While the entire Bangladesh banking industry is struggling with increasing non-performing loans, burglary, fraud, and a lack of efficient people, many are thinking: How do we ensure the migration of best practices to Bangladesh banking?
When the new private sector commercial banks (PCBs) were allowed in the early 80s, most of their CEOs and senior management came from state-owned commercial banks. The trend continued till the mid or late 90s. These people, as usual, were known large private sector clients of those banks and afterwards, the sponsors of the new banks.
They played a major role in expanding the country’s trade finance business. However, their focus was never on business process re-engineering, the establishment of a robust risk management culture, developing a delivery platform, integrated distribution channel, or even large project finance.
For obvious reasons, the central bank emerged as the only “change driver” in the Bangladesh banking sector. Reform programs initiated and supported by the development partners through the central bank brought in some visible change in the way those banks handled classified loans, charged interest rates to the clients, and maintained coverage against risk assets. However, information technology, modern management practices, human resource development, and governance did not get much priority in their laundry list.
During the implementation phase of the financial sector reform project (FSRP), a few senior managers in the state owned banks, the central bank, and the finance ministry got trained in the global banks. When those senior managers later joined the private sector commercial banks, the market could see some changes in the way “risk” is being managed and cross-border trade is carried out. The tail end of the 90s and early 2000s saw a few dynamic young individuals with global outlook mostly from the foreign banks operating in Bangladesh join the private sector commercial banks.
I would say the pressure for “change” started from there. Their spree for change was kick-started by the few second-generation foreign-educated entrepreneurs in their bank boards. This was further supported by the few at the central bank, who came from either the development partners or the foreign bank itself. The “core risk management guideline,” put up with the help of mostly the executives working for the global banks, worked as “equity” in the entire change process.
With the fall of ANZ Grindlays Bank, the closing of American Express Bank, Banque Indosuez, and some other foreign commercial banks, the market saw some good human resources available. The success of the change process in Eastern Bank (erstwhile BCCI) brought in a lot of confidence among the private sector commercial bank directors/sponsors to attract more senior managers from foreign banks to join in decision-making roles in their banks. And this now almost became a “one way traffic.”
Commercial banks started to gradually embed “change” in their growth strategies. Along with them, mid and junior level officials in those local banks also started to put in their efforts to ensure a better human resources policy, centralised processing, improved service delivery platform, a much improved and well-coordinated risk management process, an alternate product delivery and distribution channel, and more importantly relationship banking.
We have reasons to celebrate the success of the “first phase” of change management process in Bangladesh commercial banking. With more customised client solutions building, automated teller machines (ATMS), credit cards, mobile cash (M-cash), large project loans, offshore banking, cross-border financing, spur in retail, and SME banking, Bangladesh’s banking sector is poised to integrate well with the global banking system.
Centralised processing, higher investments in information technology, service delivery platform and a bigger pool for training and development of the people are commanding the agenda of the commercial bank’s boards.
CEOs of many of our banks spent considerable years in foreign banks. Many of their deputies also come from foreign banks. All of them may not be “world class,” or may not have clear visibility about the destination, but they know the importance of a people-centric policy, IT driven solutions, better risk management, and establishment of retail banking or transaction banking to diversify risk and introduce efficiency to the system.
While the Bangladesh banking system is going through a trying time now, many owners and directors of PCBs are thinking about attracting seniors from global banks to join them in the next possible opportunity. They have reconciled within themselves that “change” is going to be the only constant in banking, and we must invite young, energetic, capable people with home-and-abroad banking experience to run the show.
Though we have yet to see seniors from foreign banks driving the “change process” in state-owned banks and bring in visible changes, there and many other developing countries, the scenario may change there too, and soon.
A success transfer is underway, and must continue its journey into excellence. People with global banking experience should be more identified in the development process of Bangladesh’s banking industry and beyond. Ways could be many, but best answers come only from a few.