Financial Express :: Financial Newspaper of Bangladesh

http://www.thefinancialexpress-bd.com/print.php?ref=MjBfMDFfMDF...

Tuesday, 01 January 2013

2012: Lessons learned for banks in Bangladesh

Mamun Rashid Bangladesh Institute of Bank Management (BIBM) organised a two-day banking conference recently. Due to other pre-occupations I could not attend the conference, though an invitation from Dr. Taufic Ahmed Choudhury, Director General of BIBM always means a lot to me. I am sure, many important issues on Bangladesh banking, its future journey and challenges were discussed in the conference. I thank and congratulate all the persons, committed to a `better banking environment' in Bangladesh. I somehow got hold of a copy of the opening remarks of Bangladesh Bank (BB) Governor Atiur Rahman. He as usual put emphasis on 'inclusive banking', 'green banking' and 'central bank with a human face'. With a public relations (PR) focused individual at the helm of the central bank, I am sure, our banks have started to realize the importance of 'sustainable banking', 'banking for women entrepreneurs' and 'SME banking'. Knowing him for last 32 years, I am sure Governor Rahman worked very hard to let his presence felt in the history of central banking in Bangladesh. He should also be credited for his earnest aspiration to bring in stability in the country's banking sector. If anyone to be credited for ensuring high foreign exchange reserve, the incumbent governor should be the right person. According to a report, he did allocate good amount of money to his economist friends, mostly teachers, for studies and may be research too, on macroeconomics and monetary management. Reportedly, he also got mentioned for making the maximum number of trips to rural Bangladesh. His commitment to `green banking environment' even got mentioned in the Doha climate change conference. These are good things for any development practitioner, if not for a central bank boss. We however heartily congratulate him. While thanking Governor Rahman for his tremendous hard work and commitment to a vibrant 'rural Bangladesh', I was also thinking loud-what are the `takeaways' for our banking sector from all these `highly publicized' activities of Governor Rahman? What is the impact of those on the day to day activities of 'better asset-liabilities management' or 'international trade with no surprises' or 'better service to clients with better use of automation or product development'? I am not also sure how would they help avoid more 'Hallmark' or 'Omprakash Aggarwal' or 'Nurunnabi clearing fraud' episodes? There are strong rumours that many large business houses including few from the `land of Nurunnabi' have borrowed much higher than their group turnover from the banks. My senior banker friends are not also sure, how would they sustain their profitability in a turbulent market, when deposit and lending cost is so high, good clients are asking for more and more discounts and where 'lack of automation', increasing 'employee frauds' have started to eat into the morale of executives and directors. While our bank regulators should be thanked for their actions once Hallmark or Destiny episodes were indentified or detected, I would have been very happy, to see their pro-activeness in putting up an updated version of the 'foreign exchange regulation act 1947', initiating a dialogue with ministry of finance on a 'laundry list' for modernizing the state-owned banks or facilitating our large business houses on a `case to case' basis to invest in off-shore agriculture or manufacturing plants where we have proven competence. No doubt there were many strategic moves taken; yet we did not see a proper `interbank market' working for our dealers, be it money market or foreign exchange deals; we did not see 'two way quote' working in our interbank Dollar-Taka or call money market. Liquidity in secondary bills market is very shallow, not allowing a proper `exit route' for the operators or investors. No foreign bank operating in Bangladesh is acting us a primary dealer (PD). Was there any visible change in the way we analyze credit risk, market risk or operational risk? Not really. Classified loans are on the rise. Large accounting firms are telling- 'if we apply qualitative judgment, the size of the classified loans will be

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Financial Express :: Financial Newspaper of Bangladesh

http://www.thefinancialexpress-bd.com/print.php?ref=MjBfMDFfMDF...

bigger'. Most of the banks are not asking themselves -'what we do with too many branches' in the era of automation? Or 'why are we putting up too many ATM (automated teller machine) on our own instead of joining an existing and dependable chain or operator or 'what are we doing to reduce our cost of funds'? Or 'how do we harness or retain talents'? Or even 'why not we go for centralized processing'? If they continue to look at the central bank only with their 'mouths open', I don't think that anything good would happen or they would be able to increase their revenue, reduce their costs or ensure better service delivery platform for 'integrated client solution building'. Yes, we have come across a long way. All those who have delivered must be thanked for this. But the reality is- we have a long way to go. The year 2012 was a learning year for all of us in terms of ensuring better compliance and internal control in order to avoid operational or credit losses, diversifications of our revenue earning base by getting into better receivablepayable management, retail banking and better process management and more importantly more investment on the development of the people. Lower profit for a year or two is nothing, provided we have learned the tricks of making more money through the better applications of our intelligence better products and structured solutions for our really deserving and forward looking clients. I always thought our good clients deserved much better from our banks. And to me, 'better banks mean better client service banks'. Let 2013 bring more rewarding experience for our banks and clients. Let our banks be more identified in the development process of Bangladesh. (Mamun Rashid is a banker and economic analyst. E-mail: mrashid1961@gmail.com)

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