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Location: Ramallah, Israel

Member Since: January 2012

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Palestinian Banks and Application of Basel 2 Related to the Internal Control:

        Basel II Committee were not focused only on the calculation of capital adequacy for credit, market and operational risks, but these recommendations implied framework for assessing the internal control system in the banks, where this framework was included the five key elements relating to the internal control process:

First: The managerial supervision and control culture, which includes three principles:

1 - responsibilities of the Board And include verification of the existence and continuity of internal control effectively and appropriately, and included a periodic review of business strategies and policies, and periodic review of the adequacy of the bank's strategy and risk limits, and make sure the executive management to take necessary steps to identify, measure and control risks, and to approve the organizational structure

2 - the responsibilities of executive management: Includes the application of various strategies and policies adopted by the board of directors, the development of policies and processes for identifying, measuring and monitoring the risks faced by the bank, including the executive management to the maintenance of the organizational structure and ensure clarity of responsibilities and delegation of control powers, and to develop appropriate policies for the internal control system and monitoring the efficiency and adequacy of this system, and make sure that the activities of the bank performed by qualified and trained personnel, policies, incentives to reward good work.

3 - high standards of ethics and integrity: Which aims to promote ethical standards and create a control culture within the organization which depends on the joint efforts of the Board of Directors and executive management of general managers and their assistants to achieve this through the establishment of the principle of internal control as a responsibility of all people in the organization, and promote ideal standards for integrity and ethical principles in the dealing procedures.

Second: Risk identification and assessment:

included a risk identification and evaluation after determining their negative effects on the targets & goals, which requires effective assessment to it according to the principle of cost and benefit, and to be classified by the possibility of control, and the continuity of evaluation of their impact on goals, and comprehensiveness of all lines of the minimum working up to activities of public management at the bank.

Third: Control activities and segregation of duties

Which defined upon as agreed by the Board of Directors and executive management, including oversight activities reports the performance of departments and divisions of the bank, and material control using various controls for blocking access to assets, as well as developing special limits for risk to prevent large losses, and the use of control activities and other related system approvals and authorizations, verification and compliance. With regard to segregation of duties between opposing functions it was agreed that do not allow employees to carry out conflicting functions to mitigate & reduce the likelihood of fraud, manipulation, or the absence of controls is not appropriate in cases where the individual responsible for the activities to be contradictory, and the prevention of any activity contrary to the policies and control procedures.

Fourth: Information Systems and Communication

Able to access financial and operational data in a timely manner and include an information systems subject to appropriate protection methods, and the existence of effective channels of communication contribute to the implementation of policies which backed by an organizational structure to helps the flow of data vertically and horizontally into the bank

Fifth: Follow-up operations and correction of the imbalances:

Through continuous oversight of the internal audit system to ensure its effectiveness, efficiency and control of the major risks and periodic evaluation of these operations. Basel Committee has indicated that Internal Audit should enjoy autonomy and professional capacity and competence to act as a comprehensive and effective in the assessment of banking operations and reporting to the Board of Directors and executive management. To follow-up processes and correction of the imbalances and to report on gaps in the internal control system in a timely manner, Basel Committee have confirmed the need to inform the administrative level on a timely manner with any gaps or problems in the internal control system so that it can be processed in a timely manner. In addition, Basel Committee strongly recommended the need to evaluate internal control systems by supervisory authorities according to a different range of procedures with a view to ensure their effectiveness

By: Ibrahim M. Abu Elbeh - Risk Manager






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