Regulatory Risk Compliance
Expert-defined terms from the Postgraduate Certificate in Risk Management for Central Banks (Bangladesh) course at LearnUNI. Free to read, free to share, paired with a professional course.
Anti‑Money Laundering (AML) – A set of laws, regulations and procedures a… #
Related terms: KYC, suspicious transaction reporting, financial crime. Central banks enforce AML to protect the integrity of the payment system. Example: A bank must flag cash deposits exceeding a statutory threshold and submit a SAR. Challenge: Balancing thorough monitoring with operational cost in a resource‑constrained environment.
Basel III Capital Framework – International regulatory standards defining… #
Related terms: Tier 1 capital, risk‑weighted assets, liquidity coverage ratio. For Bangladesh’s central bank, compliance ensures domestic banks meet global resilience benchmarks. Example: Calculating the Common Equity Tier 1 ratio using risk‑weighted assets. Challenge: Aligning local accounting practices with Basel‑III definitions.
Banking Supervision – Ongoing oversight activities performed by the centr… #
Related terms: Prudential regulation, on‑site inspection, off‑site monitoring. Supervisors review capital adequacy, governance and risk management. Example: Conducting a quarterly review of a bank’s loan portfolio. Challenge: Limited human resources to conduct comprehensive on‑site examinations.
Capital Adequacy Ratio (CAR) – The proportion of a bank’s capital to its… #
Related terms: Tier 1 ratio, Basel IV, capital buffer. A CAR below the regulatory minimum triggers corrective actions. Example: A bank with $200 million capital and $1.5 Billion risk‑weighted assets has a CAR of 13.3 %. Challenge: Accurate risk‑weighting of complex derivative exposures.
Compliance Culture – The collective attitude, values and behaviors that p… #
Related terms: Tone at the top, ethical standards, risk appetite. A strong compliance culture reduces regulatory breaches. Example: Board members regularly discuss compliance metrics in meetings. Challenge: Embedding culture across all hierarchical levels, especially in subsidiaries.
Consumer Protection Regulation – Rules designed to safeguard the rights a… #
Related terms: Fair lending, disclosure requirements, grievance redressal. In Bangladesh, the central bank issues guidelines on transparent fee structures. Example: Requiring banks to provide clear loan amortization tables. Challenge: Monitoring compliance across a large number of retail branches.
Credit Risk Management – The process of identifying, measuring, monitorin… #
Related terms: Loan underwriting, provisioning, credit scoring. Effective credit risk management is a core supervisory focus. Example: Setting sectoral caps on exposure to the garment industry. Challenge: Rapid changes in macro‑economic conditions affecting borrower performance.
Currency Board Arrangement – A monetary system where a country's currency… #
Related terms: Pegged exchange rate, reserve adequacy, monetary stability. While Bangladesh does not operate a currency board, the central bank monitors foreign exchange compliance. Example: Banks must maintain a minimum foreign reserve ratio for external liabilities. Challenge: Managing liquidity when foreign inflows fluctuate.
Data Privacy Law – Legislation governing the collection, storage, process… #
Related terms: GDPR, personal data protection, consent management. Central banks must ensure that supervisory data sharing complies with privacy standards. Example: Masking customer identifiers in supervisory reports. Challenge: Aligning cross‑border data transfers with both domestic and international privacy regimes.
Derivative Risk Oversight – Supervision of banks’ exposures to derivative… #
Related terms: ISDA Master Agreement, mark‑to‑market, netting. Regulators require transparent reporting of derivative positions. Example: Requiring daily exposure reports for interest rate swaps. Challenge: Complex valuation models and limited expertise in supervisory staff.
Domestic Debt Market Regulation – Rules governing the issuance, trading a… #
Related terms: Bond underwriting, credit rating, market infrastructure. The central bank oversees market integrity and investor protection. Example: Mandating disclosure of issuer’s financial statements before bond issuance. Challenge: Developing a liquid secondary market for domestic securities.
Effective Date – The specific point in time when a regulatory provision b… #
Related terms: Transitional period, implementation schedule, grace period. Clear communication of effective dates prevents inadvertent non‑compliance. Example: A new AML guideline takes effect on 1 January 2025. Challenge: Coordinating system upgrades across all regulated entities before the deadline.
Electronic Funds Transfer (EFT) Regulation – Standards governing the elec… #
Related terms: RTGS, SWIFT, payment gateway. The central bank sets rules for batch processing and settlement. Example: Requiring two‑factor authentication for high‑value EFTs. Challenge: Keeping pace with rapid fintech innovations while maintaining security.
Enterprise Risk Management (ERM) Framework – A structured approach for id… #
Related terms: Risk appetite, risk register, risk governance. Central banks expect banks to embed ERM in strategy and operations. Example: Integrating operational risk metrics into the capital planning process. Challenge: Achieving consistent risk identification across diverse business lines.
Environmental, Social and Governance (ESG) Risk – Risks arising from envi… #
Related terms: Climate risk, sustainability reporting, green financing. Regulators are increasingly requiring disclosure of ESG exposures. Example: Banks must report the carbon intensity of their loan portfolio. Challenge: Quantifying ESG metrics due to limited data availability.
Foreign Exchange (FX) Controls – Regulatory measures restricting the buyi… #
Related terms: Capital controls, exchange rate management, foreign reserve requirements. Bangladesh’s central bank imposes limits on certain FX transactions. Example: Requiring approval for outbound remittances exceeding a threshold. Challenge: Balancing market openness with macro‑economic stability.
Governance Structure – The system of rules, practices and processes by wh… #
Related terms: Board of directors, audit committee, compliance function. A robust governance structure underpins regulatory compliance. Example: Establishing a dedicated compliance committee at the board level. Challenge: Preventing overlaps and gaps between risk and compliance responsibilities.
Hazard Identification – The process of recognizing potential sources of l… #
Related terms: Risk assessment, control environment, loss event database. Early identification enables proactive mitigation. Example: Mapping fraud scenarios in the loan origination process. Challenge: Capturing emerging risks such as cyber threats.
Information Security Policy – A formal set of rules governing the protect… #
Related terms: Cyber risk, ISO 27001, data encryption. Central banks require banks to maintain robust security controls. Example: Mandatory annual penetration testing of core banking systems. Challenge: Keeping policies up‑to‑date with evolving threat vectors.
International Financial Reporting Standards (IFRS) – Global accounting st… #
Related terms: IFRS 9, fair value measurement, financial instrument classification. Compliance ensures comparability of banks’ financial disclosures. Example: Applying IFRS 9 to measure expected credit losses. Challenge: Reconciling IFRS with local regulatory capital calculations.
Joint Liability Provision – A regulatory clause that holds multiple parti… #
Related terms: Co‑guarantor, shared responsibility, supervisory sanction. In Bangladesh, a bank and its correspondent may share liability for AML breaches. Example: Both institutions face fines if a transaction is flagged as suspicious. Challenge: Coordinating compliance efforts across jurisdictions.
Liquidity Risk Management – The process of ensuring that a bank can meet… #
Related terms: LCR, NSFR, cash flow forecasting. Regulators require banks to maintain high‑quality liquid assets. Example: Maintaining an LCR of 100 % by holding Treasury bills. Challenge: Managing liquidity during market stress when asset values decline.
Macro‑prudential Policy – Regulatory tools aimed at safeguarding the stab… #
Related terms: Counter‑cyclical capital buffer, systemic risk, stress testing. The central bank may adjust loan‑to‑value limits to curb overheating. Example: Raising the counter‑cyclical capital buffer during rapid credit growth. Challenge: Calibrating measures to avoid unintended credit contraction.
Money Market Regulation – Rules governing short‑term borrowing and lendin… #
Related terms: Repo market, short‑term funding, market liquidity. The central bank monitors money‑market participants for systemic risk. Example: Requiring disclosure of daily repo transactions. Challenge: Ensuring transparency in a fragmented market.
National Payment System (NPS) Oversight – Supervision of the infrastructu… #
Related terms: RTGS, ACH, payment rails. Bangladesh’s central bank sets standards for speed, security and resilience. Example: Mandating real‑time gross settlement for high‑value payments. Challenge: Integrating fintech solutions while maintaining regulatory control.
Operational Risk Framework – The set of policies, procedures and controls… #
Related terms: Basel II, loss event database, key risk indicators. Supervisors evaluate the adequacy of banks’ operational risk models. Example: Implementing a three‑line‑of‑defence model for risk oversight. Challenge: Capturing low‑frequency, high‑impact events such as natural disasters.
Payment Card Regulation – Standards governing issuance, usage and securit… #
Related terms: PCI‑DSS, tokenization, fraud detection. The central bank requires banks to adopt secure card‑present transaction protocols. Example: Enforcing EMV chip implementation across all ATMs. Challenge: Balancing user convenience with stringent security measures.
Quantitative Reporting Framework (QRF) – A structured approach for submit… #
Related terms: XBRL, data validation, supervisory data warehouse. Accurate QRF submissions enable effective monitoring. Example: Banks upload quarterly capital adequacy figures in XBRL format. Challenge: Maintaining data integrity across multiple legacy systems.
Risk Appetite Statement – A formal declaration of the amount and type of… #
Related terms: Risk tolerance, strategic risk, board oversight. It guides decision‑making and aligns with regulatory limits. Example: Setting a maximum loan‑to‑value ratio of 80 % for mortgage lending. Challenge: Translating high‑level appetite into actionable limits for business units.
Sanctions Compliance – Adherence to international and domestic economic s… #
Related terms: OFAC, UN sanctions, watch‑list screening. Banks must block transactions involving sanctioned parties. Example: Using automated screening to reject transfers to a designated country. Challenge: Keeping watch‑lists current and minimizing false positives.
Sectoral Exposure Limits – Regulatory caps on a bank’s credit exposure to… #
Related terms: Concentration risk, credit portfolio, diversification. Limits prevent excessive risk concentration. Example: Not exceeding 15 % of total credit to the real‑estate sector. Challenge: Monitoring dynamic exposure as borrowers shift between sectors.
Supervisory Review Process – The systematic evaluation conducted by the c… #
Related terms: Supervisory rating, corrective action, enforcement. Reviews may be on‑site or off‑site. Example: Issuing a supervisory rating of “satisfactory” after a compliance audit. Challenge: Ensuring consistency across diverse institutions.
Technology Risk Governance – The oversight of risks associated with the a… #
Related terms: IT governance, third‑party risk, digital transformation. Effective governance mitigates outages and data breaches. Example: Requiring board approval for major core‑banking system upgrades. Challenge: Rapid technological change outpacing governance processes.
Undertaking Supervision – Monitoring of non‑bank financial entities that… #
Related terms: Shadow banking, licensing, regulatory perimeter. The central bank extends its oversight to ensure systemic safety. Example: Requiring capital buffers for large micro‑finance firms. Challenge: Defining the scope of supervision for emerging fintech platforms.
Value‑at‑Risk (VaR) – A statistical technique used to measure the potenti… #
Related terms: Stress testing, tail risk, risk metrics. Regulators may set VaR limits for market‑risk exposures. Example: A 99 % one‑day VaR of $10 million indicates a 1 % chance of exceeding that loss. Challenge: Model risk and inadequate data for extreme events.
Watch‑List Management – The process of maintaining, updating and applying… #
Related terms: Sanctions screening, AML, risk screening. Effective management reduces false positives and compliance gaps. Example: Integrating a real‑time watch‑list feed into the transaction monitoring system. Challenge: Reconciling multiple jurisdictional lists and ensuring timely updates.
Yield Curve Controls – Policy tools used by a central bank to influence t… #
Related terms: Monetary policy, bond buying, forward guidance. While not common in Bangladesh, awareness of such tools informs risk assessments. Example: Purchasing long‑term government bonds to lower yields. Challenge: Managing unintended distortions in the credit market.
Zero‑Tolerance Policy – A strict regulatory stance that imposes severe pe… #
Related terms: Enforcement, punitive sanctions, compliance breach. The policy signals the regulator’s seriousness. Example: Immediate revocation of a banking license for a proven money‑laundering case. Challenge: Ensuring proportionality and due process while maintaining deterrence.