S M Jaffar, Deputy Managing Director of NBL, seen at a workshop on credit risk management in Dhaka.

A two-week long training course on 'Credit Risk Management' for the credit officers of National Bank Limited (NBL) ended in Dhaka.

S M Jaffar, Deputy Managing Director of NBL was present as chief guest and distributed certificates among the participants, said a press release Monday. Md Majibur Rahman, Principal, Hari Narayan Das and Zahir Uddin Mohd Babar, senior faculty members of NB Training Institute were present.

The Daily Sun/ Bangladesh/ 22-May-2012

Bangladesh Bank has selected a total of 31 public and private sector banks to bring electronic payment under a common platform, authorities concerned said.

This will be implemented under a project styled National Payment Switch (NPS) to facilitate easier transactions between banks and thus provide smooth services to customers at ATM booths.

The NPS, being set up at the central bank with a $5 million financial support from the World Bank, is scheduled to start functioning from next December.

The rest of the commercial banks will come under the system the next year, the BB authorities said.

“NPS will work as electronic clearing house for e-transactions, which will bring a revolutionary change in the inter-bank transaction,” BB Executive Director and Director of the NPS project Ahsan Ullah told the daily sun.

As many as 15 of such switches will be set up to cover all the commercial banks in course of time, he pointed out.

If entirely covered, the customers will be able to use any ATM booth of any bank, authorities said. Currently, the ATM users can use only the booths of the respective banks and face some troubles in using them. Bangladesh Bank is likely to fix a rate of Tk 15 for each inter-bank transaction through ATM (asynchronous transfer mode).

The commercial banks now charge Tk 35-Tk 70 for single use of their ATM booths, rates that are considered extremely high.

BB data show a total of 40 commercial banks are maintaining about 3,000 ATM booths across the country. Around 500,000 credit and debit cards have so far been issued to the clients.

About 500,000 Bangladeshi clients are using international payment scheme cards such as VISA, MasterCard and American Express, according to the central bank.

NPS works as a ‘mother switch’ which will gradually connect all ‘child switches’ owned or shared by the scheduled banks, the authorities said. ATM, point on sale, electronic commerce, internet banking, mobile banking and all other online banking services offered by banks will be covered by the “mother switch”.

The primarily selected banks are: Agrani Bank, Prime Bank, Standard Bank, The City Bank, Southeast Bank, United Commercial Bank, Rupali Bank, EXIM Bank, Mutual Trust Bank, NCC Bank, Bangladesh Commerce Bank, BASIC Bank, ICB Islami Bank, IFIC Bank, Jamuna Bank, Janata Bank, Mercantile Bank, National Bank, Social Islami Bank, Trust Bank, Sonali Bank, Uttara Bank, Dutch-Bangla Bank, BRAC Bank, Standard Chartered Bank, Islami Bank Bangladesh, Eastern Bank, Pubali Bank, Dhaka Bank, AB Bank and Bank Asia.

The Daily Sun/ Bangladesh/ 22-May-2012

Imagine a scenario -- your customer purchases an airline ticket online using his/her credit card. In a couple of hours your bank's call centre executive gets in touch with the customer to sell a travel insurance product. The chances of the customer positively responding to this call are very high, simply because the bank has grasped upon the right time to sell the right product to the right customer.

This real-time reaction to an event seems the most logical step for the bank, but unfortunately is one of the most difficult tasks to execute. In fact, today while there is plenty of cross-selling batch based marketing taking place, banks can seldom guarantee that the customer receives a promotion offer when he/she is most interested in.

There are a couple of reasons for this. Firstly, while data is available, getting immediate and meaningful information out of that data remains a challenge and more often than not selling opportunities remain untapped. Currently, CRM (customer relationship management) systems are capturing various customer interactions and storing them in a central repository; following which, data mining tools are analysing this historic data to execute marketing campaigns. What is lacking is adding the contextual intelligence to enable real time reactions to the business event.

Take for example, a customer conducts a single big transaction that nearly depletes his/her credit card balance. Real time banking rules should ideally prompt the call centre agent to immediately and proactively inform the customer of the high value transaction and offer a personal loan to offset the credit card outstanding against a fixed tenure flexi-EMI (equal monthly instalment) plan. Such an offer, if made at the right time, will ensure the bank keeps the customer locked in and using his/her credit card over a longer duration.

In a conventional banking setup, while the offer will be made, it may be made when a campaign is run much later in a batch. By then, most banks will have missed the

window of opportunity with the customer.

Hardly surprising then that with real-time event processing, banks can assume anywhere between 20-40 percent upside over traditional batch based marketing.

The second obstacle facing banks is an ever widening gap between business requirements and IT's ability to deliver. While IT has historically been a core enabler in the industry, processes have been developed and deployed on a project-by-project basis, creating narrow focused and siloed systems that lack the flexibility to react to rapidly evolving business changes.

Take the case when a customer applies for a loan at his/her bank branch. From the time the application is submitted to the time of loan disbursement may take up to a month. The underlying cause of this delay is that established financial organisations still have numerous, disparate, proprietary back office systems that limit the capabilities of even the most advanced front-end systems.

There are a number of manual not to mention duplicate tasks along the way that should ideally be automated. However, this is easier said than done. The remodeling and implementation of new processes to meet the demands of dynamic change are severely constrained primarily because of the expensive proposition of overhauling existing processes. Banks thus need to find a way to drive greater efficiency and value from existing systems and processes, while simultaneously managing risks associated with dynamic change and achieving greater visibility and flexibility across complex operations.

For some years now, banks have grasped on to an approach called business process management (BPM). As a concept, it is focused on aligning all aspects of an organisation with the wants and needs of clients, thereby promoting business efficiency. The driver of BPM is integration which needs to not only extend across the enterprise, but also embrace third parties who often supply key components of today's complex, multi-instrument commercial banking landscape.

However, while traditional BPM systems were designed to manage macro-level processes across multiple applications, current new and modified processes simply cannot be executed quickly enough to meet the business need. The need for such immediacy can acutely be felt when you look at what's taking place in the banking industry today. Driven by the emergence of new payment channels, banks are increasingly concerned with exercising regulatory control and preventing fraud.

Especially with the growing popularity of the mobile phone as a payment mechanism, banks require the ability to look at all payment transactions as they flow across payments processes, identify a rogue transaction based on business rules and trigger an alert process to intervene any likely fraudulent activity. It is the age of grasping upon the opportunity cost of split-second "sense-and-respond".

Reflecting this is Gartner that has coined a new term - intelligent BPM systems (iBPMS) where organisations will increasingly make intelligent, agile responses to events in real time, much like the human brain. That banks already accord high importance to event-driven processes was reflected in a survey the research firm conducted in 2010. The worldwide survey on BPM spending showed that banking was the only vertical that had event-driven processes within the top five most popular capabilities of a BPM suite, reflecting the need for banks to react to changes in the external environment.

This brings us to what banks need to do in the present day scenario? Enter the need for a unified BPM suite which can support all types of processes. Since integration is a key to BPM, it should also be unified with the rest of the bank's middleware and applications. Furthermore, the tools need to work for all participants across IT and business and should possess rich common collaboration capabilities to simplify cross functional communication.

Last and most importantly, the BPM suite should not add more software to the inventory. Rather it should provide a thin management layer above the bank's existing server, thereby minimising the need for new investment in infrastructure and enabling the bank to get more from its existing investment in applications and processes.

Of course, the benefits of such a unified solution do not end here. It facilitates shorter timescales to delivering and running processes, closes the communication gap between business and IT, delivers a single consistent view of the process that both business and developers can understand and effectively orchestrates integration between services and applications within the enterprise.

But perhaps the biggest benefit of all is that banks respond to events in real time, applying current information to historic overviews and facilitating proactive response rather than reactive. The new levels of efficiency help keep costs low yet reduce lag time to a minimum, with the overall result that the bank is better informed, instantly responsive and able to make faster, more reliable decisions that bring direct benefits to the bottom line.

The writer is the country manager of Oracle Fusion Middleware, South Asian Growth Economies-West.

The Daily Star/ Bangladesh/ 22-May-2012

The board of directors of Brac Bank has recommended rights share for the existing shareholders to raise its paid up capital.

The company will offer rights share at a ratio 1:2 - one rights share for every two shares held - at an issue price of Tk. 25 each including a premium of Tk. 15 per share on paid up capital subject to the approval of EGM and regulatory authorities.

The Bank will offer rights share to increase paid up capital to meet Bangladesh Bank Basel II requirements. As per the BB order a bank must have Tk 400 core as paid up capital. Existing paid up capital of Brac Bank is Tk 385.5 core.

The company has fixed record date for EGM on May 29, 2012, while the EGM will be held on June 28.

Another record date for entitlement of the proposed rights share will be notified later after obtaining approval from SEC. Venue of the EGM to be notified later.

The Daily Sun/ Bangladesh/ 21-May-2012

Bangladesh's balance of payments (BOP) is in stress, but the central bank is not interested at the moment in "swap funds" offered by India due to relatively high interest rates.

Swap loans make foreign currencies readily available for central banks. By definition, the purpose of the swap system is to reduce the cost of loans between central banks, so that dollars or euros are cheaper to obtain.

The arrangement meant for the Saarc countries is a measure to address short-term liquidity and BOP difficulty.

The Reserve Bank of India (RBI) has offered $2 billion to other members of the South Asian Association for Regional Co-operation.

“Return on our reserve is not more than 2 percent. But we will have to pay 3 percent interest if we take the RBI's swap fund,” a BB official told The Daily Star yesterday.

“We'll not go for this fund unless we are obligated to meet demands,” the official said.

Earlier, BB Governor Atiur Rahman at a workshop of the Economic Reporters' Forum yesterday disclosed the formation of this swap fund, first of its kind in the region.

“We will be able to take loans up to $400 million through the swap arrangement,” Rahman told reporters at the central bank.

Under the arrangement, the Saarc member countries can get the funds in dollars, euros or Indian rupees. Each instalment is of three-month tenure and can be rolled over twice. The first roll-over will be at the normal rate of interest -- LIBOR plus 2 percentage points or 200 basis points, according to the RBI.

The second tranche will be costlier by 50 basis points more than the normal interest rate.

Bangladesh's BOP, which is a summary of its economic transactions with the rest of the world, is in the negative territory indicating foreign exchange reserve outflows outstripping inflows. And, to minimise the BOP pressure, the BB has recently taken loans from the International Monetary Fund worth nearly $1 billion.

Swap arrangement between the central banks came to the surface at the Chiang Mai Initiative, a scheme drawn up by Asean, Japan, South Korea and China, following the Asian financial crisis in 1997. Under the initiative, each party to the arrangement can draw upon the financial resources of other parties in case of BOP difficulties.

Later, the concept was adopted by central banks in the US and different European countries since 2007 when the financial crisis melted them down.

The swap arrangement was first discussed at a Saarc forum several years ago. Later, the Saarc finance ministers at a meeting on global financial crisis in February 2009 noted that a major cause of the current concern in the region is the drying up of credit and the contraction of financial markets.

The issue was also discussed prominently at this year's Saarc finance ministers' meeting in Dhaka.

RBI Governor Dr D Subbarao announced formation of a $2 billion swap arrangement fund at the 24th Saarc finance governors' meeting in Pokhara, Nepal last week.

The facility will be available in three instalments.

“India has set the interest rates for the fund as it has provided the entire fund,” said the BB official, pointing at a higher interest rate.

However, he said the fund is less costly than loans, such as Islamic Development Bank that charges a 5 percent interest rate.

RBI said, to take the fund, the central banks of the requesting countries will need to enter into bilateral swap agreements, which need final approval from the Indian government.

The RBI's proposal to offer swap facility to the Saarc member countries had earlier been approved by the Union Cabinet.

The Daily Star/ Bangladesh/ 21-May-2012