Bangladesh Bank Issues New Internal Control Guidelines

Bangladesh Bank has issued new Guidelines on the Internal Control Management System (ICMS) for all scheduled banks.

“Bangladesh Bank, as the regulatory authority, is committed to strengthening risk governance, enhancing supervisory effectiveness, and promoting a culture of compliance and accountability across the banking industry,” the regulator explains. “Bangladesh Bank expects that the effective implementation of this guideline will foster a strong compliance culture, improve operational efficiency, enhance transparency and reporting quality, mitigate emerging risks, and ultimately contribute to the stability and sustainable growth of the banking sector.” 

The Guidelines support Bangladesh Bank’s transition to Risk-Based Supervision by requiring forward-looking, process-based internal controls. Under the framework, internal audit coverage extends beyond financial matters to regulatory, ethical, technological, environmental, and sustainability risks. The updated Guidelines formally adopt the Three Lines of Defense model, assigning distinct responsibilities to business units, compliance and risk functions, and internal audit.

Boards bear overall responsibility for establishing and reviewing the effectiveness of the ICMS. They are to assess the system at least annually and report the results to shareholders. The Head of Internal Audit must report directly to the Audit Committee, which is responsible for evaluating the Head of Internal Audit’s performance. The Guidelines also provide that the compliance function must remain independent from business lines and that the Head of Compliance may communicate significant findings directly to the Audit Committee or board when necessary.

Banks are required to complete the needed organizational changes in order to align with the framework by December 31.