Towards a Banking Nation

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ICE Business Times caught up with a few veteran bankers and came to learn about the changing scenarios in the banking sector from national and international perspective.

By Asaduzzaman & Irad Mustafa

Accept and Respect the Required Changes
Ambi Venkateswaran A Global Banking Veteran

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Some may be strong and very quick to respond to the ideology that those tasks that can be completed by technology require no human intervention. However, there is no need to be demotivated by the innovations of technology. With the incorporation of it in almost every professional aspect, the utilization of technology should be embraced. In this, lies the constant success and longevity of economic prosperity.
Ambi Venkateswaran is a banking consultant in the U.S.A., where the primary focus is on risk management for banks and financial institutions. He has 35 years of experience as a bank executive, 26 of which he has served with the Bank of America Corporation. Venkateswaran has had a number of notable positions, which include Senior Vice President, Country Head of India, and Managing Director of North Asia Corporate Banking. He provides his insight into the financial crises of the past.
According to Ambi, the financial meltdown of 2007-2008 was primarily a result of the overleveraged situation of the financial institution due to the housing market bubble. “Federal Banker, Alan Greenspan contributes to this meltdown, stating that in 2005 the stock market was thriving across Asia, Dubai and China. The real estate market gained popularity because of the easy availability of credit.” He goes on to say that this irrational exuberance has a definitive effect. “The value of money depreciates and price of gas becomes cheaper as a result of this phenomenon of excess; the successive expansion over the next ten years results in necessary corrections that can be distressing.”
A number of texts have been written in order to analyze and decipher the cause for these crises. “In hindsight, these texts unanimously agree that every country has its own system and brand of democracy. If one were to equate this principle of allocating capital to countries being represented in accordance to the heights of individuals, the overview would be the following: In the world economy, the U.S.A. is 6 feet tall, China is 3, Japan is 3, Germany is 2.5 and the U.K. is 1 foot tall. If the economic structure of the U.S.A. slumps, it will indefinitely compromise the quality of the other economies because of the sheer size it encompasses in the room. This will in turn affect the banking system and economy of all of the surrounding nations.”
Venkateswaran deduces that the banking dilemma is somewhat avoidable if each bank were to do its own business. Furthermore, these banks can create their individual safety nets to protect themselves from collapsing after these crises. “Hypothetically this could have saved Merryl Lynch from collapsing and selling their company to Bank of America. Is this a result of capitalism? According to Hillary Clinton, this is not the case. She stated that the idea of capitalism is very Darwinian, in its theory of survival of the fittest.”
Venkateswaran asserts that this case is contrastive in regards to challenges of Asia. It is different in nature because the correction is taking place among the middle class, the decision makers and the bankers. For instance, in a country such as India, there is a population of 2.7 billion. The population of uneducated and impoverished citizens equate to 1.5 billion of the total population. A significant number of woman have no franchise and this is a result of a number of social issues; ultimately hampering the economic prosperity. These cases are known as demographic dividends and have a different dynamic. Their unique circumstances and shortage of natural resources inflate the prices of basic necessities such as healthcare, education and other social interactions. If unfettered capitalism is promoted in varying degrees, there will be different models for individual nations such as China and India.
From his experience in Japanese economics, where lending commonly becomes loss; he details that due to the economic system and expansion, the currency is negligible at the moment. “Money is used in most countries with the trend of using plastic money such as credit, and debit cards. Whether it is necessary or not is circumstantial because the general population will accept the change. With the manner in which monetary transactions are continuously evolving, the practice of keeping money in one’s wallet should eventually become a venerable practice because of its convenience. Given that change is inevitable, adherence to the advanced practiced is pragmatic.”
The cultural divergence of economies can vary amongst different societies according to Venkateswaran. He elaborates that India and Japan are not culturally diverse. On the other hand, the U.S.A., and the U.A.E. are culturally diverse and immigrants play a significant impact in their economic development. According to him, Singapore and the U.S.A. are interesting examples of cross culture and its pronounced effects on economic development can also be witnessed.
“This acceptance of diversity will not be as openly welcomed in some Asian societies.” Venkateswaran says that he does not see a Chinese CEO in an Indian company, where as it has occurred in many American companies. Due to the unique history of each country, evolution of ideologies varies. The evolution of the newer ideas can occur through respect but not through forced adaptation.
In conclusion, Venkateswaran postulate that rumors are vicious and can be disastrous for financial performances. In which case management of information is required as opposed to amplification of the negative attributes. “Bank managements have to implement protocols for communication, which entail emergency handling protocol and preparedness. This committee will manage the information, how it is disclosed, and ensure that no aspect of it is altered or misinterpreted.”

Careful Regulation In A Business Friendly Manner Is Needed
Muhammad A. (Rumee) Ali
Director, BRAC Bank Limited

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Muhammad A. (Rumee) Ali served as a Director of BRAC Bank Limited and as the Chairman of BRAC EPL Investments Limited, BRAC EPL Stock brokerage Limited, b-Kask Limited and so on. Prior to joining in BRAC, he served as the Deputy Governor of Bangladesh Bank and has worked with ANZ Grindlays Bank. His banking experience also includes stints in India, United Kingdom and Australia.
Speaking of his early experience when he joined ANZ Grindlays Bank in 1975 he stated, “I witnessed the command regime of the banking industry. There was five year plan and the whole banking industry and financial system was regulated to that extent and ran according to the Central Bank’s provided interest rate. The lending procedure and policies were all strictly controlled but gradually we moved away from that system.”
He went on to say that Bangladesh is a very good example of how a growing economy can successfully integrate itself with the global economy. “Bangladesh is taking slow steps towards a brighter future for which deregulation was required however I am not in favor of total deregulation. The banking industry should be regulated in a careful, business friendly manner. It is the only type of business that can create new money. The banks have to maintain their capital adequacy requirement but the rest is the depositors’ money. That is the main reason why I think banks should still be somewhat regulated.”
Being one of the people who helped bKash gain prominence in the financial sector, he said, “Bangladesh’s success in the mobile banking division is quite noteworthy.” There are still problems in the banking industry, regardless of its resilience, which need to be dealt with and in this regard he thinks the Government can take up a more active role. “Political commitment is necessary to hold things in place so the political will of the Government will play a role in helping remove existing problems in the industry.”
Responding to a question regarding bad debts he went on to say that the Central Bank’s vigilance will be a key factor.“The Bangladesh Bank’s guidance will be required if we are to recover past bad debts where there are about 1.3 million unresolved cases. We can see many examples from around the world where this feat has been accomplished and with the help of modified as well as new regulations, it can be done.”

The Symbol of Shakti
Meera H. Sanyal
Veteran Global Banker

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Meera H. Sanyal is a renowned veteran banker who relinquished her banking career to enter public service recently. In her 30 year career, Meera worked with Royal Bank of Scotland, India for 21 years. She is committed to the economic, social and political empowerment of woman and is a member of Clinton’s International Council of Woman Business Leadership. She has also worked with organizations that work to empower rural and tribal woman in India. In 2013, Meera joined the Aam Aadmi Party where she chairs the party’s National Policy Committee and led the Delhi dialogue which formed the party’s manifesto for Delhi state elections.
While speaking to IBT she mentioned that the development of markets in our part of the world had been facing challenges as they were still recovering from the global financial crisis of 2008. “There are still many signs which say that emerging economies like Bangladesh’s still face the risk of becoming destabilized. The strength lies in the country’s demographics so the advantages must be taken while it can still be used.” According to her we must spur our economic growth so that all these younger people have jobs. Dwelling on the most pertinent issues of demographic dividends and Bangladesh’s journey in the banking sector she said that certainly Bangladesh had shown the world the good inclusive banking could do. She endorsed our country saying that people across the world have been inspired by what Bangladesh has done. “A lot more innovation is taking place in financial services spaces in Bangladesh than is realized by most people.”
Meera went on to talk about our human resources department, saying South Asia is lagging far behind from the rest of the world in terms of skill development, especially when compared to East Asia which has devoted itself to enhancing the social services it provides while also empowering the role of women in those countries. However, Meera noted that it is a positive sign that both our country’s Prime Ministers have opted to try to follow some of those Eastern policies.
When speaking about the differences between Asian woman and European woman, she replied with a smile saying, “If we are able to empower women economically, socially and politically it will act as an important transformation agent for the country.” She said with determination that in South Asia we have been really fortunate to see a series of politically strong women who have shown the world their strengths.
Touching on the massive digitization of the banking sector the experienced banker said that what Bangladesh has done by providing services through mobile banking services like Bkash is quite wonderful and should be seen as an example by other countries. “If technology can be used to enhance the reach of financial services to empower those who are the poorest of the poor then you will have a radical transformation in the society. The world will learn from these innovations that are taking place in South Asia because these are new and hopeful models.”

Imminent Mergers in the Coming Years
K. Mahmood Sattar
Bangladeshi Banker With Global Exposure

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K. Mahmood Sattar has 33 years of experience in his business acumen and is a banking veteran to be reckoned with. Currently, he is an advisor to the RSA Capital while holding the position of Chairman at RSA Advisory Ltd. and also the position of Independent Director at BRAC Bank Ltd. He has had a very successful track record, having worked in admirable positions at ANZ Grindlays Bank, Eastern Bank Ltd, The City Bank and IDLC.
When speaking about the country’s banking industry he said there is a swarm of banks and financial institutions in Bangladesh however out of the total population of the country 56% still remain unbanked. “It is good to see the initiatives being taken by banks, especially in the private sector to bring in greater financial inclusion in our country. The responsibility of the financial sector, especially in the case of private commercial banks is huge in terms of the contribution they are making to the country’s economic growth. There are risks involved, however and banks need to prioritize the training of people who will learn to understand local and international risks better. It is the market economy which has allowed the private sector banks to move into such a position of strength after the Bangladesh Bank relinquished their commanding grip. The deregulation of the market economy has provided the necessary thrust which had brought in a certain level of efficiency but for them to maintain this efficiency consolidation is required which will allow them to reduce the cost factor and help them keep with the requirements of the Basel III framework.”
In terms of the current banking scenario, he commented saying, “The main concern right now is that we have too many banks in our economy and it is because the regulations in place allow banks to make a lot of money. However, this cannot go on for too long due to the numerous risk areas involved. In 5 to 6 years time we will be seeing many mergers taking place. From the investor point of view, we should have the ABCs pinned down quite well. We have the right hardworking and cheap labor force that is supposed to attract foreign investors but there are still gaps we need to fix. The image we portray to the world as well as our mindset needs to change. This problem has led us to drop two notches in the World Bank’s recent Ease of Doing Business rankings. We need to improve the infrastructural condition in the country and have adequate provisions of gas and power. Foreign investors are getting dissuaded by the time wastages from utility connections and bureaucracy entanglements in the EPZs. However, these speed bumps will have to be hurdled if we are to reach our 8% growth target.”
Regarding the rise of plastic and mobile money the role of safety and how you use it are extremely important. “You have to approach the unbanked population regarding these things cautiously. The reality is that people are carrying fewer amounts cash day by day since it is easier to make payments through credit or debit cards.”

Infrastructure Development Will Have Trickledown Effect
Syed Mahbubur Rahman
Managing Director and CEO, Dhaka Bank Ltd.

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Prior to becoming Dhaka Bank’s Managing Director and CEO, Syed Mahbubur Rahman’s banking career involved him working in BRAC Bank, Prime Bank, Standard Chartered Bank, Citibank NA, ANZ Grindlays Bank and IDLC Finance in different capacities. He received “The Asian Banker Leadership Achievement Award 2011-2013”, the most prestigious accolade for banking in the Asia Pacific region, in recognition of his outstanding and progressive leadership skills.
When asked about whether our current financial sector is overbanked he replied saying, “Bangladesh has a high number of private commercial banks and Non-Banking Financial Institutions (NBFIs) who face a growth challenge at this point. The market has stagnated and imports are not picking up. There is an excess liquidity issue as well and people are not getting adequate returns on their savings.Our inflation rate are 6% and the deposit rate isn’t anything positive either. However, there is still hope. The Government has taken the initiative to invest in infrastructure which will have a trickledown effect through our economic activities.”
Not being able to specify exactly when it would happen, he mentioned that soon we would be seeing a number of bank mergers due to the overbanked scenario but before that other changes need to set in. “The Government has taken positive steps in terms of the infrastructural priorities. It has now taken on expressway and monorail projects, both of which will see trickledown effects after they have been properly established. However, there are still many question marks regarding the availability of utility services like gas, water electricity. Provided these issues are solved, we will be able to go a long way.”
The systems in place are slowly becoming more IT based and the use of plastic money is on the rise. “Its usage is increasing but there is also a matter of safety and security in terms of the infrastructural facilities needed to use the cards.”
Regarding the high interest cap and significant operational cost, he opined that interest caps are higher than in many other countries but now, nobody is borrowing from Bank. He then spoke of automation and how the customers are inclining towards that system. “You need to consider unique factors as if customers do not need to come to your branch. And there are call centers. Our job is to basically think about how to provide services so that customers do not have to visit branches at all.”
Regarding the demographic dividends he reluctantly said that there are shortages of skills in our people. “There are many openings but it is difficult to get the appropriate person for the task. We need to keep investing in human resources and skill development so that the industries in our country can reap the benefits.”

 

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