Risk Management | MuganBank

Risk Management

Risk Management Policy of “Muganbank” OJSC is implemented in accordance with the “Regulations on Corporate Governance Standards in Banks” and “Risk Management Standard” of the National Bank of Azerbaijan Republic, Basel Committee Recommendations on “Risk Management in Credit Organizations”, best risk management practices in credit organizations, and the Bank’s Charter and Strategic Plan. The key objectives of this Policy include the organization and principles of risk management work, the defining of the duties and responsibilities of responsible units, and the setting of strategic and daily risk management, monitoring and control limits. Managing a risk identified and regulated hereunder embraces the Bank’s all products, services and business processes, as well as, the third party services provided to the Bank. Furthermore, this Policy applies to the Bank’s all employees, investments, hardware and software, including its procedures and legal relations. The core objective of risk management systems is to minimize risks not to pose a threat to the Bank’s profitability. Risk management should be an integral part of the overall management of the Bank. In this regard, the risk management authorities are divided into the following groups:

Responsibilities of the Risk Management Department

  • Organizing risk management at the Bank;
  • Risk analysis;
  • Providing recommendations on risk management and risk policy;
  • Developing risk management procedures;
  • Helping develop new products; 
  • Providing risk management information to the Management Board;
  • Providing information and organizational support to the Risk Management Committee.

Responsibilities of the Risk Management Committee: 

  • Risk change analysis; 
  • Providing recommendations on risk policy;
  • Providing recommendations on risk limits;
  • Maintaining control over risk decisions;
  • Assessment and review of risk management procedures;
  • Providing operational support to risk management process;
  • Identifying relevant structural units and staff for risks.

 Responsibilities of the Credit Committee: 

  • Approving loans that exceed the Supervisory Board-set limits;
  • Providing recommendations on credit policy;
  • Analyzing credit risk development, in particular:
  • Developing lending standards by territories and types of activity;
  • Monitoring loan concentrations; 
  • Monitoring  loan portfolios; 
  • Collateral appraisal;  
  • Control over the execution of all loan repayment activities;
  • Review and analysis of adequacy of loan loss provisions;
  • Setting interest rates on loans;
  • Review, assessment and revision of lending procedures;
  • Maintaining control over credit risk decisions, in particular:
  • Ensuring compliance with lending procedures.

Responsibilities of the Asset and Liability Management Committee: 

  • Managing the Bank’s assets and liabilities;
  • Identifying the goals and objectives of liquidity management;
  • Defining interest rate policy;
  • Identifying the goals and objectives of market risk policy;
  • Identifying the goals and objectives of funds management;
  • Ensuring compliance with the standards and ratios established by the legislation;
  • Maintaining control over liquidity and market risks-related decisions.

Responsibilities of the IT Committee: 

  • Making key decisions on investment in information technologies, including both hardware and software;
  • Assessing the Bank's IT risk;
  • Ensuring continuous operation of the management information system;
  • Ensuring continuous operation of automated operating systems;
  • Developing and updating a contingency plan;
  • Creating relevant archives for accounting information and MIS;
  • Reviewing and updating information technology procedures;
  • Maintaining control over decisions on IT-related risks.

Responsibilities of the Management Board (for risk management): 

  • Carrying out risk management at the Bank;
  • Supporting risk related committees;
  • Developing recommendations on risk policies (other than the recommendations of the Risk Management Committee) and submitting them to the Supervisory Board;
  • Providing a risk status report to the Supervisory Board;
  • Submitting a risk limit change to the Supervisory Board’s approval.

Responsibilities of the Supervisory Board (for risk management)

  • Approving  the Bank’s Risk Policy;
  • Approving risk limits and their modifications;  
  • Supervising the Management Board;
  • Form risk committees;

Responsibilities of the Shareholders’ General Assembly (for risk management): 

  •  Ensuring adequate risk management at the Bank.

Responsibilities of the Bank’s employees (for risk management): 

  • Acting in accordance with risk management regulations;
  • Complying with the CBA’s and internal regulations on risks;
  • Reporting new risk types and risk changes;
  • Providing and attending necessary trainings;
  • Performing their responsibilities in a timely and good manner;

Responsibilities of the Internal Audit (for risk management): 

  • Control over the effectiveness of the risk management system at the Bank;
  • Identifying new risks;
  • Supporting risk management process; 
  • Cooperation with the Risk Management Committee, with no membership.