Trade Finance BD · Original revision handnote · Edition 2026.1
GFI — Governance in Financial Institutions
AIBB · Compulsory · 14 October 2026
Connect board oversight, management accountability, risk independence and stakeholder trust.
Use this revision pack with the full syllabus and official papers. Important topics are revision priorities, not a promise of future questions.
Contents
- A · Governance foundations
- B · Board and committee responsibilities
- C · CEO and senior management
- D · Balance-sheet stewardship
- E · Risk governance and independent assurance
- F · Subsidiaries, windows and channels
- G · Stakeholders and conduct
- H · Future strategy and transformation
- Worked example
- Applied case and model response
- Terminology
- Official syllabus and papers
Revision priorities
Board, CEO and three-line responsibilities — Reviewed 7th paper: 7th Banking Professional Exam, page 1, Q1–Q4
NPL, provisioning and RWA calculations — Reviewed 7th paper: 7th Banking Professional Exam, page 1, Q5–Q6
Syllabus-mapped handnotes
Module A
Governance foundations
Syllabus scope: Purpose; benefits; Basel principles; vision/mission; culture; conduct
Governance sets direction, allocates authority and holds decision-makers accountable. In financial institutions, failures can harm depositors, customers and systemic confidence as well as shareholders. A mission states purpose; a vision describes desired future direction; values guide conduct when choices are difficult. Sound governance aligns strategy, risk appetite, incentives and reporting. A written policy is insufficient if management routinely bypasses it. Assess real decisions, challenge, escalation and follow-up rather than counting committees or documents.
Apply it in bankingA bank claiming customer focus should examine complaints handling and product suitability, not only its mission statement.
Practice question: Explain corporate governance and why financial institutions require particularly strong oversight.
Answer framework: use the explanation above, add the banking example, then address assumptions and controls. Expand to match the question’s marks and command words.
Module B
Board and committee responsibilities
Syllabus scope: Composition; independent directors; strategy; performance; committees; regulator/observer
The board oversees strategy, appetite, management performance and the control environment. Committees support focused review but do not remove collective board accountability. Independence requires judgement, relevant competence and ability to challenge, not just a formal title. Define committee terms of reference, information rights and follow-up. Avoid routine interference in operations or conflicted lending. Assess board and committee arrangements against current local requirements when exact composition or limits are requested. Minutes should explain the decision, challenge and unresolved issue.
Apply it in bankingAn audit committee should follow material findings through remediation. Repeatedly noting an overdue action without escalation is weak oversight.
Practice question: Explain the roles of independent directors and board committees in a troubled bank.
Answer framework: use the explanation above, add the banking example, then address assumptions and controls. Expand to match the question’s marks and command words.
Module C
CEO and senior management
Syllabus scope: Execution; senior committees; tone; strategy; culture; succession
The CEO and senior team implement the approved strategy and are accountable for sound operations, controls and reporting. They allocate resources, manage risk within limits and provide the board with accurate information. Tone at the top is demonstrated through staffing, incentives and treatment of escalations. Succession planning supports continuity in critical roles. Delegation must include defined authority, competence and monitoring. Senior management should not suppress adverse information to protect a short-term target. Separate oversight from implementation while maintaining a clear flow of information between board and management.
Apply it in bankingA CEO who rewards concealment of arrears undermines governance even if written risk policies are strong. Correct incentives and reporting behaviour.
Practice question: Distinguish CEO responsibilities from board oversight and explain how management culture affects risk.
Answer framework: use the explanation above, add the banking example, then address assumptions and controls. Expand to match the question’s marks and command words.
Module D
Balance-sheet stewardship
Syllabus scope: Capital; liquidity; asset mix; RWA; problem assets; provisioning
Governance of the balance sheet connects capital adequacy, funding, credit quality and profitability. Asset composition determines risk, liquidity and return; apparently profitable growth can consume capital or concentrate exposure. Problem assets need transparent classification and appropriate provision under current rules. A provision shortfall affects earnings and capital analysis; it cannot be cured through optimistic wording. Funding concentration and maturity mismatch need governance attention even when a current ratio passes. Use scenario assumptions explicitly and avoid presenting invented practice provision rates as regulatory law.
Apply it in bankingA board should challenge rapid loan growth alongside arrears, provision coverage, capital headroom and liquidity rather than celebrating volume alone.
Practice question: Explain how asset quality, capital and liquidity should influence board decisions.
Answer framework: use the explanation above, add the banking example, then address assumptions and controls. Expand to match the question’s marks and command words.
Module E
Risk governance and independent assurance
Syllabus scope: ERM; appetite; three lines; compliance; independence; reporting
Business owns its risks; independent Risk and Compliance challenge and oversee; Internal Audit provides independent assurance. The three lines need coordination without losing accountability or independence. Risk appetite connects strategy with limits and escalation. Compliance addresses legal and conduct obligations, while audit tests governance and control effectiveness. Reports should present material exposure and required decisions clearly. A business manager cannot “approve away” a regulatory prohibition, and second-line involvement does not transfer the first line’s responsibilities.
Apply it in bankingIf a control function’s budget or appraisal depends solely on the business it challenges, examine the resulting conflict and establish independent oversight.
Practice question: Explain the three lines and design an escalation route for a persistent risk breach.
Answer framework: use the explanation above, add the banking example, then address assumptions and controls. Expand to match the question’s marks and command words.
Module F
Subsidiaries, windows and channels
Syllabus scope: Merchant/custody; OBU; Islamic windows; MFS; agent banking; group risk
Financial groups can create intercompany exposures, shared services and reputation risk. Each subsidiary or specialised business needs appropriate authorisation, governance and controls. An offshore unit is subject to its specific framework; an Islamic window needs Shariah governance and appropriate segregation; an agent channel needs supervision and customer protection. Group strategy must not obscure legal-entity responsibility. Outsourcing or partnership transfers tasks but does not automatically transfer regulatory accountability. Assess connected exposures and whether consolidated reports reveal the full risk.
Apply it in bankingA bank using agents remains responsible for its channel governance. Monitor agent conduct, liquidity, complaints and access to customer information.
Practice question: Explain governance risks in a financial group with an offshore unit and agent network.
Answer framework: use the explanation above, add the banking example, then address assumptions and controls. Expand to match the question’s marks and command words.
Module G
Stakeholders and conduct
Syllabus scope: Customer complaints; fair treatment; disclosures; CSR; stakeholder accountability
Stakeholders include depositors, borrowers, staff, investors, regulators and communities. Transparent disclosures should communicate material performance and risk without misleading omissions. Complaints are evidence of service and conduct weaknesses; resolution needs ownership, time standards and root-cause analysis. Customer suitability and confidentiality remain important when products are profitable. CSR can support community goals but cannot substitute for responsible core banking. Consider conflicting interests openly and apply lawful, fair procedures rather than assuming that maximising short-term shareholder earnings is the only governance objective.
Apply it in bankingHigh complaint volumes about hidden fees require pricing and disclosure review, not only a faster call centre.
Practice question: Explain stakeholder responsibilities and use complaints to improve governance.
Answer framework: use the explanation above, add the banking example, then address assumptions and controls. Expand to match the question’s marks and command words.
Module H
Future strategy and transformation
Syllabus scope: Technology; talent; strategic planning; future governance needs
A sustainable strategy evaluates the business model, competition, technology, people, capital and risk capacity together. Digital transformation creates new dependencies and skill needs. The board must ask whether benefits are credible, controls are proportionate and the institution can exit a failed arrangement. Talent planning and succession support execution; investment decisions need measurable outcomes and stage gates. Emerging risks require horizon scanning and updated scenarios. A strategic plan should describe choices and trade-offs, not a collection of aspirations without resources or accountability.
Apply it in bankingBefore adopting AI at scale, require a clear use case, validation, oversight, customer impact assessment and a fallback process.
Practice question: Prepare a governance framework for a bank’s digital transformation strategy.
Answer framework: use the explanation above, add the banking example, then address assumptions and controls. Expand to match the question’s marks and command words.
Worked example
NPL ratio and practice provisions
Gross loans total BDT 1,000 crore. The exercise defines classified loans as substandard 100, doubtful 50 and bad/loss 50 crore. Apply practice provision rates of 20%, 50% and 100% respectively, ignoring all other requirements and eligible security adjustments. Held provisions are 70 crore.
- Classified loans = 100+50+50 = BDT 200 crore.
- NPL ratio = 200/1,000×100 = 20%.
- Required practice provision = 100×20% + 50×50% + 50×100% = BDT 95 crore.
- Shortfall = 95−70 = BDT 25 crore. The exercise rates are hypothetical; use current local definitions and rules for a real bank.
Common mistake: Do not count every special-mention account as NPL without the applicable definition.
Case clinic
Committees exist but do not act
A bank has audit, risk and executive committees. Audit findings stay open, risk breaches are not escalated and directors influence individual loans. Recommend reforms.
Model response
Diagnose ineffective challenge, blurred oversight/management roles and conflicts. Committee existence does not demonstrate governance effectiveness.
Clarify mandates and authority, strengthen independent expertise and information quality, and establish material-issue escalation. Require actions with owners, deadlines and evidence of closure.
Restrict conflicted influence on individual credit decisions, monitor related-party risks and maintain accurate minutes. Review management incentives and follow-up reporting. Independent audit should verify that the reforms operate in practice.
Practice marking guide · 20 marks- Diagnose governance gaps (5)
- Committee and independence reforms (6)
- Credit conflicts and controls (5)
- Assurance and follow-up (4)
Terminology and comparisons
| Board / management | Oversight and strategic accountability versus implementation and operations. |
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| Governance / compliance | Direction and accountability framework versus meeting applicable obligations. |
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| CSR / responsible banking | Community initiatives versus responsible conduct embedded in core operations. |
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| Independence / expertise | Freedom to exercise judgement versus capability to make informed judgements; both matter. |
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Official references
Official papers are linked for comparison; their full text and official model answers are not reproduced. This pack’s explanations, examples and cases are original. Numerical examples are practice assumptions. Current law, instructions and subsequent amendments must be checked for regulatory answers.