable value of all stakeholders is an important corporate goal.

4.1.1Capital Management
As part of risk management system, it is the policy of TBL to maintain strong capital adequacy ratio to have sufficient cushion to absorb any unforeseen shocks arising from any potential risk, to ensure long term solvency of the Bank and to help sustainable profi t growth of the Bank that maximize value for stakeholders. At the end of 2009, Banks regulatory capital stood at Tk.4,215.98 million as against Tk.3,504.44 million as at 31 December 2008.

4.1.2 Summary of Total Capital and Capital Adequacy Ratio

4.1.3Maintenance of Net Income Growth

The Bank increased its net profit tby 32 percent or Tk.147.86 million, i.e. to Tk.610.91 million in 2009 from Tk.463.05million in 2008. The net profit is analyzed in the following table:
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4.1.4 Contribution to National Exchequer

TBL made signifi cant contribution to the government in boosting its revenue collection. As per the prevailing law of the country, the Bank being corporate citizen pays tax and VAT on its own income. Besides, the Bank deducts income tax, VAT and excise duty at source from employees, clients, depositors and suppliers, and deposits the same to the national exchequer. In addition to the Banks own income tax, the Bank contributed Taka 577.29 million to national exchequer as tax, vat, income tax and excise duty deducted at source from employees, clients, and suppliers in the reporting year.

4.1.5 Value Added Statement

The value added statement of the Bank shows how the value was created and distributed to the different stakeholder of the Bank. It is worthwhile to mention that this year 53% of income of before taxes was transferred to the statutory reserve account, while legal requirement is 20%. This caused to decrease the value distribution to stockholders to 1.10 million from 265.16 million in 2008. As statutory reserve is one of the components of shareholders equity, distribution to statutory reserve fund constitutes value distribution to shareholders.

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4.1.6 Economic Value Added (EVA) Statement

Economic Value Added (EVA) is used world-wide to measure the performance of an organization. It indicates how much absolute value has been created by the Bank for its shareholders after deducting the minimum rate of return required by the shareholders i.e. cost of equity. The Bank has been consistently able to depict high EVA to its shareholders:

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Distribution of added value 2009 of added value 2008

4.1.7 Market Value Added Statement

Market value added is the difference between the total market value (based on the price quoted in the main bourse of the country) of equity and the total book value of equity of the Bank at the 31 December of the year. The quoted market price of shares of the Bank was Tk.445 and Tk.434 on 31 December 2008 and 2009 respectively in Dhaka Stock Exchange.

4.2 Business Operation and Strategy Review

4.2.1Client as Development Partner
They look after their every client to make him/her a development partner through addressing needs and wants by providing best services at affordable prices. We put a client in the ladder
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where he/she climbs customer-supporter advocate phases and finally becomes development partner of the Bank. Our mission is customer focused and we consider it as the customers right to get modern, online and full range of banking services at an affordable price anytime and anywhere. We are promise-bound through our mission to make the banking easy for our customers and support entrepreneurship, social responsibility and economic development of the country.

4.2.2Brand Image
Their clients are the principal torchbearers of our brand and we believe a delighted client is the best medium of our advertisement to enhance the brand image of the Bank. Employees are also well trained and motivated to provide efficient services, thereby upholding the brand image further. Moreover, image of the bank would be harnessed through participating and/or sponsoring various programs and/or festivals like debate competitions, fair and exhibition related to banking products.

4.2.3 Regulatory and Compliance Culture

The Banks dealings with clients are guided by principles of fair dealing, honesty and integrity. The Banks objective is to observe all standards of market integrity, good practice and conduct expected by participants in the markets in which it conducts. The personal conduct of the staff is driven by high ethical standards. The Bank furthermore places great emphasis on safeguarding the confi dentiality of client information. Internal Auditors are entrusted with responsibility to ensure that rules and policies relating to above mentioned issues are in place. Above all, the Bank is committed to prompt and spontaneous compliance of all rules, regulations and guidelines issued by regulatorsmfrom time to time.

4.2.4Emphasis on Socially Desirable Products

The Bank continually tries to contribute to social value addition through financing socially important projects via structured finance, SME and corporate credit. Banks exposure is thus well diversified to different sectors viz. power loom, Handloom, light engineering, handicrafts, garments accessories, agri-business etc. Included examples are financing renewable energy production project under SME financing and contribution to agriculture through establishment of agriculture branch which are of paramount importance to the society.

4.2.5Corporate Banking & Syndicated Loans

Trust Bank aims to facilitate corporate customers by providing customer focused products to its valued corporate clients to meet up the individual corporate requirement. Corporate clients include sole proprietors, partnerships, incorporated businesses and publicly listed companies. So, corporate credit is the central focus of all lending operations of the Bank. The Bank has been providing comprehensive services to corporate and institutional clients by way of commercial lending in the form of working capital and/or industrial loans (both large and medium scale industries). The Banks facilities for corporate houses include both funded and non-funded facilities which are provided only after considering client business / industry environment, historical & projected financials, sponsors and management background as well
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as after taking sufficient risk mitigating measures to protect the interest of the Bank. While extending corporate facilities, Banks credit policy and regulatory guidelines are followed meticulously. Moreover, the Bank provides syndicated loan facilities to the corporate customers to encourage the industrialization of the country. Syndicated financing helps in better due diligence of projects and risk mitigation. Besides, to serve its corporate clients and to expand the base of its corporate clients, TBL has arranged syndication deal and participated in syndication deal arranged by other Banks and financial institutions. The sectors of financing through syndication now include power, steel, glass, textile, spinning, ceramic, telecommunication, poultry, hotel etc. Them Bank participated in 08 syndications during the year 2009 and financed Tk.770.09 million in different segments of the economy. The Bank also financed large credit to readymade garments industries (RMG) which is an important sector in Bangladesh and generating substantial employment opportunity in our country. At the end of the year 2009, our loan outstanding in the sector was Tk.5700.94 million. We also financed the Non-Bank Financial Institutions and different NGOs to meet their growing financing needs extended in the form of term loan and overdraft facility. Corporate finance showed steady growth during the year and it is expected that the progress will continue during 2010.

4.2.6 SME Business

Despite multidimensional constraints, SME is universally recognized as the thrust sector and driving force of the economy which has injected the appetite for bringing consistency in the banks credit portfolio by striking balance between SME and corporate lending. The issue of fostering SME growth in Bangladesh can in no way be ignored as these industries have huge prospects for creating large scale employment opportunities and potentialities of huge income generation especially in semi-urban and rural areas. As such, the Bank is moving forward to SME customer segment, considering the business potentials and return on investment. The business expansion and monitoring is carried out throughout its 42 country wide branches and 4 SME/Agri branches service centers dedicated to fullfledged SME business. The Bank has launched different products, and is marketing these products matching with the customer needs. Its especial emphasis is on: Loan for shopkeepers, Loan for light engineering, Loan for power loom and handloom industries, Agri-business loan Loan for Women Entrepreneurship Peak seasons loan Bio gas and alternative energy

4.2.7 Retail Banking

Consumer credit program is an important development scheme in the banking sector. In Bangladesh, people of limited monthly income are faced with the problem of improving their standard of living. Considering customers need and enormous potential of this sector, we have
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introduced consumer credit program under Retail Banking Unit from 2006. The core objectives of this scheme are: first, to provide consumer credit facility to service holders as well as businessmen at affordable rate of interest; second, to give them opportunity to improve their standard of living and; finally to play a significant role in the socio economic development of the country. As at 31 December 2009, total approval of Retail Banking Unit is Tk.1,589 million. We currently offer 11 retail products. They are home loan (Apon Nibash), car loan, any purpose loan (APL), household durables loan (HHD), doctors loan, marriage loan, travel loan, CNG conversion loan, advance against salary, education loan and hospitalization loan. Eyeing a bright prospect, Bank successfully launched five types of VISA Credit Cards under Retail Banking Unit in the year 2007 to serve its existing and potential customers. The aforesaid products are available from all branches of TBL.After the successful completion of year 2009, we now have 5217 valued clients enjoying the retail products of the Bank. A remarkable growth in terms of total disbursement registered by Retail Unit and a graphical comparison of last 3 years is given below:

4.2.8 Merchant Banking

The overall increase of activities of Merchant Banking operation plays an important role in the improvement of capital market of the country and enhances earning capability of the Bank. Trust Bank Limited started its Merchant Banking operation from 10 May 2008 under appropriate risk management policies and guidelines approved by the Board. Merchant Banking Division launched BDA, IDA and NIDA products under the title Portfolio Management Services for investors to invest in the secondary market having the option to operate under both margin and non-margin accounts. The scheme has diversifi ed products with different category of investment ceiling and other value added services for more than 5,000 customers. The customers were also assisted with service facilities on the basis of published information and accounts. The Division also organizes Investors Awareness Program on regular basis. The Division manages portfolio values more than Tk.731 crore under margin and non-margin accounts. Apart from this activity, the Division also provides
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different depository services to its BO account holders as a custodian DP (Depository Participant) of CDBL. Besides, the Division also actively carries out Underwriting and Banker to the Issue operation in a number of Initial Public Offering (IPO) as well as Right Share Offering (RSO). MBD is also managing Banks own portfolio through investing in listed shares for boosting up the profitability of the Bank and also for enhancing shareholders value. As a result, MBDs contribution to the profitability of the Bank was significant in the year 2009. The bank has established a well decorated and high technology based trading facilities for the convenience of the customers in its premises through enlisted brokerage firms. MBD has already extended its branch network at Karwan Bazar, Gulshan and Sylhet Uposhahor Branch and has a plan to extend its portfolio management services to different areas in and outside of Dhaka using designated branch of the bank. Central Bank issued a guideline for separation of merchant banking operation of the Bank by forming a subsidiary company. We are in the process of forming a subsidiary company in accordance with Central Bank guideline.

4.2.9 International Operations

Since inception, Trust Bank has been highly active in facilitating international trade related services to its customers. The Bank offers various types of trade products to its customers such as Import and Export Letter of Credit, Foreign Guarantees, Standby Letters of Credit, Discounting etc. Despite the global fi nancial turmoil that seriously affected the import and export trade business world wide, the Bank has achieved a sizeable growth in both import and export sector in 2009. The total import of the Bank stood at Tk.23,680 million (USD 340 million) which is 42% higher from import of 2008. The Bank registered a sound growth in export in 2009 from.

The total export was Tk.12,770 million (equivalent to USD 182 million) million in 2009 which is 110% higher than that of FY 2008.

4.2.10 Foreign Remittance

Remittance service in 2009 has turned out to be one of the core businesses as rewarding and successful one in terms of receiving Remittance Award, new tie-ups with renowned and the largest overseas Money Transfer Companies around the globe including Western Union with a
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view to channeling inward foreign remittance and association with countrys one of the largest Microfinance Institutions (MFIs), Shakti Foundation for disadvantaged women, eventually with a goal to provide faster and expeditious service to deliver the proceeds of inward foreign remittance even in the most remote corner of Bangladesh. For secure remittance service, Trust Bank had made strategic alliances with 5 other local private banks as its associates for processing and payment of Zenj Exchange Turbo Cash Remittance. As a result, flow of inward foreign remittance has substantially increased. In the year 2009 the flow of remittance was TK.8,669 Million as against TK.5,789 Million in 2008 registering a notable growth of 50% over the preceding year.

4.2.11 Total Capital

At the end of 2009, total capital stood at Tk.4215.98 million against Tk.3,504.44 in 2008 registering a growth of 20.30 percent over preceding year. And capital adequacy ratios were 12.66% and 12.81% of total risk weighted assets in 2009 and 2008 respectively against the regulatory requirement of 10%.

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4.2.12 Any Branch Banking

Any branch banking is a facility for our customers to operate their accounts from any of our network branches. Any branch banking facility is available at all branches of Trust Bank. At present, following online banking services can be made with the system: Cash deposits i.e. accountholder of one branch can deposit cash in his/her account at another branch. Cash withdrawals i.e. accountholder of one branch can withdraw cash from another branch. TBL Cheque deposits i.e. accountholder of one branch can deposit TBL Cheque in his/her account at another branch. Fund transfer between Customer Accounts of different TBL Branches i.e. accountholder of one branch can transfer fund to another account maintained with any branch of TBL.

4.2.13 Phone Banking

TBL customers can access to their accounts information using any phone even after regular banking hours. A customer can have the following information through the phone banking services: about bank products balances on accounts, turnover and performed operations currency rates existing deposit terms, accrued interests and amounts loan repayment schedule account statements blocking/unblocking Visa cards accessing the banks hot line

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4.2.14 SMS Banking

SMS Banking is a mobile technology that allows customer to request and receive banking information from bank on customer mobile phone via Short Message Service (SMS). Individuals or corporate bodies can manage their bank accounts, check their account balances, transfers money, pay some bills and perform other banking transactions using their mobile phones.

4.2.15 Internet Banking

Internet banking facilitates banking operations carried out between banks and their clients through Internet. The customer can log on to the banks website with the user name and password to access his/ her bank account. Internet banking greatly facilitates defense personnel, one of the major groups of our valued clients serving UN Mission, through giving access to their accounts and informing them about their transactions such as status of their remittance to their near and dear ones. Very soon, Trust Bank is going to implement the internet based fund transfer facility for its customers. Along with this Bank will be connected with National Payment Gateway to provide the best service to its customers.

4.2.15 Automated Teller Machine (ATM)

At present, they have ten ATM booths to facilitate our valued clients to withdraw cash round the clock and 7 days a week. The Banks clients can also use ATM network of Q Cash, one of the largest network of the country with free of cost if it is owned by the Bank and for a very nominal fees if the booth is owned by other banks of the network Moreover, we signed contract with the DBBL and BRAC Bank to allow our customers to use their booths with a fee of Tk.20 per withdrawal. Furthermore, to cater the needs of the customers, the Bank plans to establish 15 more ATM booths in 2010.

4.2.16 Existing Human Resources and Recruitment

Trust Bank is expanding its branch network as well as business activities very fast. To meet the manpower requirements of the expanding business and network of the Bank, TBL recruited the required human resources through fresh recruitments of MTOs and Junior Officers. A number of experienced hands were also recruited to fill up vacancies during the year 2009.

As a result, the need for human resources has also increased constituting the following existing human resources as at 31 December 2009 and that of 2008:

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4.3 REVIEW OF FINANCIAL POSITION

4.3.1 Total Assets
Total assets of the Bank stood at Tk.54,206.65 million in 2009 as against Tk.38,534.72 million in 2008 registering a growth of 40.67%. Increase in assets was mainly driven by significant growth of customers deposits. The growth of deposits was used for funding growth in credit and investment. Loans and advances constituted 60% of total assets while investment in government and other instruments held 16% of the assets. Percent 6.54 of assets were invested in money at call and short notice and almost same percentage lied in cash in hand and balance with Bangladesh Bank and its agents, whereas balance with other banks and financial institutions held 7.53% of total assets. Moreover, other assets which are very current in nature made up almost 2.56% of assets leaving only 0.70% of assets, tied up in fixed assets including premises, furniture and fixtures. The above common size analysis showed that almost 93% of total assets of the Bank are utilized in different earning assets leaving 6.30% in liquid form for meeting cash withdrawal demand of customers and maintaining Cash Reserve Ratio (CRR) requirement of Bangladesh Bank

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4.3.2 Cash in Hand & Balances with Bangladesh Bank & Its Agent Banks Including Foreign Currencies
As at 31 December 2009, cash in hand and balances with Bangladesh Bank and its agent banks (including foreign currency) stood at Tk.3,433.83 million as against Tk.2,137.48 million of 2008 registering a growth by Tk.1,296.35 million or 61%. This increase in cash attributed to maintaining cash reserve ratio (CRR) with Bangladesh Bank and to providing uninterrupted cash services to our growing customers. However, this asset remains 6% of the total assets in both the years 2009 and 2008.

4.3.3 Balance with Other Banks and Financial Institutions

The International Banking Division of the Bank has to maintain some short-term deposit (STD) accounts and current deposit (CD) accounts with other banks in and outside the country for smooth functioning of the treasury operations and international trade finance. The Bank also places excess fund with other banks and financial institutions as term deposits for optimizing the profit of the Bank. As at 31 December 2009, balance outstanding with other banks and f nancial institutions significantly rose by 59% to Tk.4,086.48 million from Tk.2,568.93 million at the end of 2008 due to lower utilization of funds in loan portfolio.

4.3.4 Money at Call & Short Notice

Treasury Division of the Bank manages surplus fund of the Bank through inter-bank money market on daily basis repayable at short notice. At 31 December 2009 the balance of Money at call and short notice shot up by 1009% to Tk.3,550 million from 320 million at the end 2008. The composition of this asset to the total assets of the Bank also showed a growth of almost 6% over preceding year. The high rise of this asset is attributed to high rise of deposits during the year 2009.

4.3.5 Investments
The Banks investments grew by Tk.3,742.95 million during the year and stood at Tk.8,705.61 million at the end of 2009 as against Tk.4,962.66 million in 2008. The investment showed a sizable growth rate of 75% over last year. The Bank purchased government treasury bills and treasury bonds to cover-up the increased requirement of Statutory Liquidity Requirement (SLR). Out of the total investments, Tk.8,032.95 million was invested in government securities and the rest amount i.e. Tk.672.66 million was invested in ordinary and preference shares of different listed and unlisted companies.

4.3.6 Loans & Advances

Total loans & advances of the Bank as on 31 December 2009 was Tk.32,663.11 million as against Tk.27,528.08 million in the year 2008, showing an increase by 18.65% over the preceding year. The Loans and advances cover up the areas of corporate (based on both conventional and Islamic Shariah mode), SME, retail and credit Card. The credit portfolio of the Bank also included mix of scheme loans, namely- Renovation and Reconstruction of
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Dwelling House Loan (RRDH), Consumers Durable Scheme Loan (CDS), Marriage Loan, Car Loan, HBF Loan and Commercial Loan. Corporate lending is still the core business of the Bank and continues to remain the major segment of the business. While providing loans to our customers the policy of Bangladesh Bank is strictly followed. The portfolio has been further diversified to avoid risk of single industry concentration and remains in line with the Banks credit norms relating to risk quality. The Customer Relationship has been strengthened and frequent visits to the clients have been ensured for further cementing existing relationship.

4.4Liabilities and Capital - Claims on Total Assets

4.4.1 Total Liabilities
Total liabilities of the Bank comprise broad three items, such as borrowing from other banks, financial institutions and agents, deposits and other liabilities. Total balance of liabilities of the Bank stood at Tk.50,451.78 million at the end of 2009 as against Tk.35,415.07 million in 2008, representing a rise of 42.46%. The rise in total liabilities mainly resulted from 47% growth of deposits. Deposits constituted 96% of total liabilities of the Bank.

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4.4.2 Deposit Portfolio

In spite of sharp decline in market interest rates resulting from fixation of ceiling of interest rate of bank deposits by the Association of Bankers Bangladesh (ABB), in the year 2009, the to Tk.48,464.64 million from Tk.32,919.76 million as recorded in the year 2008. The combination of competitive interest rates, depositors trust in the Bank and mobilization efforts of the Bank Management resulted in this rapid growth of deposits. Mix of deposits showed that fixed deposits and short-term deposits contributed 57% and 16% respectively. .

Deposit Portfolio

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4.4.3 Shareholders Equity

Total shareholders equity increased by 20.36% and stood at Tk.3,754.87 million at the end of 2009 as against Tk.3,119.65nmillion in 2008. The increase was mainly attributed to the issue of bonus sharesnof Tk.308 million, increase of Tk.609.80 million in statutory reserve and other reserve also increased by Tk.48.28 million in 2009. However, share premiumnand retained earnings dropped by Tk.308 million and Tk.22.85 million respectively due to issuing bonus shares out of premium in the year 2009.

4.4.4 Profit Growth

The Bank earned operating profit of Tk.1,358.35 million during 2009 as compared to 1,252.44 million in the immediate preceding year, registering a growth of 8.46%. After keeping Tk.207.78 million as provision against classified and unclassified loans & advances, diminution in value of investment, off-balance sheet exposure and other assets, pre-tax profit stood at Tk.1,150.57 million. After keeping Tk.539.67mmillion as provision for income tax, net profit stood at Tk.610.90 million as against Tk.463.05 million in 2008, posting a growth of 32%.

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4.4.5 Other growth

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Chapter -5 LOANS AND ADVANCES OF TBL

5.1 Loans and Advances
Loans are an important source of income of TBL. There are many types of loans .TBL also uses many types of loan schemes. I have focused on all types of retail credit offered by TBL.

5.2 SME Loan

5.2.1 Agri-Business Loan
Features Loan facility from TK. 2.00 lac to 100.00 lac to setup Agro Processing Units or to meet up working capital requirement of the business. No Mortgage or Equitable Mortgage for Loans up to TK.25 lac. Interest rate 15% (case to case basis). Processing fee 1% to 1.50%. Repayment Period 01(One) year for Time Loan/OD and maximum 03(Three) for Term Loan. Repayment of loan by Equated Monthly Installment (EMI) or from sales proceeds Eligibility Any sole Proprietorship or Partnership firm or Private Ltd. Co. having 03 years successfully business operation Monthly cash flow to repay the proposed Loan installment Owners in the age group of 25 to 60 years For more information please contact the nearest TBL Branch or SME Center or please the following loan officer:

5.2.2 Entrepreneurship Development Loan

This product is specially designed for retired other rank army personnel. Features Any Business Purpose Loan from Tk. 2.00 lac to 20.00lac to purchase Machinery & Equipment or to meet up Working Capital requirement. No Mortgage or Equitable Mortgage for loans up to Tk. 5 lac. Interest rate 15% (case to case basis). Processing fee 1% to 1.50%.
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 Tenor of Loan For working capital maximum 01 year and for fixed assets purchase

maximum 03 years. Repayment of Loan by Equal Monthly Installment (EMI) or from sales proceeds Eligibility Any Sole Proprietorship or Partnership firm preferably having 02 years successful business operation. Monthly cash flow in support of proposed loan installment. Owners in the age group of 35 to 60 years having completed at least 18 years of service.

5.2.3 Loan for Light Engineering

Features Loan facility from Tk.2.00 lac to Tk.50.00 lac for Working Capital or to purchase Machinery & Equipment. No Mortgage or Equitable Mortgage for loans up to Tk. 25 lac. Interest rate 15% (case to case basis). Processing fee 1% to 1.50% Loan Repayment Period: Maximum 01(One) year for Time Loan/OD and for Term Loan maximum 05 years. Repayment of Loan by Equal Monthly Installment (EMI) or from sales proceeds. Eligibility Any Sole Proprietorship or Partnership firm or Private Ltd. preferably having 03 years successful business operation. Monthly cash flow to support the proposed loan installment. Owners in the age group of 25 to 60 years.

5.2.4 Loan for Poultry Farm

Features Loan facility from Tk. 2.00 lac to Tk. 20.00 lac for Poultry Business to meet up working capital requirement. No Mortgage or Equitable Mortgage for loans up to Tk. 5 lac.* Interest rate 15% (case to case basis). Processing fee 1% to 1.50%. Tenor of loan not exceeding 01 (One) year. Loan to be repaid by Equal Monthly Installment (EMI) or from sales proceeds. Eligibility Any Sole Proprietorship or Partnership firm or Private Ltd. Co. having 03 years successful business operation. Cash flow in support of the proposed loan installment. Owners in the age bracket of 25 to 60 years.

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 For details please contact the nearest TBL Branch or SME Center or please contact the following loan Officer.

5.2.5 Loan for Shopkeepers

Features To purchase inventory Shopkeepers may enjoy credit facility from Tk. 2.00 lac to 50.00 lac. No Mortgage or Equitable Mortgage for loans up to Tk. 25 lac. Interest rate 15% (case to case basis). Processing fee 1% to 1.50%. Tenor of loan not exceeding 01 (One) year. Facility may be adjusted by Equal Monthly Installment (EMI) or from sales proceeds. Eligibility Any Sole Proprietorship or any Partnership firm having 03 years successful business operation. Monthly cash flow to support the proposed loan installment. Owners age: 25 to 60 years.

5.2.6 Peak Seasons Loan

Features Loan Facility from Tk.2.00 lac to 20.00 lac for purchasing inventory to meet peak seasons demand for different festivals. Interest rate 15% (case to case basis). Processing fee 1% to 1.50%. Loan Repayment Period: Maximum 03(Three) months. Repayment of loan by Installment or in Lump Sum within loan period. Eligibility Any Sole Proprietorship or Partnership firm or Private Ltd. Co. having 03 years successful business operation. Cash flow in support of proposed loan installment. Age of the owners in the range of 25 to 60 years. For details please contact the nearest TBL Branch or SME Center or please contact the following loan Officer.

5.2.7 Women Entrepreneur Loan

Features Any business purpose loan from Tk.1.00 lac to Tk. 50.00 lac. No Mortgage or Equitable Mortgage for loans up to Tk. 25 lac. Interest rate 9%.
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 Processing fee 1% to 1.50%. Loan Repayment Period: 01 year for working capital finance and maximum 05 year for fixed assets purchase. To be repaid by Equal Monthly Installment (EMI) or from sales proceeds. Eligibility Any Sole Proprietorship or any Partnership firm preferably having 02 years successful business operation. Monthly cash flow to support the proposed loan installment. Owners in the age group of 20 to 55 years

5.2.8 Car Loan

Now a car is no longer luxury but necessity. Moreover, a car is more than a symbol of prestige. TBL offers you to materialize your dream of owning a car through TBL car loan facility. Eligibility: For New and Reconditioned Car Confirmed Service holders, Businessman, Professionals Supportive cash flow to repay the loan Maximum age limit of the borrower 60 yrs; in exceptional case, MD can relax the age limit up to any age depending on the merit of the case. For Microbus, Minibus & Truck Corporate bodies Individual(s) with supportive cash flow to repay the loan Maximum age limit of the borrower 60 yrs; in exceptional case, MD can relax the age limit up to any age depending on the merit of the case. For New Car Loan Limit: Interest Rates (%) Down Payment/Equity Loan Period/ Tenor Processing Fee (15% VAT will be added) Risk Fund For Reconditioned Car Loan Limit: Interest Rates (%) Down Payment/Equity Loan Period/ Tenor
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Tk.2.00-20.00 Lac 14% 20% 1- 5 years 1% Nil Tk.2.00-20.00 Lac 14% 20% 1- 5 years

Processing Fee (15% VAT will be added) Risk Fund For Microbus Loan Limit: Interest Rates (%) Down Payment/Equity Loan Period/ Tenor Processing Fee (15% VAT will be added) Risk Fund For Minibus, Trucks Loan Limit: Interest Rates (%) Down Payment/Equity Loan Period/ Tenor Processing Fee (15% VAT will be added) Risk Fund

1% Nil Tk.2.00-15.00 Lac 14% 20% 1- 3 years 1% Nil Tk.2.00-50.00 Lac 14% 20% 1- 5 years 1% Nil

5.2.9 Consumer Durable Scheme Loan

Need are constantly changing phenomena in human life to improve the standard of living. Sometimes your saving is not good enough to meet your requirements. At, the Trust Bank, we take care of your financing needs and you can trust on us as your financial partner indeed. Eligibility: For Consumer Durable Scheme Loan Employees of: Confirmed Service holders, Businessman, Professionals Supportive cash flow to repay the loan Government/Semi Government/Autonomous bodies Sector Corporation Non-Government organizations Multi-national companies Banks/Financial institutions Educational institutions

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Maximum age limit of the borrower 60 yrs; in exceptional case, MD can relax the age limit up to any age depending on the merit of the case. 0.5 lac -5.00 lac 15% 30% 1 year to 4 years 2% Nil

Loan Limit: Interest Rates (%) Down Payment/Equity Loan Period/ Tenor Processing Fee (15% VAT will be added) Risk Fund

5.2.10 Doctors Loan

Medical is a noble profession which is evolving fast. In a country like ours it is important to be a part of those changes as we cannot afford to be lag behind. Keeping that in mind and with a vision to support and promote health services, TBL is at your side with our Doctors' Loan. Eligibility: General Practitioner, FCPS & MBBS Doctors/dentists or Specialist Doctors having a Postgraduate degree and specialization in a particular area of treatment such as Medicine Specialist, Eye Specialist, ENT Specialist, cardiac surgeon/specialist etc. having 5 years experience as specialist. Maximum age limit of the borrower 60 yrs; in exceptional case, MD can relax the age limit up to any age depending on the merit of the case. Loan Limit: Interest Rates (%) Down Payment/Equity Loan Period/ Tenor Processing Fee (15% VAT will be added) Risk Fund 1.0 lac -5.00 lac (GP) 10 lac (SP) 15% 20% 1 year to 5 years 1% Nil

5.2.11 Advance against Salary Loan

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Life is continuously facing unforeseen events. For which sudden financial support is essential. We are at your side to meet up your urgency at any moment through our "Advance against salary" scheme. Eligibility: For Advance against Salary Salaried person in Govt. organization/Semi Govt. Organization/Autonomous bodies /Multinational Com./Banks/Insurance Com. /Financial Institutions/Educational Institution Confirmed employee having 3 years service ahead Maximum age limit of the borrower 60 yrs; in exceptional case, MD can relax the age limit up to any age depending on the merit of the case. Loan Limit: Interest Rates (%) Down Payment/Equity Loan Period/ Tenor Processing Fee (15% VAT will be added) Risk Fund 0.5 lac -5.00 lac 15% N/A 1 year to 3 years 1% Nil

5.2.12 Education Loan

A substantial amount of finance is required to give your child the best education or to get a higher degree either at home or abroad. TBL, "Education Loan" relief the clients from this burden and ensure uninterrupted study through steady flow of cash. Eligibility: For Education Loan Employees of confirmed service holders, Businessman, Professionals Adequate cash flow to repay the loan Maximum age limit of the borrower 60 yrs; in exceptional case, MD can relax the age limit up to any age depending on the merit of the case. Loan Limit: Interest Rates (%) Down Payment/Equity Loan Period/ Tenor Processing Fee (15% VAT will be added)
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0.5 lac -3.00 lac 15% 10% 1 year to 3 years 1%

Risk Fund

Nil

5.2.13 Travel Loan

When people plan to travel local or global exotic location, financing is the key issue. Don't be worried; TBL Travel loan is ready to provide instant financial support. Eligibility: For Travel loan Employees of confirmed service holders, Businessman, Professionals Adequate cash flow to repay the loan Loan Limit: Interest Rates (%) Down Payment/Equity Loan Period/ Tenor Processing Fee (15% VAT will be added) Risk Fund 0.5 lac -3.00 lac 16% 20% 1 year to 2 years 1% 1%

5.2.14 Hospitalization Loan

Crisis comes at anytime and well being comes at a price. When the urgency comes for medical treatment of your family, there can never be compromised. At any urgency if you feel, please remember us to provide financial support through our "Hospitalization Loan" scheme. Eligibility: For Hospitalization Loan Employees of confirmed service holders, Businessman, Professionals Supportive cash flow to repay the loan Maximum age limit of the borrower 60 yrs; in exceptional case, MD can relax the age limit up to any age depending on the merit of the case. Loan Limit: Interest Rates (%) Down Payment/Equity Loan Period/ Tenor Processing Fee (15% VAT will be added) Risk Fund 0.5 lac -3.00 lac 15% 10% 1 year to 2 years 1% Nil

5.2.1Any purpose Loan

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Clients have so many needs, some are attainable with our means & standing and some are unattainable. The unattainable needs can be met by TBL. "Any Purpose Loan' Eligibility: For Any Purpose Loan Confirmed employee of the Govt. Organizations/ Semi-Government Organizations / Autonomous Bodies / Multinational Companies / Banks /Insurance companies / Educational Institutions / Corporate Bodies Supportive cash flow to repay the loan Maximum age limit of the borrower 60 yrs; in exceptional case, MD can relax the age limit up to any age depending on the merit of the case. Loan Limit: Interest Rates (%) Down Payment/Equity Loan Period/ Tenor Processing Fee (15% VAT will be added) Risk Fund 0.5 lac -5.00 lac 15% N/A 1 year to 4 years 1.5 % Nil

5.2.16 Apon Nibash Loan

TBL offers Apon Nibash (House Finance) to you with easy repayment schedule matching your affordability. You have unlimited options of choosing your home with limited means and standing. Here, TBL Apon Nibash helps you to match your long cherished dream. Eligibility: For Apon Nibash (Home Finance) Loan Maximum age limit of the borrower 60 yrs in exceptional case, MD can relax the age limit up to any age depending on the merit of the case. Employees of: Confirmed employees of govt./Autonomous body Confirmed employees of financial institution Confirmed employees of different Public Limited Company/Private Limited company having Corporate Structure Teachers of any school/college/university Professionals Doctors /Medical Professionals Engineers Accountants
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 IT Professionals Management Consultant Self Employed Businessman (in business at least for five years) Loan Limit: Interest Rates (%) Down Payment/Equity Loan Period/ Tenor Processing Fee (15% VAT will be added) Risk Fund Up to 75.00 lac 13.00% (Conditions apply) 40% for Construction 30% for New Apartment Up to 20 years 1% Nil

5.2.17 CNG Conversion Loan

Eligibility: For CNG Conversion Loan Confirmed service holders, Businessman, Professionals (Owner of the vehicle or valid user of the vehicle) & Corporate Clients (for more than one Car) Any other persons who have adequate cash flow to repay the loan installment Maximum age limit of the borrower 60 yrs; in exceptional case, MD can relax the age limit up to any age depending on the merit of the case. Loan Limit: Interest Rates (%) Down Payment/Equity Loan Period/ Tenor Processing Fee (15% VAT will be added) Risk Fund 0.6 Lac for Individual, 1.00 Lac for Corporation 16% 10% 18 months Tk.1000.00 Nil

5.2.18 Marriage Loan

Tying the marital knot is an event of a life time and its celebration and memories should last forever. TBL "Marriage Loan" will help you to arrange celebrate the marriage in style. Eligibility: For Marriage Loan
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Employees of confirmed service holders, Businessman, Professionals This Loan is applicable for first marriage This Loan may be availed by the guardian and/or Applicant as the case may be Supportive cash flow to repay the loan Maximum age limit of the borrower 60 yrs; in exceptional case, MD can relax the age limit up to any age depending on the merit of the case. 0.5 lac -3.00 lac 16% 20% 1 year to 3 years 1% 1%

Loan Limit: Interest Rates (%) Down Payment/Equity Loan Period/ Tenor Processing Fee (15% VAT will be added) Risk Fund

5.2.19 Loan against Trust Money Double Scheme Loan will be sanctioned up to 90% of present value of the respective Loan Against Trust Money Double Scheme. Eligibility: For Loan against Trust Money Double Scheme (TMDS) Must have Trust Money Double Scheme acoount. Interest rate is 10.50%. Maximum age limit of the borrower 60 yrs; in exceptional case, MD can relax the age limit up to any age depending on the merit of the case.

5.2 Other Retail Loans

5.3.1Entrepreneurship Development Loan

This product is specially designed for retired other rank army personnel. Features Any Business Purpose Loan from Tk. 2.00 lac to 20.00 lac to purchase Machinery & Equipment or to meet up Working Capital requirement. No Mortgage or Equitable Mortgage for loans up to Tk. 5 lac.
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 Interest rate 15% (case to case basis). Processing fee 1% to 1.50%. Tenor of Loan For working capital maximum 01 year and for fixed assets purchase maximum 03 years. Repayment of Loan by Equal Monthly Installment (EMI) or from sales proceeds Eligibility Any Sole Proprietorship or Partnership firm preferably having 02 years successful business operation. Monthly cash flow in support of proposed loan installment. Owners in the age group of 35 to 60 years having completed at least 18 years of service.

5.3.2 Loan for Light Engineering

Features Loan facility from Tk. 2.00 lac to Tk. 50.00 lac for Working Capital or to purchase Machinery & Equipment. No Mortgage or Equitable Mortgage for loans up to Tk. 25 lac. Interest rate 15% (case to case basis). Processing fee 1% to 1.50%. Loan Repayment Period: Maximum 01(One) year for Time Loan/OD and for Term Loan maximum 05 years. Repayment of Loan by Equal Monthly Installment (EMI) or from sales proceeds. Eligibility Any Sole Proprietorship or Partnership firm or Private Ltd. preferably having 03 years successful business operation.
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 Monthly cash flow to support the proposed loan installment. Owners in the age group of 25 to 60 years.

5.3.3 Agri- Business Loan

Features Loan facility from TK. 2.00 lac to 100.00 lac to setup Agro Processing Units or to meet up working capital requirement of the business. No Mortgage or Equitable Mortgage for Loans up to TK.25 lac. Interest rate 15% (case to case basis). Processing fee 1% to 1.50%. Repayment Period 01(One) year for Time Loan/OD and maximum 03(Three) for Term Loan Repayment of loan by Equated Monthly Installment (EMI) or from sales proceeds. Eligibility Any sole Proprietorship or Partnership firm or Private Ltd. Co. having 03 years successfully business operation Monthly cash flow to repay the proposed Loan installment Owners in the age group of 25 to 60 years

5.3.4 Loan for Poultry Farm

Features Loan facility from Tk. 2.00 lac to Tk. 20.00 lac for Poultry Business to meet up working capital requirement. No Mortgage or Equitable Mortgage for loans up to Tk. 5 lac.* Interest rate 15% (case to case basis). Processing fee 1% to 1.50%. Tenor of loan not exceeding 01 (One) year. Loan to be repaid by Equal Monthly Installment (EMI) or from sales proceeds. Eligibility
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 Any Sole Proprietorship or Partnership firm or Private Ltd. Co. having 03 years successful business operation. Cash flow in support of the proposed loan installment. Owners in the age bracket of 25 to 60 year

5.3.5 Loan for Shopkeepers

Features To purchase inventory Shopkeepers may enjoy credit facility from Tk. 2.00 lac to 50.00 lac. No Mortgage or Equitable Mortgage for loans up to Tk. 25 lac. Interest rate 15% (case to case basis). Processing fee 1% to 1.50%. Tenor of loan not exceeding 01 (One) year. Facility may be adjusted by Equal Monthly Installment (EMI) or from sales proceeds.

Eligibility Any Sole Proprietorship or any Partnership firm having 03 years successful business operation. Monthly cash flow to support the proposed loan installment. Owners age: 25 to 60 years.

5.3.6 Peak Season Loan

Features Loan Facility from Tk.2.00 lac to 20.00 lac for purchasing inventory to meet peak seasons demand for different festivals. Interest rate 15% (case to case basis). Processing fee 1% to 1.50%. Loan Repayment Period: Maximum 03(Three) months. Repayment of loan by Installment or in Lump Sum within loan period. Eligibility Any Sole Proprietorship or Partnership firm or Private Ltd. Co. having 03 years successful business operation.
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 Cash flow in support of proposed loan installment. Age of the owners in the range of 25 to 60 years.

5.3.7 Women Entrepreneurship Loan

Features Any business purpose loan from Tk.1.00 lac to Tk. 50.00 lac. No Mortgage or Equitable Mortgage for loans up to Tk. 25 lac. Interest rate 9%. Processing fee 1% to 1.50%. Loan Repayment Period: 01 year for working capital finance and maximum 05 year for fixed assets purchase. To be repaid by Equal Monthly Installment (EMI) or from sales proceeds. Eligibility Any Sole Proprietorship or any Partnership firm preferably having 02 years successful business operation. Monthly cash flow to support the proposed loan installment. Owners in the age group of 20 to 55 years.

Chapter - 6 RISK MANAGEMENT

6.1 Introduction Risk management is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events. Risks can come from uncertainty in financial markets, project failures, legal liabilities, credit risk, accidents, natural causes and disasters as well as deliberate attacks from an adversary. The strategies to manage risk include transferring the risk to another party, avoiding the risk, reducing the negative effect of the risk, and accepting some or all of the consequences of a particular risk. In ideal risk management, a prioritization process is followed whereby the risks with the greatest loss and the greatest probability of occurring are handled first, and risks with lower probability of occurrence and lower loss are handled in descending order. Risk management also faces difficulties allocating resources. This is the idea of opportunity cost. Resources spent on risk management could have been spent on more profitable activities.
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Again, ideal risk management minimizes spending while maximizing the reduction of the negative effects of risk

6.2

Principles of Risk Management

The International Organization for Standardization identifies the following principles of risk management: Risk management should create value. Risk management should be an integral part of organizational processes. Risk management should be part of decision making. Risk management should explicitly address uncertainty. Risk management should be systematic and structured. Risk management should be based on the best available information. Risk management should be tailored. Risk management should take into account human factors. Risk management should be transparent and inclusive. Risk management should be dynamic, iterative and responsive to change. Risk management should be capable of continual improvement and enhancement.

6.3 Key Risk Types

Risk may be defined as reductions in firm value due to changes in the business environment. Typically, the major sources of value loss are identified as:

6.3.1Credit Risk
Risk is inherent in all aspects of a commercial operation; however for Banks and financial institutions, credit risk is an essential factor that needs to be managed. Credit risk is the possibility that a borrower or counter party will fail to meet its obligations in accordance with agreed terms. Credit risk, therefore, arises from the banks dealings with or lending to corporate, individuals, and other banks or financial institutions.

6.3.2Foreign Exchange Risk

The foreign exchange market has played a vital role in the last decade or so in guiding the purchase and sale of goods, services and raw materials globally. The market directly affects each countrys bond, equities, private property, manufacturing and all assets that are available to foreign investors. Foreign exchange rates also play a major role in determining who finances government deficits, who buys equities in companies and literally effects and influences the economic scenario of every nation to cope with the foreign exchange risk in an open market economy. Foreign Exchange Risk refers to the potential change in earnings resulted from exchange rate fluctuations, adverse exchange positioning or change in the market prices.

6.3.3Money Laundering Risk

Money Laundering has become a universal problem as a result of the convergence of several remarkable changes in the world market. The growth in global trade, expansion of the
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international financial system, lowering of impediment to international travel and surge in the internationalization of organized crime have combined to provide the source and opportunity for converting illegal proceeds into legitimate fund. A definition of what constitutes the offence of money laundering under Bangladesh law is set out in Section 2 (Tha) of the Prevention of Money Laundering Act 2002 (Act No. 7 of 2002) which is reads as follows: Money Laundering means (Au) Properties acquired or earned directly or indirectly through illegal means; (Aa) Illegal transfer, conversion, concealment of location or assistance in the above act of the properties acquired or earned directly of indirectly through legal or illegal means;

6.3.4 Internal Control & Compliance Risk

Internal control is the process, affected by a company's board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the effectiveness and efficiency of operations, the reliability of financial reporting and compliance with applicable laws, regulations, and internal policies. The primary objective of internal control system in a bank is to help the bank perform better through the use of its resources. Through internal control system bank identifies its weaknesses and takes appropriate measures to overcome the same. The main objectives of internal control are as follows: Efficiency and effectiveness of activities (performance objectives). Reliability, completeness and timelines of financial and management information Compliance with applicable laws and regulations

6.3.5Asset Liability or Balance Sheet Risk

Asset Liability risk can be classified into three major types a) Liquidity Risk b) Interest Rate Risk & c) Foreign Exchange Risk

6.3.6 Information Technology Risk

Clear policies and procedures have been formulated, training programs have been arranged, organizational structure have been shaped, roles and responsibilities of all relevant officials have been defined in the Bank with a view to maintain IT risk effectively.

6.3 Risk Management Initiatives by Trust Bank Ltd

The Bank is in the activity of managing risks while still adhering to the main principles of building a profitable business. The ultimate goal of risk management is not to eliminate risk but to control risk in such a way that long term profitability is sustained. Intelligent risk taking is the core principle of risk management at TBL. The assessment of risk is one of the major tasks of banks and other financial institutions. Many risk factors can affect the Bank. The policy of Board of Directors is to constantly monitor and manage various risks the Bank faces in its business. For these purposes, the Bank operates different risk management divisions. In addition, internal auditors oversee operations in order to ensure that the risk
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management rules are implemented in accordance with the policy made by the Board of Directors.

The Banks risk management operates by classifying risks into core risks such as credit risk, asset-liability/ balance sheet risk, foreign exchange risk, internal control & compliance risk, money laundering and ICT risk. The risk management policy of the Bank are designed under the following broad principals:

Oversight by the Board / Executive Committee. Board approves policies and processes of risk management recommended by the management.

Audit committee of the Board reviews the internal audit reports of the Bank and risk management covering credit risk, operational risk including money laundering risk, market risk and liquidity risk; Independent risk management units viz. Credit Risk Management (CRM) Unit, Credit Administration Department (CAD), Credit Monitoring and Recovery Department, Treasury Department, Internal Control & Compliance Division, IT Division and Anti-Money Laundering Department and compliance officers of the branches are engaged in managing various risks.

Dedicated committees at management level have been set up to monitor risk viz. credit risk through Credit Committee, operational risk through Management Committee (MANCOM) and IC&C Division, market and liquidity risk through Asset Liability Committee (ALCO).

6.4.1 Risk Management Unit

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For effective management of various types of risks, Risk Management Unit (RMU) is working dedicatedly at the Bank. Unit comprises of the following Divisions:
Credit Risk Management (CRM) Division Internal Control & Compliance (IC & C) Division

International Division Operation Division Anti Money Laundering Department and IT Division Other than above mentioned departments, Credit Administration Department (CAD) plays a vital role in managing risk through ensuring proper compliance of documentation procedures before disbursement of loans and advances. Moreover, Board Audit Committee plays a pivotal role to risk management process of the Bank through evaluating effectiveness and adequacy of risk management unit and giving suggestions for further improvements thereto The Banks risk management operates by classifying risks into core risks such as credit risk, asset-liability/ balance sheet risk, foreign exchange risk, internal control & compliance risk, money laundering and ICT risk. The risk management policyof the Bank are designed under the following broad principals: Oversight by the Board / Executive Committee. Board approves policies and processes of risk management recommended by the management. Audit committee of the Board reviews the internal audit reports of the Bank and risk management covering credit risk, operational risk including money laundering risk, market risk and liquidity risk; Independent risk management units viz. Credit Risk Management (CRM) Unit, Credit Administration Department (CAD), Credit Monitoring and Recovery Department, Treasury Department, Internal Control & Compliance Division, IT Division and Anti-Money Laundering Department and compliance officers of the branches are engaged in managing various risks. Dedicated committees at management level have been set up to monitor risk viz. credit risk through Credit Committee, operational risk through Management Committee (MANCOM) and IC&C Division, market and liquidity risk through Asset Liability Committee (ALCO).

6.4.2 Credit Risk Management

Credit risk is the current and prospective risk to earnings and capital arising from the failure of an obligor of the Bank to repay principal or interest at the stipulated time or failure otherwise to perform as agreed. The Banks main asset is its loan portfolio. Carefully monitored credit risk serves as a basis for stable profits. To maintain and further improve a healthy loan portfolio it is
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imperative to scrutinize all applications and weed potential problem loans out during the application phase, as well as constantly monitor the current loan portfolio. While it is not the Banks policy to extend credit only for cases of very low risk, it is of utmost importance that the price of issued credit reflects both the risk and the cost incurred. This means that a detailed assessment of individual customers, their financial positions, and the collaterals in question are prerequisites for granting credit. Therefore, Credit risk management is at the heart of the overall risk management system of the Bank. It is designed and continuously updated to identify, measure, manage and mitigate credit risk to maintain and improve quality of loan portfolio and reduce actual loan losses and to ensure that approved policies and procedures are followed and appropriate due diligence is made in approving credit facilities. In the evaluation process the Bank takes into account all the relevant information and financials reflecting the borrowers personal credibility, business status and prospect. Besides, the Bank always endeavors to diversify the loan portfolio across borrowers, entrepreneurs, groups to avert credit concentration risk. Risk grading is another tool for mitigating credit risk. All the new commercial loan proposals are graded according to stipulated criteria. Credit risks are managed within our devised system. The Bank has an exhaustive credit policy which is periodically reviewed and updated under which all the functions of credit operations and management are carried out. Moreover, regulatory agencies guidelines are complied with in managing risks.

The Banks credit risk management encompasses the following strategies:

The Board of Directors approves major policy guidelines, growth strategy, exposure

limit for particular sector, product, individual company or group, keeping in view regulatory compliance, risk management strategy and industry best practice; The Board of Directors as the supreme authority only can approve maximum lendable exposure allowed by Bangladesh Bank. The Executive Committee of the Board of Directors can approve lendable exposure as approval authority has been delegated by the Board of Directors for speedy disposal of credit proposal; Some members of the Management Committee were also carefully delegated some approval authorities to strike a balance between adequate control and flexibility in credit operations; There is an independent risk management division called credit risk management (CRM) to assess credit risks and suggest mitigations before recommendation of every credit proposal; There is a separate credit administration department (CAD) which confirms that perfected security documents are in place before disbursement; There is a credit recovery unit to review loans and advances and strengthen the recovery process;

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 Interest accrued on classified loan is suspended and adequate provision is maintained

there against as per Bangladesh Banks Guidelines; Internal Control & Compliance Division (IC&C) verifies and ensures, at least once in a year, compliance with approved lending guidelines, Bangladesh Banks guidelines, operational procedures, and adequacy of internal control and administration; Status of classified loan is reported to the Board of Directors at the end of each quarter for its evaluation and review; Operations and performance of loans are regularly monitored at different levels to trigger the early alert system to address the loans whose performance show deteriorating trend;

Credit Risk is considered as a crucial factor in banks and financial institutions that needs to be managed meticulously. Trust Bank Ltd has designed a guideline for Credit Risk Management in line with the Credit Risk Guidelines circulated by Bangladesh Bank. In addition to this, Credit Policy of the Bank is being updated time to time in order to cope up with the changing scenario of dynamic global economy, liberalization and globalization and in the light of the directives of the focus group of Bangladesh Bank. The bank takes the following initiatives for Credit Risk Credit Risk Management: Management Segregation of Credit Line focusing on the risk factors and demand, Equipping the Credit Officials with modern risk assessment tools and techniques, Monitoring loans and advances after the proposal being approved and sanctioned by establishing separate division. The key methods used to identify, assess, control and monitor the credit risk of the Bank are as follows:

1. Risk Identification Critical analysis and review of delinquent accounts to identify weakness in credit. Benchmark of asset quality against industry peers. Apart from these, Credit Risk for the counterparty arises from an aggregation of Financial Risk, Industry Risk, Management Risk, Security Risk, Relationship Risk etc.

2. Risk Assessment and Measurement Use of credit risk rating system to grade the quality of borrowers. Collect the Credit Information Bureau (CIB) report of the potential borrowers from Bangladesh Bank. Stress testing of loan portfolios.

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3. Risk Control Credit policy which documents the credit risk rating, collateral policy and policies on rehabilitation and restructuring of problematic and delinquent loans. Efficient credit personnel to deal with the credit approval, processing and review. Segregation of duties between credit approval functions and credit origination. Independent credit control and monitoring.

4. Risk Monitoring Loan terms and conditions are monitored, financial statements are received on a regular basis and any breaches or exceptions are to be referred to the proper authority. Timely corrective action is to be taken to address findings of any internal, external or regulatory inspection. All loan facilities are reviewed and approved through the submission of a credit application annually.

Table: Credit Risk Management Process The credit risk management starts with experienced personnel appointed to the credit committee, which is chaired by the Additional Managing Director. All significant loans are approved at Head Office level by the Credit Committee while experienced senior officers at branches are given authority to approve loans with lower risk exposure. The following flow chart represents the Credit Approval Process of the Bank:

Credit Application Recommended by Relationship Officer/ Branch Manager

Head of Corporate & Head of Credit Risk Management

Managing Director

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Figure: Flow Chart of Credit Approval Process

6.4.3 Liquidity and Funding Risk Management

Liquidity and funding risk is an unavoidable source of risk in Banks operations. Liquidity risk is the current and /nor prospective risk that the Bank, though solvent, either does not have sufficient resources available to meet its liabilities when they fall due, or can secure them only at excessive cost. Liquidity risk arises from the inability ton manage unplanned decreases or changes in funding sources. Liquidity risk management of any financial institution focuses on the following three factors: first, sufficient liquidity; second, asset liability management; third, contingent funding. TBLs liquidity risk management includes the following strategies:

6.4.3.1 Maintaining sufficient liquidity it is the Banks policy to always maintain sufficient liquidity by maintaining a sufficient ratio of liquid assets and available funding to near term liabilities and possible payment outflows in a stressed environment. 6.4.3.2 Asset and liability management the Bank is managing its assets and liabilities in order to ensure sustained profitability so that the Bank can maintain a balanced and sustainable growth. As per Bangladesh Bank guidelines and considering the most practical aspects of the Bank, an approved policy manual on ALM has been prepared so that it could be followed consistently every sphere of the management. To support the ALM process, the Bank has established a committee called Asset Liability Committee (ALCO) headed by Managing Director, which holds meeting at least once in every month. ALM Desk, an executive functional and operational desk of the asset liability management, is embodied herewith the ALCO function under the direct control of Head of Treasury. The most important strategy of the ALM of the Bank is to ensure long-term funding and pre-fund what the Bank estimates will be the likely cash need during liquidity crisis. In order to manage asset-liability risk, the Bank:

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Reviews the interest rate structure and compares the same to the interest/product pricing of both assets and liabilities; Examines the loan and investment portfolios in light of the foreign exchange risk and liquidity risk that might arise; Examines the credit risk and contingency risk that may originate either due to rate fluctuations or otherwise and assess the quality of assets; and Reviews the actual performance against the projections made and analyzes the reasons for any effect on the spreads.

6.4.3.3 Contingency funding the Bank always maintains adequate liquidity to ward off liquidity crisis. The principal responsibility of liquidity risk management of the Bank rests with Treasury Division. Treasury Division maintains liquidity based on historical requirements, current liquidity positions, anticipated future funding requirement, sources of fund, options for reducing funding needs, present and anticipated asset quality, present and future earning capacity, and present and planned capital position. ALCO monitors the liquidity management of Treasury by Setting tolerance limit for cumulative cash fl ow mismatches, Setting limit on loan to deposit ratio, and Setting limits on dependence on institutional deposits which are volatile in nature.

5.4.5 Market Risk Management Market risk is the current or prospective risk to earnings and capital arising from adverse movements in market prices and rates. Broadly speaking, the Bank concerns itself with three main components under market risk: Interest rate risk is the risk that the value of interest rate sensitive instruments will change as a result of a change in market interest rates. Foreign exchange risk is the risk of loss due to adverse changes in foreign exchange rates. Equity price risk is the risk of loss due to adverse changes in equity markets. Interest rate risk Interest rate risk is the risk where changes in market interest rates might adversely affect a banks financial condition. In the year 2009, we observed how a bank is prone to interest rate risk caused from market interest rate movements especially when Bangladesh Bank fixed interest on certain loans and spread between interest on loans and deposits. Changes in interest rates affect a banks both the current earnings (earnings perspective) as well as the net worth of the bank (economic value perspective). Re-pricing risk is often the most apparent source of interest rate risk for a bank and is often gauged by
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comparing the volume of a banks assets that mature or re-price within a given time period with the volume of liabilities that do so. The short-term impact of changes in interest rates is on the Banks Net Interest Income (NII). On a longer term, changes in interest rates impact the cash fl ows on the assets,, liabilities and off-balance sheet items, giving rise to a risk to the net worth of the Bank arising out of all re-pricing mismatches and other interest rate sensitive position. Moreover, market competition; cost of fund, market volatility and regulatory compliance are key issues that are usually taken into account to manage any adverse movement of interest rate.

6.4.5 Foreign Exchange Risk Management

Foreign exchange risk arises from potential changes in the rate of foreign exchange which may affect the profit of the Bank. It involves prudently managing the foreign currency position in order to control within set parameters of the Bank. The frequency and direction of rate changes, the extent of the foreign currency exposure and the ability of counterparts to honor their obligations to the Bank are significant factors in foreign exchange risk management. In addition, the Bank is also exposed in interest rate risk and settlement risk on account of its foreign exchange business. Foreign exchange risks are measured and monitored by Treasury Division of the Bank. To address the issue, all foreign exchange activities have been segregated between front office and back office which are responsible for currency transactions, deal verification, limit monitoring and settlement of transactions separately. Trust Bank follows all the prudential guidelines of foreign exchange risk management set by Bangladesh Bank. Treasury Division always monitors the market scenario of risks and manages the foreign exchange operations in such a way that earnings are not hampered against any adverse movement in market prices. All NOSTRO accounts are reconciled on monthly basis and outstanding entries beyond 30 days are appraised by the Management for settlement. The NOSTRO accounts are verified by the external auditor and reports are submitted to Bangladesh Bank. Trust Bank Ltd has adopted a policy guideline with a view to reducing the foreign exchange risk. The initiatives include: Treasury Back Office is conducting operation in separate locations apart from the Treasury Front Office. Treasury Back Office is responsible for currency transactions, deal verification, limit monitoring, and settlement of transactions independently. Treasury Division always monitors the market scenario of risks and manages the foreign exchange operations in such a way so that earnings are not hampered against any adverse movement in market prices. NOSTRO accounts maintained with different countries in various currencies are operated by the International Division. All NOSTRO accounts are reconciled on monthly basis and outstanding entries are reviewed regularly for settlement. NOSTRO accounts are verified by the external auditors and reports are submitted to Bangladesh Bank.

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6.4.5 Equity Price Risk

Equity risk is defined as losses due to change in market price of the equity held. To measure and identify the risk, mark-to-market valuation of the share investment portfolios is done. Provision for equity price risk is made when market value of shares held for trading is lower than the cost price of shares at the reporting date. As at 31 December 2009 equity risk on banks investment was nil as the market value of shares were higher that the cost price. Investment account (Margin Account) where margin loan is allowed is monitored very closely against predetermined margin requirement and margin ratio. Moreover, at the time of providing margin loan factors such as, fundamentals of securities, liquidity of securities, capital appreciation, and risk factors are taken into consideration.

6.4.6 Operation Risk Management

Operational risk is the risk of direct or indirect loss or damage to the Banks reputation resulting from inadequate or failed internal processes or systems, or from human error or external events that affect the Banks image. It may arise from the risk of loss arising from fraud; unauthorized activities, error, omissions, inefficiency, and system failure form an external event. In TBL, operational risks are identified and measured in the following manner: Risks are identified with reference to the relevant policy manuals, processes, procedures and practices; Manuals and standard operating procedures are in place and implementation of these are regularly monitored; Review of system and network by Management Committee (MANCOM) Risk based and/or comprehensive audit by Internal Control & Compliance Division Audit by Board Auditor.

6.4.7 Internal Control and Compliance Risk Management

Internal Control refers to the mechanism in place on a permanent basis to control the activities in an organization. In absence of it risks result in unexpected losses caused by faulty internal processes, human errors, frauds & forgery, technology failure and documentary lapses may surface. The primary objectives of internal control system are to help the Bank performs better through the use of its resources, identify its weaknesses, take appropriate measures to overcome the same and ensure compliance with applicable laws and regulations. The Bank has set up Internal Control & Compliance ( IC & C) Division at Head Office to ensure that the internal control processes are in place through establishment of Audit Committee as per the instructions of Bangladesh Bank, which reviews the internal and external audit reports without any intervention of the Bank Management and ensures that Management takes effective measures in case any deficiency/ lapse is found in the internal control system. The Bank has introduced Risk Based Internal Audit (RBIA) to assess the business risk as well as control risk associated with the branches and determine how much care, monitoring & periodicity of comprehensive internal audit would be required to reposition the branches. In addition, the Bank has also introduced Spot Inspection in the branches in order to help avoid
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any fraudulent activities. In setting out a strong internal control framework within the organization the Bank has already brought out its Internal Control Manual, which focuses on monitoring the functions of various departments/divisions of Head Office and branches of the bank periodically on regular basis. IC & C Division of the Bank ensures its Internal Control Process through review of Departmental Control Function Checklist (DCFCL), Loan Documentation Checklist and Quarterly Operations Report of the branches and other mechanisms. In 2009 IC & C Division conducted comprehensive audit in 37 branches and 06 divisions at Head Office of the Bank. In the same year, the internal audit team of IC & C division carried out 08 spot audits in different branches. Also 20 special audits on different issues were conducted in the year 2009. In addition, audit was also conducted in the Merchant Banking Division of the Bank in 2009. Each year the IC & C Division sets out an audit plan (internal) for the year which is approved by the Managing Director. At the end of the year a summary report on audit findings and corrective action taken, is placed in a meeting of the Audit Committee of the Board for information and necessary advice/suggestions. To comply with the directives of Bangladesh Bank a special meeting of the Board of Directors was convened in 2009 to review the compliance/ implementation status on the observations of Bangladesh Banks comprehensive inspection report, where the representatives of Bangladesh Bank were also present.

6.4.8 Money Laundering Risk Management

In accordance with Money Laundering Prevention Act, 2009 money laundering means transfer, conversion, remitting abroad or remit or bring from abroad to Bangladesh the proceeds or properties acquired through commission of a predicate offence for the purpose of concealing or disguising the illicit origin of the property or illegal transfer of properties acquired or earned through legal or illegal means. The enactment of Anti-Terror Act, 2009 in the same year has given terrorist financing a deserved area of specialization for the financial institutions. Like other banks and FSI across the globe TBL reckons that prevention of Money Laundering & combating Terrorist Financing are the two challenges that confront the financial sector today. The Board of Directors, as such, has approved policy guidelines for anti-money laundering and countering of financing for terrorism (CFT) of the Bank. One of the main objectives of the Banks policy on CFT & AML is to portray the procedures and measures to be taken for combating financing of terrorism & money laundering and develop a workable system within the Bank for safeguards so that the institution can not be abused in any way as a conduit for ill practices, for the sake of disciplined financial management and social stability. To implement the Banks policy effectively the Central Compliance Unit (CCU) of AML Department at Head Office of the bank has been strengthened by delegating more power and authority to the Chief Anti-Money Laundering Compliance Officer (CAMLCO) to comply with the provisions of the legislation as well as the directives of Bangladesh Bank and other regulatory bodies. The CCU functions under the direct supervision of the Managing Director of the Bank. In the branch level there is designated anti-money laundering compliance officer, called Branch Anti-Money Laundering Compliance Officer (BAMLCO). All officers & executives of the Bank are well conversant with the process of Know Your Customer (KYC) through the exercise of due
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diligence. Bank has also introduced uniform account opening forms as Bangladesh Bank has prescribed for all banks, to have adequate information about the account holders and account operators. Bank shall continue to deploy considerable resources to establish and maintain employees awareness of the risk of money laundering & terrorist financing through proper training and to enhance their competence to identify and report suspicious account transactions. 6.4.8.1 Anti-money Laundering Policy Guideline The Board of Directors has approved policy guidelines for Anti-money Laundering and Countering of Financing for Terrorism (CFT) of the bank in line with Money Laundering Prevention Ordinance-2008. 6.4.8.2 Formation of Central Compliance Unit A Central Compliance Unit (CCU) has been formed under the leadership of a high Official at Head Office of the bank. 6.4.8.3 Appointment of Chief Anti-money Laundering Compliance Officer The Bank has designated a Chief Anti-money Laundering Compliance Officer (CAMLCO) at Head Office, who has sufficient power and authority to implement and enforce anti-money laundering policies, procedures and who reports directly to Senior Management and the Board of Directors. 6.4.8.4 Training & Workshop The Bank has already arranged and repeatedly arranging proper training and workshop for all relevant officials of the Bank giving the importance on the process of Know Your Customer (KYC) requirements for money laundering prevention purpose

6.4.9 IT Risk Management

Information technology risk refers to the possibility of facing a calamity in business due to technological glitches. In order to protect the interest of the financial institutions and the clients, the prevention of undue access to IT information, modification, physical destruction of IT systems and IT information are of paramount importance. There are mainly two types of IT risks one is loss of information permanently or temporarily and another is unauthorized use of information for alternation, modification, theft of information. There are also three types of inappropriate computer activity or computer fraud: Theft of information, such as customer lists, market research information, cost and pricing data, and launching plan of new products; Theft of assets by means, such as unauthorized electronic funds transfer or improper transfer of money from one account to another; Malicious destruction of information or programs by disgruntled employees or former employees, competitors, or hackers. The Banks IT risk management mainly focuses on safeguarding the financial and organizational information and our IT risk management is fully complied with the rules and regulations of central bank. For risk of losing information, the Bank has established a Disaster
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Recovery System along with Data Protection facility which includes a Disaster Recovery site for restoring and retrieval of the Banks data with utmost security measures. And for risk of unauthorized use of information and computer fraud, proper security measures are in place at the Bank For example, authorized employees are given ID number and password to access the information system of the Bank. However, power of user to access and manipulate data fully depends on authorization by senior management. Moreover, IT division of the Bank arranges training programs for the employees on a regular basis on banking software operation, hardware maintenance and network security in a wide area networking as well as local area networking environment. These training sessions help participants understand the risks involved IT operation and how to minimize those risks. By taking all other appropriate measures, the Bank has designed its overall IT risk management process aiming to contain the risks in this field.

6.4.10 Reputation Risk Management

Reputation risk refers to the risk of losses, falling business volume or income as well as reduced value of the company arising from business events that may reduce confidence of the customers, shareholders, investors, counterparties, business partners, credit rating agencies, regulators, public at large. TBL ensures adequate awareness amongst all employees, the branches and operational divisions of any changes in the market perception. With this end in view, business policies are framed and transactions are made exercising careful consideration. Any allegation by any aggrieved party against any employee of the Bank is taken with utmost significance, investigation is carried out, and if allegation is found correct, appropriate actions are taken against the person(s) liable. Necessary precautions are in place to watch and guard significant tax, legal or environmental risks.

6.4.11 Basel-II accord & its implementation

In 2004, the Basel Committee on Banking Supervision endorsed the publication of the International Convergence of Capital Measurement and Capital Standards: a Revised Framework, commonly referred to as Basel II. Bangladesh Bank adopted Basel-II accord for implementation in Bangladesh from 1 January 2009. Basel II provides three approaches of increasing sophistication to the calculation of credit risk capital: the Standardized Approach, the Internal Ratings Based Foundation Approach, and the Internal Ratings Based Advanced Approach. Basel II also introduces capital requirements for operational risk for the fi rst time. Basel II is structured around three mutually enforcing pillars: Pillar 1 sets out minimum regulatory capital requirements, that is, the minimum amount of capital banks must hold against credit, operational and market risks. Pillar 2 sets out the key principles for supervisory review of an institutions risk management framework and, ultimately, its capital adequacy. It sets out specific oversight responsibilities for the Board and senior management, thus reinforcing principles of internal control and other corporate governance practices. Pillar 2, in the new regulation, requires that the institutions conduct an internal capital adequacy assessment process (ICAAP). Pillar 3 aims to bolster market

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discipline through enhanced disclosure by banks. TBL is strongly committed to compliance with Basel II capital accord. As such, TBL has set up Basel Committee comprising top management of the Bank and Basel-II Implementation cell to comply with and implement the guidelines provided by BB with a view to strengthen capital structure against Banks exposure towards credit, market and operational risk. During the year TBL computed and reported capital on the basis of Basel II regime in parallel to Basel-I. In accordance with this, revised minimum requirements have been set for the Tier 1 and total capital ratios, including the requirement to treat capital deductions in the same manner, as required under Basel II. As dynamic growth of financial markets and the increased use of complex bank products have brought about substantial changes and challenges in the banks business environment, TBL has established several functioning systems for being limitation of and targeted control over each risk situations/center. Besides these, the new regulatory capital regime (Basel-II) has also placed the bank in an increased emphasis on risk management and an integrated intra-branchwide management Bank has taken a number of initiatives to identify and take apt measures for managing different risks posed by the ever changing business environment. The core risk areas include Credit Risk, Foreign Exchange Risk, Asset Liability Risk, Internal Control & Compliance Risk and Money Laundering Risk. Moreover considering present diversity in banking industry and to make the Banks capital requirement more risk sensitive, Bangladesh Bank has implemented Risk Based Capital Adequacy popularly known as Basel ll. According to the guidelines of Basel II, it is required to maintain minimum capital for market risk, operational risk along with credit risk. So it is momentous to manage market and operational risk along with credit risk with due care and zero tolerance. 6.4.12 Balance Sheet Risk Management 6.4.12.1 Formation of Asset Liability Committee As per Bangladesh Banks requirements, the Bank has formed a committee namely, Asset Liability Committee (ALCO) comprising of the senior management of the Bank to make important related to the Balance Sheet. The ALCO meets at least once in every month to receive and review reports on liquidity risk, market risk and capital management issues. 6.4.12.2 Market Risk Management The key objective of Market Risk Management is managing the effects of adverse movements on the Banks earnings and capital effectively. 6.4.12.3 Interest Rate Risk Management ALCO in its regular meeting analyses Interest Rate Sensitivity by computing GAP i.e. the difference between Rate Sensitive Assets and Rate Sensitive Liability and take decision of enhancing or reducing the GAP according to prevailing market situation in order to mitigate interest rate risk.
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5.4.12.4 Liquidity Risk Management The Bank continuously monitors liquidity risk and actively manages the Balance Sheet to minimize this risk. The Management has established minimum liquid assets holding requirements, together with limits. 6.4.12 Internal Control & Compliance Risk Management 6.4.13.1Policy Guideline The Board of Directors has approved a policy guideline on Internal Control & Compliance (IC&C) Risk for managing the activities in line with IC&C Framework formulated by Bangladesh Bank. 6.4.13.2 Separate Organizational Structure The bank has set up Internal Control & Compliance (IC&C) Division at Head Office to ensure that the internal control processes are in place through establishment of Audit Committee as per the instructions of Bangladesh Bank. Each year the IC & C Division sets out an audit plan (internal) for the year which is approved by the Managing Director. 6.4.13.4 Risk Based Internal Audit The bank has introduced Risk Based Internal Audit (RBIA) to assess the business risk as well as control risk associated with the branches and determine how much care, monitoring & periodicity of comprehensive internal audit would be required to reposition the branches.

6.4.13.5 Monitoring Unit IC & C Division of the bank ensures its Internal Control Process through review of Departmental Control Function Checklist (DCFCL), Loan Documentation Checklist and Quarterly Operations Report of the branches and other mechanisms. 6.4.13.6 Spot Inspection In addition, the bank has also introduced Spot Inspection in the branches in order to help avoiding any fraudulent activities. 6.4.14 Information Technology Risk Management 6.4.14.1 Automation Trust Bank Ltd provides services to its customers through automated system. Upgradation of the automation has been made through the years. The bank is eying to introduce Bangladesh Automated Clearing House, Western Union Money Transfer and Central Customer Support Center. 6.4.14.2 IT Audit Teams As per Bangladesh Banks guideline, a IT Audit Team has been formed. The members of the team audit the branches and divisions in regular interval. 6.4.14.3 Software The Bank uses different banking software which can minimize the Information Technology Risk
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Chapter - 6 Findings, Recommendations & Conclusions

6.1 Findings

During my internship in Trust Bank Ltd Dhanmondi Branch, I have observed some problem of the bank as such: Lack of sufficient and efficient executives or officers especially in the foreign exchange division. Foreign exchange business is highly dependent on the world economic situation. So any change in the world economic situation will affect the business. The suppliers influence is overlooked. Lengthy Lending process Not focusing on the competitive position of the bank with other players in the market.

6.2

Recommendations
approval of loans and to reduce the loan processing cost. To faster the lending process, The Trust Bank Ltd should facilitate online loan application submission and personal credit processing. Monitoring of a loan should be conducted at regular interval. Establishing strong Law and Recovery Team for recovery of classified loans For eliminating the risk of foreign exchange business, the bank should hire experts who can understand the future economic situation and can take initiative based on the forecast. Analyze existing players in the industry and potential players yet to enter. Recruit efficient personnel.

Credit committees at all levels must work in co-ordination with each other for quick

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6.2 Conclusions
Currently the banking sector is becoming extremely competitive with the arrival of multinational banks as well as technological infrastructure, effective foreign trade management, higher performance level and utmost customer satisfaction. Again the advent of a new era of information technology has changed the ways banks handle their business. Risk is an integral part of business, and the main role of risk management principle is to find the optimal balance of risk and return. In todays challenging environment, effective risk management is vital for maximization of shareholders wealth. In this report I take attempt to identify different types of risks of Trust Bank Ltd as such credit risk, asset-liability or balance sheet risk, foreign exchange risk, internal control & compliance risk and money laundering risk. In addition to these risks there is another risk namely information technology risk which is very apparent in todays corporate world. The Banks risk management process encompasses mitigating these risks in conformity with the guidelines of Bangladesh Bank. Trust Bank should minimize these risks as well as reengineer its plan and reform the service improvement strategy to retain the higher performance level, customer satisfaction and to compete with the existing and potential players.

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Annexures
Annexure A at a glance from 2004 to 2008

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Balance Sheet of 2009 and 2020(Half Yearly)

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BIBLIOGRAPHY
David H Pyle (1997). Bank Risk Management : Theory. Working Paper RPF-272

(http://haas.berkeley.edu/finance/WP/rpflist.html) http://www.bangladeshbank.org/mediaroom/circulars/fid/internalcont http://www.bangladesh-bank.org/mediaroom/circulars/fid/assetliability http://www.bangladesh-bank.org/mediaroom/circulars/fid/creditrisk.pdf. http://www.bangladeshbank.org/mediaroom/corerisks/ferisks.pdf http://www.bangladeshbank.org/mediaroom/corerisks/albsrisks.pdf http://www.bangladeshbank.org/mediaroom /corerisks/creditrisks.pdf http://www.bangladeshbank.org/mediaroom/corerisks/mlrisks.pdf. http://www.bangladeshbank.org/mediaroom/corerisks/iccrisks.pdf http://www.trustbank.com.bd/

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