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Addressing the challenge of Macro Banking Environment and Operations

  • Published at 12:52 am November 26th, 2017
Addressing the challenge of Macro Banking Environment and Operations
The entire global banking system is experiencing a crisis of skilled human resources and leadership to address the growing complexities and risks associated with banking activities. Capacity development and knowledge management might contribute effectively in this context. As part of promoting knowledge management in the banking industry of Bangladesh, Bangladesh Institute of Bank Management (BIBM) has been organising the Annual Banking Conference since 2012. It is a two day-long programme aimed at bringing together experts, academics and researchers to exchange and share knowledge, experience and research outputs on banking and related issues. The conference this year will be held from November 26 to 27. A total of 20 papers will be presented at the two-day long event in four plenary sessions, The  sessions are ‘Macro Banking Environment’, ‘Operational Areas of Banking’, ‘Digital Technologies for driving Financial Inclusion for the Last Mile’ and ‘Promoting Client Centric Approaches in DFS’. On the first day, a total of 12 papers will be presented, and the remaining 8 papers will be presented in the day-two of the event. A publication titled ‘Card Gallery-Credit and Debit Card of Banks’ will be launched at the inaugural session which could be a useful product information source for both bankers and consumers. Two special keynote papers will be presented on day one and day two respectively. The conference will end with a Cultural Program titled ‘Unforgettable Classics’ and a Concluding Dinner. BIBM appreciates the support of UNCDF, Q Cash, Enroute and ammra network, and the media partners- Banik Barta, Channel 24 and Dhaka Tribune. BIBM invited selected senior academicians from the universities and top level bank executives to add value to the conference sessions as session chairmen, moderators or panelists. We are really grateful for their kind consent to be the chairmen and panelists. We believe that the audience and participant of the conference will be immensely benefited by their deliberations and comments. Regulatory and supportive macro banking environment and operational efficiency are key for the sustainable banking operation in any economy. For creating a ‘Prudential Supervisory Framework’, the Central Bank has initiated arrangement for monitoring the overall banking sector by using international standards and also by undertaking some innovative measures. BB has been working hard on technological development for ensuring transparency, and incorporating technology in supervision and service facilitation has brought remarkable changes in its approach. For efficient credit operation, online access to Credit Information Bureau has been successfully started. Installation of Bangladesh Automated Clearing House, Bangladesh Electronic Fund Transfer Network and National Payment Switch are other remarkable events in the history of our financial sector. By publishing ‘Financial Stability’ report each year, BB provides information on the financial market to the stakeholders. To ensure improved customer service, a key area of addressing sustainable finance, a ‘Customer Interest Protection Centre’ was established in the head office and regional offices of BB. A department named ‘Financial Integrity and Customer Services Department’ has been working to deal with the complaints of the customers and clients of banks and financial institutions more quickly and easily. To protect borrowers’ right and to improve the accountability of banks, BB has amended the ‘Guidelines for Customer Services and Complaint Management’ and banks are now obligated to communicate with borrowers regarding the increase in interest rate before one month with proper logic behind this and in case of term loan banks needs to have the option of early settlement against fees but for short term loan or demand loan, no early settlement fee can be imposed by banks. On the way to promote corporate governance practices and transparency, BB asked banks to make ‘Self-Assessment of Internal Control System’ to prevent fraud-forgeries in the banks and prepare report by bank’s Internal Control and Compliance department and submit to Department of Off-site Supervision, on a half-yearly basis. BB has also remained proactive in its mandated developmental role. Through developmental Central Banking approach, Bangladesh Bank has been supporting the government in  attaining inclusive growth and poverty reduction goals based on national aspirations and global visions like the UN SDGs. Several supportive regulations have come up over the years to ensure a better macro environment. In several instances, growing compliance requirements are becoming burdensome for the practitioners; however, this is a necessity today. In spite of some notable achievements and progress, a lot to be achieved in the area of corporate governance and transparency in the banking industry of Bangladesh. To ensure banking sustainability, the key concern of the policy makers and bankers has been the level of non-performing loans (NPL) of the banking industry.  In spite of improvements over the years, the NPL remained the key worry in the banking industry. Thus in general, addressing credit risk has been the main challenge of the banking sector. Especially, the culture of willful default is worrisome and is the top financial crime.  Banking sector of the country is also coming across other types of financial crimes, not different from other countries that are often associated with money laundering, embezzlement, evasion of sanction, and illegal transfer of funds for tax avoidance and financing terrorism. The situation became a serious cause of concern as the contemporary criminals make use of sophisticated skills and advanced technologies to perform illicit activities in the financial realm. The changed scenario exposed a financial institution to various risks in terms of operations, legal affairs, regulations and reputations. If the perpetrators take advantage of deficiency in bank management, the risks become even higher. Alongside big banks, small banks are easy prey for criminals, as many lack robust systems to fend off threats. Given the dynamism in the approach of financial crimes, it became a critical challenge for banks to catch up with the development. In regard to a current challenge of the banking industry, the recent trend of remittance slowdown into the country became concerning to the policy makers. We know that worker remittances have been a consistent source of foreign exchange in Bangladesh that has been playing an important role in improving supply side in the foreign exchange market and reducing poverty level. In spite of several recent policy initiatives, the remittance flows are yet to receive due push. There are suppositions that changes in global policy and regulatory environments and leakage of remittances from formal to informal channels might be the reasons. It is very difficult to estimate the magnitude and volumes of true size of the remittance flows as a considerable portion of the foreign remittances are believed to be entering into the country through the informal channel; and it is extremely difficult to estimate the volume of informal flows with accuracy. There are evidences that informal remittance channeling remained popular for sending money to rural Bangladesh to a section of expatriate Bangladeshi workers. The system has proved to be efficient and dependable in general over the period that involves significantly less time, less or no formalities, and require comparatively less cost in channeling fund as compared to official channel such as banks. Lack of knowledge about banking procedures and involvement of paperwork and documentation are also notable hindrances for using official channels. In spite of the growing use of information technology, it seems not easy for banks to compete with the informal sector money remitters. In the present scenario, the policy makers are facing a key challenge to augment remittances through formal banking channels and thus integrate remitters with the development process of the country lawfully and productively.  In the area of international banking, our banking sector also experienced correspondent relationship cut in recent time which is affecting the cross border trade facilitation by the banks. It is associated with addressing compliance requirement in response to the banks’ approaches to address money laundering. Trade-based money laundering is amongst the key concerns in the country.