Sovereignty structure of risk management
Sovereignty structure of risk management in Bank Mellat is a subset of bank’s sovereignty structure and includes Board of Directors, Higher Committee of Risk Management, Technical Committee of Risk Management, Risk Management Administration, working units and internal audit.
This structure determines strategy, approach, risk control and management. This structure contains definitions of risk management approaches,structures, and processes in business goals. Some of the features of risk sovereignty structure are a transparent definition from responsibilities and expectations of all departments, including board of directors, manages, and staff. Modification of business model from traditional to integrated banking, has changed approach of bank management towards risk-based management. In this new pattern, Bank Mellat offers its services to respond different (banking, financial, insurance, investment,…)
requirements and profitability. In the new business model, trade behavior of bank is based on “risk-return” principle. Bank Mellat believes that risk culture must flow in the entire of organization. Therefore, it selected and trained risk interfaces in different departments to maintain continuous communication and to identify and control key risks. Bank Mellat holds training courses to increase organizational knowledge of staff about risk management and has implemented risk management units in all business departments.
Risk Management Higher Committee
One of the most important columns of risk sovereignty structure in Bank Mellat
is Risk Management Higher Committee, which has an independent nature. Some of the duties of this committee are:
- To design and propose risk tolerance and demand level to board of directors
- To apply risks in redaction of bank’s strategies
- To study submitted reports about major risks in bank operations
- To evaluate fulfilled actions against reported risks
- To offer necessary proposals to board of directors
Risk Management Higher Committee uses Risk Management Technical
Committee views to redact policies and strategies for risk management. In 2013, Risk Management Higher Committee and Risk Management Technical Committee held 13 meetings and issued 67 and 64 approvals, respectively.
Risk Management Department
Risk Management in Bank Mellat has an independent and concentrated structure and examines and reports strategic, market, credit, operational, compatibility, liquidity, and financial risk. Risk Management Department uses Ball Committee guidelines and standards to optimize capital usage and to maximize equity of stockholders. Regarding the effects of major economic vari ables on bank’s performance, Risk Management Department anticipates
these variables such as inflation rate, real economy growth rate, liquidity volume, the effects of “Purposeful Subsides Law”. This department redacts many credit and investment strategies according to market risk situation. Bank Mellat monitors indices such as adjusted return to risk index, money finished price increment risk, bank profit quality, liquidity split situation,
exchange items risk, assets quality risk, etc. to recognize and evaluate the existing risks in the financial structure of bank. Regarding to the important role of some indices such as RAROC and money finished price risk in policy-making, these indices are evaluated in branches management levels too. Meanwhile, Camels Ratios are evaluated in this bank to improve capital sufficiency risk, assets quality risk, profitability, liquidity and market. To decrease liquidity risk, risk appetite limit (expected return), and combination of liquidity reserves, credit limits are determined. Also, the above mentioned risk management program was executed in 8 areas in order to decrease human resources risk. Other actions of Risk Management Department are monitoring capital sufficiency, studying comparative risks for all bylaws, and monitoring laws and regulations of authorities.
Liquidity risk management
By effective liquidity risk management, Bank Mellat could use profitability opportunities created by optimization of liquidity resources.