The Bangladesh Institute of Bank Management (BIBM) has been doing a great job since the introduction of the 'Nurul Matin Memorial Lecture (NMML)' several years back. They have so far invited many luminaries to speak on 'Ethics in Banking', the last person being Dr. A B Mirza Azizul Islam, an eminent economist and former adviser to the interim caretaker government.

Though, I have collected the copies of the speeches delivered by Professor Rehman Sobhan, M. Sayeduzzaman, this was for the first time, I physically attended the BIBM's NMML lecture session. Let the reason for attending the session remain a secret to my readers.

Mirza Aziz, who has the track record of working with our ministry of finance, Securities and Exchange Commission and state-owned Sonali Bank was meaningfully very articulate and focused. In the speech, he did focus on 'the definition of right and wrong in business', 'ethical way of running a business', 'the stakeholders' approach' and most importantly 'the possible interface between ethics and banking'.

To him, banks' principal functions are: financial intermediation or intermediation, maturity transformation in deposit and loans management, credit allocation and facilitation of payments. He felt, in running their businesses, the banks must comply with all laws and regulations; they must ensure fair and equitable treatment to all stakeholders- shareholders, clients and people; they must make adequate disclosures about their health as well as risk coverage and they must be socially responsible.

If one would ask me, I think banks' primary job is to create value out of a happy relationship between clients and their people, without losing sight of the shareholders. To ensure, continuity of the business, without any reputation loss, they must focus on regulatory compliance and give back to the community, where they make money from. To me- maintenance of the customer's confidentiality and continuous client solutions building are the most significant issues here.

My 27 years of banking career at home and abroad taught me one thing: clients want their confidentiality to be maintained, no matter how adverse situation the bank executives face. It is equally important for the bankers to be of use to the clients offering continuous product or service solutions. Here one should differentiate between selling and marketing, customer service versus customer loyalty, occupying the rack space versus occupying the mind space. The banks do survive out of long-term client loyalty, making the clients to be their ambassadors; not through a tendency to 'get rid of what they have'.

Even at the time of having many alternatives, the clients never forget the bank, which have stood by their side during tough time and kept on designing new product or solutions to get them out of the mess. To me equally, if not more, important is, how the bank behaves as a 'corporate citizen', ensures `migration of best practices' and create space for its' employees. Banks need to be always upfront with their clients, be it interest rates, exchange rates and handling fees. This means no hidden charges. At the same time, banks must attend to commitment made to all clients.

While I have observed Professor Rehman Sobhan very rightly focusing on 'financial inclusion', M. Sayeduzzaman focusing on `tolerable interest rates and better customer service' and now Mirza Aziz focusing on 'behaving responsively', if I am not mistaken there has been very little discussion on maintaining the 'fire wall' by the regulators or watchdog agency.

While in the past, number of regulated institutions were less and mostly state-owned enterprises, deposits and loans were small and banks activities were limited, regulators' jobs, more or less, remained confined to a few inspections and issuances of prudential guidelines. Now businesses have become huge and complex, foreign trade and foreign exchange transactions have increased manifold and private sector operators are commanding the market. Banks and bank executives are much more clever and organised now with owning a bank to now deemed as 'feather in the cap' for the sponsors.

Often the clients are being forced to a 'back seat' in the entire show. And they don't get a `right deal'. Here comes the role of the 'watchdog agency'. While commercial banks seniors even today are found engaged in various shady deals with the clients (at times with the defaulting ones) in exchange for personal gains; recent record and corridor rumors show various compromises by the regulatory agency too, in exchange for various favors like jobs for the relatives, low interest rate loans and so on.

Added to this is, of course, supervisory failures due to capacity constraints. Some senior citizens, having regulatory background would also tell you- compromises are being made, while the retiree regulatory agency seniors seek employment in the commercial banks after their retirement.

Take it or leave it, banking has become a 'big money game' with the passage of time, while their owners are following the same 'age old practices' of governance failures and 'cutting the corners'. Therefore, they at times seek refuge under the regulators' umbrella to maximise profit and bypass or misinterpret laws to marginalise the competitors.

Profitability remains the core issue for all commercial enterprises. Banks can't be any exception. All the institutions, especially banks, are more involved in devising new ways of making money as fast as possible. Any ethical bank is being judged by - how they perform in the midst of cut-throat competition, how respectful they are towards a robust risk management culture, how they treat their clients- be it depositors or borrowers, how they invest in their people or delivery platform and distribution network to make sure there is a winning bondage between 'client and the people'.

In order to serve the clients best and most importantly-'how they are being perceived by the commoners as a responsible corporate citizen', are increasingly becoming the indicators of being an 'ethical organisation', as such for banks. I can vouch, there will be banks coming up in the neighborhood, with the desired virtues; because they want to survive and move on. Survival of the fittest means, survival of the ones that follow right practices.

Financial Express /Bangladesh/ 23th Feb 2012