Table of Contents of the Book: 8170947073

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Contents

Foreword     

Preface        

1.    Management and Audit of Banking Risks — Introduction and Approach        

n        Business Risks           

n        Control Risk   

n        Management of Banking Risk   

n        Inspection and Audit Function         

n        Risk-Based Internal Audit System           

2.    Credit Risk       

n        Defining Credit Risk 

n        Need for Effective Credit Risk Management  

n        Views of Eminent Bankers and Economists on Factors Responsible for High Level of NPA

n        Credit Risk Management  

n        Parameters Generally Used by Banks for Risk Scoring / Rating Systems      

n        Managing Credit Risk — Policies and Procedures       

n        Organizational Structure for Effective Credit Administration and Risk Management Function

n        Approach to Credit Audit Function         

n        Broad Areas to be Examined during Credit Risk Audit

Annexure I:   An Illustrative Model of Credit Risk Scoring / Rating System

Annexure II: Organizational Structure for Credit Risk Management Function

Annexure III: Audit Issues Related to Loans / Advances to be Covered by Central Statutory Auditors in Long Form Audit Report (LFAR)

Annexure IV:  Credit Portfolio — Asset Classification & NPAs              

Annexure V:   Risk Categorisation of Credit Portfolio Related to Sanctions by Various Offices

Annexure VI:  Credit Risk Concentration, Categorization and Migration 

Annexure VII: Credit Risk in Off-Balance-Sheet Items [Bank Guarantee (BG) & Letter of Credit (LC) Facilities both Inland & Foreign]

3.    Market Risk with Focus on Earning and Interest Rate Risk                  

n        Defining Market and Interest Rate Risk   

n        Sources of Funds           

n        Deployment of Funds

n        Mismatch / Gap Risk   

n        Basis Risk   

n        Price Risk   

n        Embedded Option Risk 

n        Reinvestment Risk   

n        Management of Interest Rate Risk   

n        Duration Gap Analysis           

n        Simulation Method           

n        Issues that Need to be Looked into by the Auditors while Auditing Earning and Interest Rate Risk   

Annexure I: Gap Statement of Interest Rate Sensitivity

4.    Management of Foreign Exchange and Country Risk 

n        Defining Forex Risk     

n        Types of Forex Risk     

n        Management of Forex Risk     

n        Credit Risk related to Forex Transaction 

n        Country Risk     

n        Management of Country and Forex Risk — Policies and Procedures  

n        Issues Requiring the Auditor’s Attention

5.    Liquidity Risk                

n        Background     

n        Defining Liquidity Risk    

n        The Need and Importance of Having a Reasonable Level of Liquidity

n        Items of Assets / Liabilities

n        Dynamic Liquidity Statement

n        Management of Liquidity Risk     

n        Management of Liquidity Risk     

n        Audit of Liquidity and Asset Liability Management Function in Banks

6.    Operational Risk                

n        Technology Risk     

n        Process Risk     

n        Legal Risk     

n        Reputation Risk     

n        People Risk     

n        Measuring Operational Risk    

n        Capital Allocation for Operational Risk     

n        Audit Issues related to Operational Risk     

7.    Organization and Management Risk                

n        Background     

n        Broad Guidelines of RBI     

n        Role and Functions of Committees     

n        Risk-Based Internal Audit Including Creation of Proper Organizational Set-up       

n        Audit of Organization and Management — Aspects to be  Commented upon by Auditors  

Annexure I: Broad Organizational Structure for Management of Banking Risks

8.    Group Risk       

n        Background     

n        Reasons for Unsatisfactory Functioning of Subsidiaries / Joint Venture Companies    

n        Issues Related to Group Risk to be Examined by the Auditors

9.    Equity and Commodity Price Risk                

n        Defining Equity Risk

n        Factors Influencing Equity Investment Decisions

n        Highlights of RBI Guidelines

n        Management of Equity Investment

n        Commodity Price Risk

n        Issues Requiring Attention of Auditors

10.  Bank’s Business Strategy and Environment Risk      

n        Background     

n        Issues Generally Covered in Bank’s Loan Policy Documents     

n        Issues Related to Business Strategy and Environment Risks to be Looked into by the Auditors      

11.  Risk Related to Control Function       

n        Different Types of Banks’ Control and Inspection / Audit Systems     

n        Inspection / Audit Including Risk-Based Supervision Conducted by RBI to View Bank’s Functioning

n        Highlights of RBI’s Guidelines to Banks’ on Switching over to a Risk-Based Internal Audit System       

n        Management of Control Risk   

n        Issues Related to Control Risk Requiring Examination by Auditors

12.  Bank’s Internal Inspection and Risk-Based Audit of Branches  

n        Risk-Based Internal Audit (RBIA) System of Branches as Implemented by Some Banks

n        Earlier Inspection and Present Risked-based Audit Systems

Annexure I: Internal Risk-Based Audit of Credit Activity in Relation to Business and Control Function

13.  Suggestions for Effective Management of Banking Risks with Emphasis on HRD Issues   

n        Background

n        Credit Risk — Appraisal System

n        Credit Risk Rating and Scoring System

n        Monitoring and Follow-up Systems

n        Non-Performing Assets (NPAs)

n        Bank’s Policy Documents

n        Organisational and Management Aspects

n        Risk-Based Internal Audit System (RBIAs)

n        Concluding Observations

14.  Basel Committee on Banking Supervision — Highlights of the Reports          

n        Background                               

n        The First Basel Committee Report (1988)               

n        The New Basel Capital Accord               

n        The Basel Committee Second Accord (2004)               

n        Credit Risk — Approaches for Calculating Risk-Weighted Assets 

n        Operational Risk                               

n        Market Risk / Trading Book Exposures               

n        Supervisory Review Process               

n        Market Discipline               

Index