Mamun Rashid
My interface with a commercial bank happened in 1973, while I needed a `demand draft' (DD) to apply for admission into a cadet college. It was the state-owned Sonali Bank in Sylhet. That time, the 'bank manager shaheb' or branch manager of any state-owned bank was a very respectable job. Then we all were introduced to Agrani Bank at Faujdarhat Cadet College in Chittagong where we tried to understand the term called 'clearing' or inter district payment through 'draft issuance'. That's all.
I became familiar with commercial banking, when I joined a first generation private commercial bank in 1984. That time banking was all about taking deposits and lending to businesses including state-owned enterprises. Banks' record keeping used to be done through large and fat ledger books.
All clients were at the receiving end- most of the time. They were eager to meet the branch managers to get things done early and without hassle. I moved to a foreign commercial bank early in 1987. Even there, level of automation was pretty low. Our clearing person used to count all his clearing claims without usage of a calculator even. And now? Except a few, all banks are automated with some of the banks being on latest service delivery platform and alternate distribution network. `Syndication', `club deals', `convertible bonds' or `securitization', these are nothing uncommon these days with more and more banks getting into `retail banking', `internet banking' and `investment banking' including `capital markets' opportunity spaces.
The banking industry in Bangladesh has flourished over last forty years, earning respectable amount of profits annually, sustaining growth and surviving cut-throat competition while providing attractive returns to shareholders.
However, news about bank directors' and chairmen's involvement in politics and underhand deals using banks' goodwill raise question about the banks' independence in running their operations. It also makes you think whether all the disclosures in the annual reports and other regulatory papers are only the glowing shell covering a huge hollow.
I, at times, question myself whether excessive regulation is the reason behind the veneer of goodness or whether there are other regulatory malpractices, disconnects or deficiencies that allow these banks to take advantage of the situation.
The image of the banking industry has many a times been tarnished by several media stories on the owners' irregular practices, operational lapses or credit failures. Despite the considerable progress made, global institutions are still somehow treating our banking industry activities with suspicion.
Countering the image issue is not the only block in the road to developing a respectable and successful institution, there are also the problems of 2Ps 3Cs and a T-- people, product, compliance and ethics, competition, change management and technology among others.
Though someone may differ, competition in Bangladesh seems to be the deadliest of all. It not only brings in positive developments but also encourages malpractice. There is competition not only from other banks but also from non-bank financial institutions (NBFI) and micro finance institutions (MFI).
Not only are the institutions competing, the regulators and customers are also pitting one against the other, making the situation extremely difficult, which gives you the feeling of being stuck between a rock and a hard wall. A customer will often try to make the best out of the situation by not complying with the regulatory requirement, referring to the service provided by a bank or banks.
The requirement of bankers to meet steep targets often results in succumbing to the demand from corporate houses, resulting in the bypassing of regulations. One act of bypassing results in another and then another. The breach of rules and regulations gives rise to malpractices, which often becomes the norm.
Competition in the banking industry is also emerging from the capital market end, as more and more corporate houses are going to the equity market to raise money. This not only hits the banks in the belly by affecting their core business but also indirectly affects their contribution to the market cap. More importantly, it forces them to risk their position by over-exposing themselves to volatile capital market through proprietary trading and position taking in order to maintain profitability.
All of us feel that the banking industry badly needs skilled human resources who will not only service old products but will also create and launch new innovative and forward looking products. Educating the market remains the first requirement towards creating new products and developing skilled human resources. Besides people and product issues, you need to be alive although to the ever-changing technology and regulatory requirements.
The new offering in the market which has got all banks running are the requirements of BASEL II & Automated Clearing House. The major challenge with change of regulation is that often the regulators are in a hurry to implement a sudden decision, rolling out action plans without proper research or understanding the broad implications and capabilities of the banks to comply with those.
The outcome is delay in implementation, confusion among stakeholders and new techniques to bypass these regulations. This, in turn, creates an uneven playing field for those who comply with the regulation versus those cleverly "managing" the situation without having to comply with. Too much noise and less action, at times, create doubt about the sincerity of the purpose.
As a law-abiding citizen you wonder why it is so easy to "manage" non-compliance? The final question remains -- who is losing out by this? Ultimately, every citizen of the country, as our country suffers.
Our new country started with a weak and shallow banking system in 1972 and that too with handful of state, owned banks. Now private sector banks- local and foreign call the shot, commanding majority of the market share. While letters of credit, cash credit and term loans were the asset products available, usage of ATM or credit card, mortgage loan or life style loans are increasing every day, with transaction banking, corporate advisory or capital markets services taking prominence. Banks are going `extra miles' for high net-worth and top tier clients.
However, we need to move further with emphasis on new product development in line with `M- commerce' and `E-commerce' opportunity spaces available, `Green Banking' and more importantly to serve the un-served clientele by expanding the banking services and customize product offering according to the target market. Increasing number of Bangladesh business houses are going cross-border with their need increasing for `world class' as well as cross-border banking services. The `regulatory' agency is also running out of tools and capacity to manage, guide and help the expanding banking world. Future is going to be much more competitive, yet great fun too, provided we play the game well and in togetherness. (Mamun Rashid is a banker and economic analyst.
>> http://www.fe-bd.com, January 03, 2011
My interface with a commercial bank happened in 1973, while I needed a `demand draft' (DD) to apply for admission into a cadet college. It was the state-owned Sonali Bank in Sylhet. That time, the 'bank manager shaheb' or branch manager of any state-owned bank was a very respectable job. Then we all were introduced to Agrani Bank at Faujdarhat Cadet College in Chittagong where we tried to understand the term called 'clearing' or inter district payment through 'draft issuance'. That's all.
I became familiar with commercial banking, when I joined a first generation private commercial bank in 1984. That time banking was all about taking deposits and lending to businesses including state-owned enterprises. Banks' record keeping used to be done through large and fat ledger books.
All clients were at the receiving end- most of the time. They were eager to meet the branch managers to get things done early and without hassle. I moved to a foreign commercial bank early in 1987. Even there, level of automation was pretty low. Our clearing person used to count all his clearing claims without usage of a calculator even. And now? Except a few, all banks are automated with some of the banks being on latest service delivery platform and alternate distribution network. `Syndication', `club deals', `convertible bonds' or `securitization', these are nothing uncommon these days with more and more banks getting into `retail banking', `internet banking' and `investment banking' including `capital markets' opportunity spaces.
The banking industry in Bangladesh has flourished over last forty years, earning respectable amount of profits annually, sustaining growth and surviving cut-throat competition while providing attractive returns to shareholders.
However, news about bank directors' and chairmen's involvement in politics and underhand deals using banks' goodwill raise question about the banks' independence in running their operations. It also makes you think whether all the disclosures in the annual reports and other regulatory papers are only the glowing shell covering a huge hollow.
I, at times, question myself whether excessive regulation is the reason behind the veneer of goodness or whether there are other regulatory malpractices, disconnects or deficiencies that allow these banks to take advantage of the situation.
The image of the banking industry has many a times been tarnished by several media stories on the owners' irregular practices, operational lapses or credit failures. Despite the considerable progress made, global institutions are still somehow treating our banking industry activities with suspicion.
Countering the image issue is not the only block in the road to developing a respectable and successful institution, there are also the problems of 2Ps 3Cs and a T-- people, product, compliance and ethics, competition, change management and technology among others.
Though someone may differ, competition in Bangladesh seems to be the deadliest of all. It not only brings in positive developments but also encourages malpractice. There is competition not only from other banks but also from non-bank financial institutions (NBFI) and micro finance institutions (MFI).
Not only are the institutions competing, the regulators and customers are also pitting one against the other, making the situation extremely difficult, which gives you the feeling of being stuck between a rock and a hard wall. A customer will often try to make the best out of the situation by not complying with the regulatory requirement, referring to the service provided by a bank or banks.
The requirement of bankers to meet steep targets often results in succumbing to the demand from corporate houses, resulting in the bypassing of regulations. One act of bypassing results in another and then another. The breach of rules and regulations gives rise to malpractices, which often becomes the norm.
Competition in the banking industry is also emerging from the capital market end, as more and more corporate houses are going to the equity market to raise money. This not only hits the banks in the belly by affecting their core business but also indirectly affects their contribution to the market cap. More importantly, it forces them to risk their position by over-exposing themselves to volatile capital market through proprietary trading and position taking in order to maintain profitability.
All of us feel that the banking industry badly needs skilled human resources who will not only service old products but will also create and launch new innovative and forward looking products. Educating the market remains the first requirement towards creating new products and developing skilled human resources. Besides people and product issues, you need to be alive although to the ever-changing technology and regulatory requirements.
The new offering in the market which has got all banks running are the requirements of BASEL II & Automated Clearing House. The major challenge with change of regulation is that often the regulators are in a hurry to implement a sudden decision, rolling out action plans without proper research or understanding the broad implications and capabilities of the banks to comply with those.
The outcome is delay in implementation, confusion among stakeholders and new techniques to bypass these regulations. This, in turn, creates an uneven playing field for those who comply with the regulation versus those cleverly "managing" the situation without having to comply with. Too much noise and less action, at times, create doubt about the sincerity of the purpose.
As a law-abiding citizen you wonder why it is so easy to "manage" non-compliance? The final question remains -- who is losing out by this? Ultimately, every citizen of the country, as our country suffers.
Our new country started with a weak and shallow banking system in 1972 and that too with handful of state, owned banks. Now private sector banks- local and foreign call the shot, commanding majority of the market share. While letters of credit, cash credit and term loans were the asset products available, usage of ATM or credit card, mortgage loan or life style loans are increasing every day, with transaction banking, corporate advisory or capital markets services taking prominence. Banks are going `extra miles' for high net-worth and top tier clients.
However, we need to move further with emphasis on new product development in line with `M- commerce' and `E-commerce' opportunity spaces available, `Green Banking' and more importantly to serve the un-served clientele by expanding the banking services and customize product offering according to the target market. Increasing number of Bangladesh business houses are going cross-border with their need increasing for `world class' as well as cross-border banking services. The `regulatory' agency is also running out of tools and capacity to manage, guide and help the expanding banking world. Future is going to be much more competitive, yet great fun too, provided we play the game well and in togetherness. (Mamun Rashid is a banker and economic analyst.
>> http://www.fe-bd.com, January 03, 2011
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