BRPD Circular No. 06: Guidelines on Internal Control & Compliance in Banks

Department of Banking Regulation and Policy Bangladesh Bank Head Office Dhaka. 04 September 2016 BRPD Circular No.- 06 Date: ------------------ 20 Bhadra 1423 Managing Director/Chief Executive Officer All Scheduled Banks operating in Bangladesh. Dear Sir, Regarding the maintenance of internal control and compliance. Reference is made to BRPD Circular No. 03 of this department dated 08 March 2016 on the above subject. The following paragraphs of the attached guidelines with the said circular are hereby amended/replaced:

1. In Chapter Four, paragraph 4.0 (Compliance), the words 'and such other laws' and the second paragraph i.e., 'Section 15 (b) of the Bangladesh Bank Order, 1972-Presidential Order No. 12 of 1972, as amended from time to time, shall be deleted;

2. In paragraph 4.2 (Internal Audit of BBUs), the third paragraph 'Internal Audit of BBUs shall be conducted by the Head Office' shall be replaced with 'Internal Audit of Branches shall be conducted by the Head Office'; and the fourth paragraph 'Branches shall not conduct their own internal audit' shall be deleted;

3. In paragraph 4.4 (Audit of BBUs), the first paragraph 'Independent Audit' shall be replaced with 'Independent Audit Report'; and the words 'If the Managing Director, General Manager, Chief Operating Officer/Company Secretary of BBU is not independent' shall be deleted;

4. In paragraph 4.4 (Audit of BBUs), the second paragraph i.e., 'If the Audit of BBU is conducted by any person who is an employee of the bank or has any financial interest in the bank, the audit report shall be submitted to the Board of Directors' shall be replaced with 'If the Audit of BBU is conducted by any person who is an employee of the bank or has any financial interest in the bank, the audit report shall be submitted to the Board of Directors. If the Audit of Branches, according to the rules of the bank, is conducted by the employees of the branches, the audit report shall be submitted to the Board of Directors';

5. In the third paragraph of paragraph 4.4 (Audit of BBUs), the words 'The independence of the auditor conducting the audit of BBUs shall be ensured' shall be replaced with 'The independence of the auditor conducting the audit of BBUs shall be ensured';

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6. In the second paragraph of paragraph 4.5 (Appointment and Removal of Auditors), the word 'Auditor' shall be preceded by the word 'Head Office' and the words 'who is an employee of the bank' shall be deleted;

7. Paragraph 4.7 (Conduct of Audit of BBUs) shall be replaced with the following paragraph; namely: '4.7 Conduct of Audit of BBUs If the Audit of BBUs is conducted by any person who is an employee of the bank or has any financial interest in the bank, the audit report shall be submitted to the Board of Directors. If the Internal Audit and External Audit of BBUs are conducted by different persons, they shall be coordinated. According to the rules of the bank, if the audit is conducted by any person, the audit report shall be submitted to the Board of Directors.'

8. Paragraph 5.0 (Compliance) of Chapter Five shall be added as follows; namely: '5.0 Compliance Section 15(A) of the Bangladesh Bank Order, 1972-Presidential Order No. 12 of 1972, as amended from time to time, shall be followed. As per the rules of the bank, compliance shall be ensured.'

9. In clause (a) of paragraph 5.1 (Submission of Reports), the word 'BBU' shall be replaced with 'Head Office';

10. In the third paragraph of paragraph 5.2 (External Audit Procedures) and in the last paragraph, the words 'BBU' and 'BBUs' respectively shall be replaced with 'Head Office' in each case;

11. In paragraph 5.5 (Removal), the words 'If the Managing Director of BBU is removed from office due to misconduct or negligence' shall be replaced with 'If the Head Office is removed from office due to misconduct or negligence/submitting reports';

12. The model format shown in Annex-A of the amended paragraph 4.4 of this circular shall be considered amended.

Except for the above, all other instructions of the guidelines attached with BRPD Circular No. 03 dated 08 March 2016 shall remain unchanged.

Yours faithfully,

(Abu Farah Md. Nasir) General Manager Phone: 9530252.