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CHAPTER 1 : INTRODUCTION

1.1 Introduction:
The banking sector in Bangladesh presents a vital position for the financial
development of the nation. The principal task of the bank is to generate cash and
cash equivalent in the form of deposits from the public and provide the loan or
different investment who require that based on appropriate evaluation of the
project. The cash is transferable by using checks, draft, different credit/debit card
etc. The purpose of banking is switching cashes from surplus to deficit devices or in
other phases. To attain the research objective, the researcher will be considering a
sample of one commercial bank and financial data of five commercial banks. The
conventional banks are Prime Bank Limited, Southeast Bank Limited, Brac Bank
Limited, Mercantile Bank Limited, United Commercial Bank Limited and AB Bank
Limited. Banks are selected based on the availability of the financial data.
1.2 Research Background
Henry Fayol first introduced the idea of the risk management in 1916. However it
has been formalized later by Russell Gallagher in 1956 when he posted the Risk
Management-a fresh phase of cost control in the Harvard Company where it is
evaluated and debated that the professional insurance Manager ought to be a Risk
Manager. The Noble laureate Harry Markowitz was the primary economic
philosopher to have done the explicit study over the risk management strategies
and portfolio diversification. He connected phrases which includes the arrival and
application by the threat concept.
In todays competitive world credit risk plays a major concern for all financial
institution especially a banking sector. Profitability of the banks depends on an
appropriate credit risk management . Another main reason for selecting this topic is
the risk of liquidity associated with commercial banks, since every bank is now
encountering more crisis of liquidity and finally might also lead to the bankruptcy.
Therefore efficient risk management in the banking sector is the prime aspect to
ensure goal congruence and for the researcher it is a paramount importance for
selecting this topic.

1.3 Problem Statement


The main motto of this thesis broadsheet is to swot the arguable cause for threat
management schemes of the commercial banks where threat supervision is defined
as the collection of evading strategies to adjust the opportunity allocation of the
price of belongings of belongings of the banks. There the reasons for risk
administration are combined with the objective purpose of the form, where all risks
are tradable perfectly by the firm maximizing the shareholder value by evading
completely (Froot, A and Stein, 1998). The main purpose of this very study is to
evaluate the quantity of liquidity threat related with economic establishments
specifically banks and to assess the concurrent Liquidity Risk Control (LRC) in
conjunction with a comparative evaluation between different commercial banks of
Bangladesh.

1.4 Aim of the Study


1. Critically appraising the literature on risk management practices & threat
management model of several business banks in Bangladesh
2. Carry out research by questionnaires to figure out the actual data & scenario of
organization
3. Gathering secondary data & comparing them with Bank liquidity risk practices
4. To arrive at conclusion and make specific recommendation of liquidity risk
practices in Bangladesh

1,6 Research Overview


1.6.1 Literature Review
At the outset, this thesis will depict the general picture of the banking system in
Bangladesh and the acclaim threat situation and management. Subsequently a
more explicit approach will be applied in order to understand the specific literature
associated with the credit risk management and possible solutions that the case
bank uses while dealing with different form of risks.

1.6.2 Research Methodology


For this research work, being a researcher I will be using deductive approach which I
think will be most suitable for this research. The sample size consisted of 25
respondents who are the staffs of the selected banks. At the time of preparing the
questions for the review, vigilant consideration was given for stimulating detailed
responses rather than merely a Yes/No answer, which would not deliver adequate
statistics for this particular purpose. The in person interview or gathering opened
the door of chances to see the soothe stage of different managers in the place, the
simplicity of gathering feedback to queries and their elaborative response as well in
those cases where there is a need of further explanation
1.6.3 Research Analysis & Findings
Secondary data collected through statistical analysis will be split up into three
dimensions, i.e. Descriptive, correlated and Regression. The analyzed statistics
figures will show the Mean, Standard Deviation, minimum and Maximum values. The
correlation coefficients will be presented in a diagram. This will deliver the data on
the degree of correlation between the explanatory variables, The opportunity will be
tested with the pearson correlation coefficients test. Finally, the being a researcher I
will also evaluate the following ratios to interpret different types of risk associated
designated banks:

Capital Adequacy Ratio (CAR)

Return on Assets (ROA)

Net working capital (NWC)

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