An appropriate internal control system for private commercial banks should be designed to ensure that the bank’s operations are efficient, effective, and compliant with laws and regulations. The system should include policies and procedures that address key risks such as credit risk, market risk, liquidity risk, and operational risk.

A system of strong internal controls can help to ensure that the goals and objectives of a banking organization will be met, that the bank will achieve long-term profitability targets, and maintain reliable financial and managerial reporting. A properly designed and consistently enforced system of operational and financial internal control helps a bank’s board of directors and management safeguard the bank’s resources, produce reliable financial reports, and comply with laws and regulations.

Developing an effective internal control system involves:

All banks operate in an IT environment. Understanding of commercial banks operations, specialised IT and accounting principles on receipts and payments skills are needed by the internal control designer for effective test of controls so as to provide a reasonable assurance that operations are working as designed. For a simple internal control, a written narrative may be sufficient, but in a complex system, a system flowchart or specially designed questionnaires may be needed for the system.