Report on:

Comparison of performance analysis and risk management between: 1. Dutch-Bangla Bank Limited (DBBL) 2. Islami-Bank Limited(IBBL)

Comparison of performance analysis and risk management between: 1. Dutch-Bangla Bank Limited (DBBL) 2. Islami-Bank Limited(IBBL) Submitted to: Course teacher: Nushrat Faruqui, Lecturer Department: BBA Daffodil International University Submitted by:

LETTER OF TRANSMITTAL
20 December 2010

Serial no 1 2 3 4 5

Name Md. Habibur Rahman Md. Mahamudul Bari S.M. Sourov

ID 091-11742 091-11714

Section A A A A A

091-11675 091-11Shamim Ahmed 757 091-11Smita paul 721

Ms. Nushrat Faruqui, Lecturer

Department of Business Administration Daffodil International University Dhaka-1207 Subject: Submission of report Paper. Dear Madam: We are very pleased to submit this research Paper on comparison of overall performance and risk management system between Dutch-Bangla Bank limited (DBBL) and IslamiBank Bangladesh Limited (IBBL) as you have authorized us in this semester. We are honored to prepare this assignment under your guidance since it gave us the opportunity to know the current status of overall performance & risk management system of both of the banks and analyze its condition in our country. We tried our level best to accumulate the information for you as comprehensive as possible. We believe that it was a great opportunity for us to get involved with process of reporting and enriching our knowledge. I will be obliged to provide further clarification on this assignment whenever necessary. Thanks & Sincerely yours, MD. Habibur Rahman MD. Mahamudul Bari MD. shamim Ahmed S.M Sourav Smita Paul

Executive Summery:
This report has prepared as a requirement of the principles of banking course. The report is based upon the comparison of overall performance and risk management system between

Dutch-Bangla Bank limited (DBBL) and Islamic-Bank Bangladesh Limited (IBBL). This report will help us know about overall performance analysis of DBBL and IBBL and Risk management system of both of the banks. The report will also focus on total performance indicators of both of the banks. Further the report analyses DBBL and IBBL in the country by identifying key market players (including major procedures, traders, etc), as well by evaluating foreign economic relations within the Banking sector in recent years. Secondary sources of data have been used to gather information in this report. The report has analyzed the comparison between DBBL and IBBL for the term of last five financial years. The aim of the study is to provide a clear conscious about the comparison of overall performance and risk management system, which will assist strategy group and the management terms and also shareholders in making correct decisions as how to penetrate the Bangladesh Banking company and how to catch the maximum commercial opportunities in dealing with Business partners in this country.

ACKNOWLEDGEMENT

In the process of preparing this report we received genuine cooperation in collecting annual report and various Information on both of the banks from number of individuals whose names are not possible to mention in this report but we would remember them with my heart felt appreciation and gratitude. First of all, I am very much grateful to Almighty Allah who gave blessings, courage and ability to prepare this report. I am very much grateful to Nushrat Faruqui, Lecturer, Department of Business Administration, Daffodil International University, for guiding us to prepare the report. We are also highly indebted to her for his scholarly and constructive suggestion which was of much assistance to prepare this report on comparison of overall performance and risk management system between Dutch-Bangla Bank limited (DBBL) and Islami-Bank Bangladesh Limited (IBBL) And finally, we would like to say that we have tried heart and soul to prepare this report accurately. However there might be some errors and mistake, so we seek your kind consideration as we are in the process of learning.

Table of contents
1. Introduction:
i. Rationale of the report:

ii. iii. iv. v. vi.

Objective of the report: Scopes of the report: Methodology Limitations Reasons of choosing DBBL and IBBL:

2. The Organization:
i. ii. iii. iv. v. vi. Historical Background of Dutch Bangla Bank Limited Historical Background of IBBL Nature of Business of Dutch-Bangla Limited Nature of Business of Islami-Bank limited Mission & vision of Dutch-Bangla Bank limited Mission and vision of Islami-Bank limited

3. Analysis and Findings: i. ii. Comparisons of overall performance between Dutch-Bangla Bank limited (DBBL) and Islami-Bank Bangladesh limited (IBBL) Risk management of DBBL and IBBL a. credit risk b. Operational Risk Management c. Market risk Management 4. Recommendations and conclusion

1. Introduction: 1.1.
Rationale of the report:

Banking is a crucial global financial service industry. The fundamental functions enclosed by a bank comprise gather together deposit and deploying that in credits of different categories in form with the requirement of various customers. The interest of the extensive variety of people is strongly related to banks operation and performance. For the sake of investors safety, regulators are also engrossed in monitoring performance of banks all over. More than 90% of financial assets of Bangladesh are owned by different category of bank, which is also largely contributing to the growth in the countys GDP and employment. Since, banking activity affects the overall economic performance; incessant measurement of performance of these financial institutions has been indispensable. In the recent years, a series of most prominent banking institution like Dutch- Bangla Bank limited (DBBL) and Islami Bank Bangladesh Limited (IBBL) have been announced their annual report. Some offerings and yearly overall performance has been published on behalf of Shareholders and clients and gathered acceptance in the market. Most offerings performance has a global reach. But it is not really clear how they differentiate, where and how exactly they add value and how their offering will develop. A lot of expectations are built up but have not yet translated into market-wide adoption.

1.2. Objective of the report:

The report is based upon the Comparison of performance analysis and risk management between DBBL and IBBL. This report will help us know about the performance analysis and risk management system of both of the Bank. The report will also focus on Benefits generated by both of the bank and contributions development of the bank and earnings to the shareholders. This study contrasts financial performance and its deviations among different conventional and Islamic banks in Bangladesh with the following specific objectives: 1. Comparative profitability status of DBBL and IBBL 2. Comparative riskiness of DBBL and IBBL 3. Comparison of performance of both the Banks with the industry average and different generations of banks 4. Identifying points-of-riskiness for both the banking Sector and recommendation on possible turning points

1.3. Scopes of the report:

The research regarding our term paper is

 To fulfill the requirement of the course curriculum. To find out the historical background of DBBL and IBBL. To present the financial performance and solvency of both the bank To identify performance analysis and risk management system of both of the bank. To find out some major problems of banking sector. To suggest necessary steps to develop this business in a developing country like Bangladesh.

1.4. Methodology
The Graphical methods have been use to represent the analysis of the report. The basic research program is to represent the comparisons of performance analysis and risk management system of DBBL and IBBL. Secondary sources of data have been used for data requirements of the report. Secondary sources of data: Annual report of Dutch-Bangla Bank and Islami Bank Bangladesh Limited and different articles published in the journals & magazines have been used. Secondary Sources are: Annual report of DBBL and IBBL. Internet website of the Bank. Banking Journals

1.5 Limitations
Preparing the term paper we have faced some obstructions which are Lack of proper information in the websites of both of the Bank. Lack of required information in the annual report of both the bank. Lack of necessary information in the journals and official publications of insurance companies. Inexperience and time constraint is the limitation restricting this report from being more detailed. Secondary data has been collected from the hand books, magazines, which may biased to the insurance business.

1.6. Reasons of choosing DBBL and IBBL:

Dutch-Bangla Bank limited (DBBL) and Islami-Bank Bangladesh limited (IBBL) are two leading private owned commercial Banks in Bangladesh. In Bangladesh, two types of banking system are operating.

DBBL is the bank which is working for generating profit by collecting money as a form of deposits with a low rate of interest rate and supply money on the basis of short term and long term loan to the business people with a high rate of interest. The actual profit generated gap between the interest given to depositors and interest taken borrowers. IBBL is the bank which is operating under a distinct system of banking, Islamic Shariah, Islamic banks have been facing immense competition from other Islamic banks and conventional banks of domestic and multination origin. It is committed to conduct all banking and investment activities on the basis of interest-free profit-loss sharing system. The Bank has been maintaining its leading position among Private Sector Banks of the country in respect of its Deposit, Investment & Profitability. IBBLs well diversified product lines offer a wide range of Shariah based commercial banking services comprised both asset-based and liabilitybased.

2. The organization:
2.1. Historical Background of Dutch Bangla Bank Limited:
Dutch-Bangla Bank started operation is Bangladesh's first joint venture bank. The bank was an effort by local shareholders spearheaded by M Sahabuddin Ahmed (founder chairman) and the Dutch company FMO. DBBL was the first bank in Bangladesh to be fully automated. The Electronic-Banking Division was established in 2002 to undertake rapid automation and bring modern banking services into this field. Full automation was completed in 2003 and hereby introduced plastic money to the Bangladeshi masses. DBBL also operates the nation's largest ATM fleet and in the process drastically cut consumer costs and fees by 80%. Moreover, DBBL choosing the low profitability route for this sector has surprised many critics. DBBL had pursued the mass automation in Banking as a CSR activity and never intended profitability from this sector. As a result it now provides unrivaled banking technology offerings to all its customers. Because of this mindset, most local banks have joined DBBL's banking infrastructure instead of pursuing their own. Even with a history of hefty technological investments and even larger donations, consumer and investor confidence has never waned. Dutch-Bangla Bank stock set the record for the highest share price in the Dhaka Stock Exchange in 2008.

2.2. Historical Background of IBBL:

Bangladesh is one of the largest Muslim countries in the world. The people of this country are deeply committed to Islamic way of life as enshrined in the Holy Qur'an and the Sunnah. Naturally, it remains a deep cry in their hearts to fashion and design their economic lives in accordance with the precepts of Islam. The establishment of Islami Bank Bangladesh Limited on March 13, 1983, is the true reflection of this inner urge of its people, which started functioning with effect from March 30, 1983. This Bank is the first of its kind in Southeast Asia. It is committed to conduct all banking and investment activities on the basis of interestfree profit-loss sharing system. In doing so, it has unveiled a new horizon and ushered in a new silver lining of hope towards materializing a long cherished dream of the people of Bangladesh for doing their banking transactions in line with what is prescribed by Islam. With the active co-operation and participation of Islamic Development Bank (IDB) and some other Islamic banks, financial institutions, government bodies and eminent personalities of the Middle East and the Gulf countries, Islami Bank Bangladesh Limited has by now earned the unique position of a leading private commercial bank in Bangladesh.

2.3 Nature of Business of Dutch-Bangla Limited:

The bank grew its reputation through social work rather than profits. The bank's conservative nature, long-term strategies, hefty social donations and technology investments have always led to modest but steady profits. DBBL has been known to be overly conservative in its banking practices. Much of the success and strategy has been attributed to the leadership of the founder chairman, M Sahabuddin Ahmed. Dutch Bangla Bank is noted to be the first and only local bank in Bangladesh to have an automated banking system. The bank has spent over BDT 2 Billion in automation upgrades (first bank in Bangladesh to do so). This automation took place in 2003 whereby services of the bank were available uniformly though any branch, ATM and internet. Banking was a paper based until DBBL, with its wide local network, delivered banking automation and modern banking services to the masses.

2.4 Nature of Business of Islami-Bank limited:

Bangladesh is one of the largest Muslim countries in the world. The people of this country are deeply committed to Islamic way of life as enshrined in the Holy Qur'an and the Sunnah. Naturally, it remains a deep cry in their hearts to fashion and design their economic lives in accordance with the precepts of Islam. This Bank is the first of its kind in Southeast Asia. It is committed to conduct all banking and investment activities on the basis of interest-free profitloss sharing system. To maintain islami shariah the bank performs such tasks To maintain all types of deposit accounts. To make investment. To conduct foreign exchange business. To extend other banking services. To conduct social welfare activities through Islami Bank Foundation.

2.5 Mission & vision of Dutch-Bangla Bank limited:

Dutch-Bangla Bank engineers enterprise and creativity in business and industry with a commitment to social responsibility. "Profits alone" do not hold a central focus in the Bank's operation; because "man does not live by bread and butter alone". Dutch-Bangla Bank dreams of better Bangladesh, where arts and letters, sports and athletics, music and entertainment, science and education, health and hygiene, clean and pollution free environment and above all a society based on morality and ethics make all our lives worth living. DBBL's essence and ethos rest on a cosmos of creativity and the marvel-magic of a charmed life that abounds with spirit of life and adventures that contributes towards human development.

2.6 Mission and vision of Islami-Bank limited:

To conduct interest-free banking To establish participatory banking instead of banking on debtor-creditor relationship To invest on profit and risk sharing basis To accept deposits on Mudaraba & Al-Wadeah basis To establish a welfare-oriented banking system. To extend co-operation to the poor, the helpless and the low-income group for their economic upliftment To play a vital role in human development and employment generation. To contribute towards balanced growth and development of the country through investment operations particularly in the less developed areas. To contribute in achieving the ultimate goal of Islamic economic system.

2.7 Analysis to perform to indicate performance:

1. Deposits 2. Total revenue 3. Net profit after tax 4. earning per share 5. Return on equity 6. Return of assets 7. Income from investment 8. Tax paid to government 9. Total import business 10. total export business

3.

Comparisons

of

overall

performance

between

Dutch-Bangla Bank limited (DBBL) and Islami-Bank Bangladesh limited (IBBL): 1. Deposits:
In last five years the IBBL raveled higher performance in collecting money as a form of deposits then DBBL. Year DBBL IBBL 244292.14 202115.45 166325.29 132419.40 107779.42
In million taka

diposits
300000 250000 200000 150000 100000 50000 0 2009 2008 2007 year 2006 2005 DBBL IBBL

2009 67788.53 2008 51575.67 2007 42110.15 2006 40111.54 2005 27241.11

So, here we can say that, IBBL is more efficient in collecting money as a form of deposits from people as compared to DBBL.

2. Total Revenue:
The total revenue IBBL was very high as compared to DBBL. In 2009, the total revenue DBBL was 8914.28 million where the total revenue of IBBL was 25403.86 million taka. The revenue of subsequent year as follows: Year DBBL IBBL

Total revenue
30000 25000 In million taka 20000 15000 10000 5000 0 2009 2008 2007 Year 2006 2005 DBBL IBBL

2009 8914.28 25403.86 2008 7275.75 23756.33 2007 6367.58 17699.52 2006
5181.15 14038.3

2005 3434.73 10586.78 So, here, we can say that, IBBL generates more profit by investing their funds as compared to DBBL.

3. Net profit after tax:

IBBL has reveled high profit generating performance as compared to DBBL last five subsequent financial years. In 2009, the net profit after tax of IBBL was 3403.55 where the net profit after tax was 1137.7. The subsequent profit after tax as follows: Year DBBL IBBL 2009 1137.7 3403.55 2008 821.67 2674.8 2007 2006 2005
479.81 362.18 367.82 1427.36 1400.59 1125.82

Profit after Tax

4000 3500 3000 2500 2000 1500 1000 500 0 2009 2008 2007 ye a r 2006 2005 DB BL IB BL

Because, total revenue of IBBL is more than DBBL. So usually, the profit after tax of IBBL is greater then DBBL.

4. Earning per share (EPS) :

In last five financial years, The DBBL has reveled high earning per share as compared to IBBL. The highest move up of DBBL in EPS was 237.37 where IBBL has 30.04 tk EPS.
In taka

In million taka

Earning per Share

250 200 150 100 50 0 2009 2008 2007 Year 2006 2005 DBBL IBBL

Year DBBL IBBL

2009 2008 2007 2006 2005 75.85 54.78 237.37 179.18 181.97 55.1 43.3 30.04 36.84 48.76

So, Here, DBBL reveled high effectiveness to get Higher earning per share as compared to IBBL.

4. Return on equity:

Percentage

DBBL has proved their efficiency and effectiveness to get proper return on equity as compared to IBBL. In last year, DBBL has got return on equity 30.28% where the return on equity of IBBL was 16.93%. The return on equity of last five years as follows: Year
2009 2008 2007 2006 2005

Return on equity (% )
35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2009 2008 2007 year 2006 2005 DBBL IBBL

DBBL
30.28% 29.89% 24.02% 24.07% 31.01%

IBBL
16.93% 19.02% 13.00% 13.42% 13.51%

The chart shows that, the return on equity of DBBL Is more than IBBL. Here, DBBL is highly effective in getting proper return on equity.

6. Return on Assets:
DBBL has also proved their efficiency & effectiveness to get return on assets (ROA) as compared to IBBL. But there was a move down in 2006, that the IBBL got much ROA then DBBL. The subsequent ROA of last five years of both of the banks as follows:
year 2009 2008 2007 2006 2005 DBBL 1.60% 1.49% 1.01% 0.93% 1.29% IBBL 1.34% 1.27% 0.84% 1.03% 1.00%

Return on Assets (ROA)

2.00% 1.50% percentage 1.00% 0.50% 0.00% 2009 2008 2007 ye a r 2006 2005 DBBL IBBL

The chart shows that, DBBL is also effective in getting proper return on assets as compared to IBBL.

7. Income from Investment:

In million Taka

IBBL aims to make proper investment and make profit. IBBL proved their efficiency in Investment decision and made a huge amount of Income from Investment as compared to DBBL. The subsequent income for last five years as follows: Tk in million
year 2009 2008 2007 2006 2005 DBBL 1334.17 621.73 630.86 428.97 202.02 IBBL 21485.69 19952.59 14856.19 11295.43 8426.53

Income from Investment

25000 20000 15000 10000 5000 0 2009 2008 2007 year 2006 2005 DBBL IBBL

Most of the income or assets are invested rather than lending money in IBBL. So income from investment of IBBL is more than DBBL.

8. Tax paid to government:

The overall profit of IBBL is greater then DBBL. So considerably, IBBL will pay more Tax then DBBL. Exactly, IBBL has paid huge amount of tax to government then DBBL. The amount paid for last five years as follows: Tk in Million
year 2009 2008 2007 2006 2005 DBBL 1016.68 954.41 542.45 374.81 320 IBBL 3253.23 3245.08 2322.46 1490.12 973.09

Tax paid to government

3500 3000 In million taka 2500 2000 1500 1000 500 0 2009 2008 2007 year 2006 2005 DBBL IBBL

The total Income before tax of IBBL remains greater than DBBL. So IBBL pays tax to government more than DBBL.

9. Total Import Business:

In million taka

IBBL has found more profitable and attentive in Import business. It has reveled satisfactory performance in import business then DBBL. The total import businesses of both the banks are as follows:
year 2009 2008 2007 2006 2005 DBBL 53088.66 43999.44 53667.74 32067.74 26029.01 IBBL 161230 168329 137086 96870 74525

Total Import
200000 150000 100000 50000 0 2009 2008 2007 year 2006 2005 DBBL IBBL

10. Total Export Business:

The IBBL has found more approving and trusted bank in export business and by foreign buyers as compared to DBBL.the total export business of both the banks are as follows:
In million taka

Total Export
120000 100000 80000 60000 40000 20000 0 2009 2008 2007 Year 2006 2005 DBBL IBBL

year 2009 2008 2007 2006 2005

DBBL 41162.51 40083.14 34060.27 33344.69 22144.17

IBBL 106424 93962 66690 51133 36169

Risk management of DBBL and IBBL:

Banks usually manages following types of risks: 1. credit risk 2. Operational Risk Management 3. Market risk Management

Credit Risk:
Credit risk is the most significant and inherent risk in banking business. Every loan exposure or transaction with counterparty involves the Bank to some degree of credit risks. Credit Risk Management is at the heart of the overall risk management system of the Bank. Dutch-Bangla Bank Limited manages its risks by taking following measures: Early warning system Credit policy approved by the Board Credit approval is delegated properly Independent Credit Risk Management Division Separate Credit Administration Division for Documentation Credit operations are subject to independent Internal Audit Reporting to Board /Executive Committee

Islami-Bank Bangladesh Limited, though IBBL does not provide short-term loans, it makes profitable investments. In order to manage investment risk the bank formulated investment policies in compliance with 1. 2. 3. 4. 5. 6. regulatory requirements covering investment assessment, collateral requirements, risk grading and reporting, Documentation and legal formalities and procedures. Separate investment guidelines Consumer Investment Schemes. Authorization limits are carefully allocated to branches, Zonal Offices and Head Office for the approval and renewal of investment facilities.

On the basis of designation of officials, Board is the supreme authority to approve investment beyond the discretionary power of Branches, Zonal officials, Head Office Executives, Management Committee and Executive Committee. Having specific guidelines, concentration limits of exposure to industries and geographies are set through observing market trend. However, maximum concentration to individual client is determined on the basis of regulatory guidelines. Investment Wing of Head Office also provides advice, guidance and specialized skills to business units to promote best practice throughout the bank in the management of investment risk. Moreover, Internal Control and Compliance Wing and Shariah Muraqibs independently verify the compliance with approved Investment guidelines, Bangladesh Bank guidelines and operational procedures. The investment functions of the bank have been segregated in the area of Relationship Management/Marketing, Investment Administration, Investment Documentation and Investment Recovery. 2. Operational

Risk Management of DBBL and IBBL:

Operational risk is the risk of loss resulting from inadequacy or failure of internal processes, systems and people or from external events.

I.

Internal Control & Compliance (ICC) Risk:

Internal Control & Compliance Division of DBBL under direct supervision of Audit Committee of the Board has been implementing detail guidelines on ICC risk management to assess and mitigate risks and as part of it the IC&CD has been divided into three (3) independent units; namely :a) Audit & inspection unit b) Monitoring unit c) Compliance unit The units have been functioning independently & separately with direct reporting lines to the Head of Internal Control & Compliance (ICC) department. In addition, Departmental Control Function Check List has been introduced in the branches & divisions at head office under direct supervision of Monitoring Unit of IC& CD which ensures compliance with regulatory rules and regulations as well as general banking norms and procedures. Internal Control and Compliance Wing of IBBL has been minimizing the errors and frauds through establishment of three separate divisions namely A) Audit & Inspection Division, B) Compliance Division and c) Monitoring Division. Audit and Inspection Division undertakes periodic and special audit of the branches and departments of Head Office to review the operational effectiveness of the bank. In YE2009, the audit team visited all the Zonal Offices, branches and SME/Agriculture Branches and provided 304 reports on branch level and 18 reports on Head Office level. The head of 11 Zonal Offices visited the respective branches and provided 451 reports on them. Moreover, head of all branches conducted self-audit on their respective branches. The compliance division ensures that the bank complied with all regulatory requirements, maintain liaison with the regulatory bodies and notified all regulatory changes to all concerned. Monitoring division assesses the risk of functional areas of business mentioned in the Departmental Control Function Checklist (DCFCL), monitor the internal control functions through Quarterly Operations Report (QOR) and check the completion of investment documentation.

II. Money Laundering Risk Management:

In order to prevent money laundering, Money Laundering Prevention Act, 2002 was enacted in our country to give tight rein on money laundering process. Bangladesh Bank undertook a project in the year 2003 to review the global best practices in the risk areas in view of globalization of business and identified 5 (five) core risks for implementation by the banks which included, among others, Money Laundering Risk. Money Laundering Prevention Act, 2009 was enacted in 2009 to update the previous Act. DBBL, In line with the money laundering law and relevant guideline of Bangladesh Bank on Money Laundering risk has already formulated guidelines on policies & procedures on

prevention of Money Laundering. The prime objective of the guidelines is to combat Money Laundering in an effective way. As per the guidelines of Bangladesh Bank, Uniform Account Opening Form for all banks has been introduced for obtaining particulars of Personal Identity of customer and Transaction Profile. The Bank has also undertaken enhanced due diligence in case of opening of accounts of Politically Exposed Persons( PEP) as per directive of Bangladesh Bank which is in line with recommendation of Financial Action Task Force of United Nations. Anti Money Laundering units have been set up in all the branches under a central unit at Head Office. Basic training has been imparted to most of the officers of the Bank on compliance with rules & regulations of Money Laundering Prevention Act so as to prevent opening of suspicious accounts and identify suspicious transactions. IBBL, In order to mitigate the money laundering risk has formed 5 members Central Compliance Unit (CCU) Chief Anti Money Laundering Compliance Officer (CAMLCO) Anti Money Laundering (AML) Department, Branches Control Division (BCD) Head Office

Anti Money Laundering Compliance units are also functioning at Zonal Offices and Branch level. IBBL has introduced (a) 13 numbers of uniform Account Opening Form (AOF) (b) Know Your Customer (KYC) Profile and (c) Transaction Profile (TP) in the bank as per Bangladesh Bank instruction in 2009. IBBL has introduced a Policy Guideline to combat terrorist financing in the light of Anti Terrorism Act, 2009 coupled with the Anti Money Laundering Act, 2009 approved by the Board of Directors of the Bank. IBBL has exclusively completed the KYC procedures of Legacy Accounts (accounts opened before April 30, 2002) by December, 2009. To establish fruitful Anti Money Laundering drive at branch level, IBBL introduced AML Rating systems such as excellent/good/satisfactory/marginal through self Assessment Report & Independent Testing Procedure as per instruction of Bangladesh Bank.

Market Risk Management of DBBL and IBBL: i. Interest rate, Investment profit risk:

In DBBL, The Treasury Division manages the liquidity, interest rate and foreign exchange risks with oversight from Asset-Liability Management Committee (ALCO) comprising senior executives of the Bank. ALCO is chaired by the Managing Director. The Committee meets at least once in a month. The Board approves all risk management policies, sets limits and reviews compliance on a regular basis. The overall objective is to provide cost effective funding to finance the asset growth and trade related transactions, optimize the funding cost, increase spread with the lowest possible liquidity, maturity, foreign exchange and interest rate risks.

In IBBL, Regulatory pressure to reduce profit rate in the market has been creating substantial profit rate risk for the banks. The Asset Liability Committee (ALCO) of IBBL monitors and evaluated the overall profit rate structure. IBBL has been following a competitive profit rate and has flexibility of setting profit rate according to market conditions and Bangladesh Bank ceilings. The bank has no profit sensitive portfolio except investment in Bangladesh Government Islamic Investment Bond. For non trading portfolio (general investment), the bank has been operating through buying and selling modes i.e. Bai-Murabaha, Bai-Muajjal, BaiSalam, Bai-as-Sarf and Rent sharing mode like HPSM. IBBL also makes Investment under Musharaka mode i.e. profit and loss sharing mode and Mudaraba mode i.e. profit sharing and loss bearing on short term basis.

ii.

Foreign Exchange risk:

Foreign exchange risk is potential loss arising from changes in foreign currency exchange rate in either direction. Assets and liabilities denominated in foreign currencies have foreign exchange risks. DBBL operates its foreign exchange and money market activities under a centralized and single functional area. DBBL's dealing room is equipped with advanced technology and experienced personnel. Bank's Exchange Rate Committee meets on a daily basis to review the prevailing market condition, exchange rate, exposure and transactions to mitigate foreign exchange risk. IBBL, In order to address the foreign exchange risk has adopted foreign exchange risk manual and investment guideline of Bangladesh Bank, through which the foreign exchange operations are being dealt with by 43 Authorized Dealer (AD) branches. Currency rate appropriateness is carried out by the treasury back-office to check as to whether all deals have been dealt at market rates.

Recommendations:
From the presiding discussions of the report, we can realize that the policy makers within the government and the Banking Company should adopt effective measures in order to make good use of the opportunities and to tackle the threats for ensuring a healthy development of the Banking Company. The following actions are suggested. In order to create the growth of banking business in our country companies should expand their target market by providing responsive services and establish efficient departments to perform such task. One of the basic requirements for the Banking industry to have sustained growth is to enhance training facilities. To regain and maintain a positive public image the Banking companies should overcome the dissatisfaction in regards to services and should maintain a service standard.

 The collected deposits should be invested in large and beneficial sectors so that Banking companies earn proper return. Banking companies need to modify their recruitment strategies with increased focus on the marketing and sales training because, Banking being a service marketing industry it requires special attention. In response to the opportunity of growing market the Banking companies can expand their target market by identifying and providing responsive services. In order to do so each company should established and effectively operate research and development department.

Conclusion:
Now a days Bank is in great use by Business industries and also by general people. Banking companies is contributing to the national economy and creating employment opportunity for unemployed persons. It is also contributing to reduce inflation rate from the country. Most of the companies provide more or less same services. For this reason the competition is increasing day by day between the Banking companies. In present, a company cannot establish properly without developing information technology. People search their desires requirement through Internet so, Banking companies need to automate their service and develop Web address to increase both foreign and local investors. So we have discussed about both the problem and prospects of insurance business in Bangladesh. Comparison of overall performance and risk management system between Dutch-Bangla Bank limited (DBBL) and Islami-Bank Bangladesh Limited (IBBL) The progress of Banking business depends on the progress of economic condition .Banking business also faces many problem. So if we develop economic condition as well as overcome the problems, it will help a lot to flourish this business in our country.

Reference:
We have collected necessary information from following media:

1. Annual Report of DBBL-2009 2. Annual report of IBBL-2009 3. CSRIL report of IBBL-2009