Abstract:
Driven by an environment of constant change and intense competition, the banking sector is increasingly focusing on ensuring that it has a robust and dynamic risk measurement and management practice in place. Bank managers recognize that effective risk management allows banks greater control in achieving an appropriate balance between risks they wish to accept and risks they wish to mitigate.
The banking industry itself has worked both collaboratively and individually to develop the essential elements of an effective risk measurement and management program. Banking supervision, based on the ongoing analytical review of banks, serves the public good as one of the key factors in maintaining stability and confidence in the financial system. Banks are subjected to a wide array of risks in the course of their operations. In general, banking risks fall into four categories: financial, operational, business, and event risks. Bank appraisal in a competitive and volatile market environment is a complex process. In addition to effective management and supervision, another very important factor necessary to ensure the safety of banking institutions includes proper disclosure requirements. This will form as the basis of my thesis study- using Askari bank as an example to represent Pakistan’s banking industry- I will carry out a qualitative and quantitative analysis, using the framework set by the World Bank, and find out the short comings in out country’s banking sector. This will eventually lead to the fact that a proper risk measurement and management in this industry cannot be carried out in the true sense, due to lack to disclosure requirements by the State Bank of Pakistan (SBP). Users of financial statements need information to assist them in evaluating a bank’s financial position and performance in making economic decisions. Disclosure of financial statements should therefore be sufficiently comprehensive to meet the needs of other users within the constraints of what can reasonably be required.
