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rganization. He advanced such loans in which they did not calculate the Credit Risk. Consequently the bank led to failure because of nonpayment of interest and even not the principal. Although the bank had mortgages as collateral against loans but they were not of the value to recover even one fourth of the principal. This shows mortgages were not properly assessed. So we can say that they do not have proper documentation of mortgages and even do not have Credit Risk Policy.

There are a lot of tools and models to calculate credit risk and to mitigate risk if any. A lot of work is done by current International organizations on the current Financial Crisis to address any risk that Financial Institution can face. Basel Committee on Banking Supervision has different summits and declared the Basel Accord-II in June, 2004 that addresses such risks. The domain for the Accord covers another important risk that is Operational Risk which was not the feature of Basel Accord-I. In the modern world of computer technology there are a lot of software developed to calculate the risk and its intensity. By just entering the values for different given variables and using finger tip on the mouse a person can have intensity and level of credit risk displayed on the screen. Managers can take decisions quickly because of this technology.

The project will address the problem that occurred due to Political Loans and NPLs those not recovered yet. Gov of NWFP wants to revive the bank rather than liquidating it. As we know that Government works for the wellbeing of people, which is why Gov do not want the employees to lose their jobs. Provincial Assembly has asked the Finance department to inject funds in the bank to run bank's operations and keep the personnel employed. Finance dept was initially reluctant as they already financed the bank and because of the failure they have lost almost whole of its investment, now they approved lump sum of PKR 1Bn on the directions of Provincial Assembly.

We are going to study its Management, Treasury, Investment, Risk Management, Credit, and Equity Investment operations. Then we will make a plan for its operations to excel as Finance department is advancing fund of Rs 1 Bn as an interest free loan to the bank.

We will analyze its current operations and will make suggestions and recommendations to better utilize the funds.

1.2) Problem Statement

Establishing and applying better Credit and Operations Risk Controls.

1.3) Objectives of the Study

It will contribute positively in enhancing our current knowledge of subject and addressing the issues to some extent as well. The project will achieve following objectives,

Understanding credit risk.

How to develop Credit and Operational Risk Management policies?

Understanding how to develop limit while extending advances.

Main factors of default causing credit risk.

Assessment procedure and eligibility criteria for mortgages as collateral.

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