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Compliance to be only option for survival of banks: AB Bank chief

abShamim Ahmed Chaudhury, an internationally reputed banking expert and Managing Director of AB Bank Limited sees private banks in Bangladesh are moving ahead parallel to some banks in Asia. But the most challenges for them are issues of compliance, check and balance and few more things unknown to many at this moment.
As the global banks grapple with tides of regulation, fines, and a myriad of other post-crisis issues, local Asian institutions are tooling up and stepping in to fill the gaps. In this race, it would be very hard and difficult for the local private banks to manage their risks”, Chaudhury said.
AB Bank chief was talking to The Daily Observer during his busy schedule at the bank’s head office to express his views on the global banking trends and the state of local private banks based on his over 34 years of international banking experience both at home and abroad.
Mr. Ahmed started his career with American Express Bank in 1980 and worked in Bank of Credit and Commerce International (Overseas) Limited, Bank of Small Industries and Commerce, Union Bank of Zambia Limited, Al Rajhi Banking and Investment Corporation, CIT Financial Limited, BPB North American Financial Services from 1988 to 2005.
He served in ONE Bank Limited as Deputy Managing Director from October 2005 to March 2008.
Global banks have had a tough time in the past five years. Asia in particular is proving to be challenging ground, with as many different regulatory regimes as there are countries in this large and hugely diverse region. Add the need to be ‘local’ in every market and it can be a stretch too far.
“This has created a very fertile ground for local banks. Regulators, therefore, focus on compliance issues and banks globally find it as the only option for their survival”, Shamim Ahmed Chaudhury told the daily during the discussion on global banking trends.
“From terrorist financing, money laundering, international criminal gangs to drug networks, the challenge for banks is made greater by the increasing volume and speed of banking transactions. Now each one must be checked against the list almost in real time. Accordingly, banks have had to devote increased resources to ensure they comply. But therein lies execution risks”, he said.
Margin compression is becoming a feature across banking markets as regulation, capital requirements, funding costs, lackluster demand, low interest rates, price competition and shifting buying patterns all affect profitability.
“Scale or niche expertise is increasingly crucial and, as we’ve seen already, so are customer expectations”, Chaudhury said.
Replying to a question on the state of private banks in comparison with foreign ones, AB Bank chief said
some local banks still remain far behind in comparison to foreign banks operating in Bangladesh. One of the main reasons is the short-term practice by local banks as compared to long-term by foreign banks.
“In many local banks, you cannot take any decision without the approval of the board. Working process & procedure is different in local private banks whereas foreign banks operate here under set global process & procedure which they have implemented though out its network” Chaudhury said. though out its network” Chaudhury said.
He said local private banks are trying to implement compliances, but soaring capital adequacy ratios and ballooning compliance costs have forced them to look carefully at their business models and cost base, he said.
“But the situation is improving now. Private banks are now coming out of the vexing of unwanted interference thanks to the central bank’s recent policy and regulations”, he said.
” For instance, I can say our bank where we bankers take decisions freely and our board members keep eyes to surveillances our performance. They sometimes encourage us with the view to do more to make the bank as a international stand bank”, Chaudury said.
AB Bank chief said many banks in Bangladesh are yet to implement Basel-II compliance while the regulators are stepped up to press on banks with Basel-III. Then many new things will come in the scene and many banks will lose grounds as was experienced in many countries including our neighboring country India.
“In this situation some local banks are yet to come up to international standard”, AB Bank chief said.
Industry experts say that banks are finding that compliance can have some business benefits. In a recent survey conducted by SunGard of the USA on stress testing, over a third of bankers indicate its top benefit is that it better informs them on capital planning decisions.
The nearly half who have not undertaken stress testing said that maintaining a forward-looking view of the organization’s risks was a top benefit.
In this discussion, Mr. Shamim Ahmed Chowdhury added that banks are struggling to comply with changing regulations coming from every direction. But one of the most daunting challenges is complying with sanctions imposed on rogue individuals or institutions. This has become a new challenge for private banks.
He said retail and small business customers have apprehension about present state of banking industry. Further examples of regulatory and compliance breaches during the recent past have done little to shift that opinion.
“Large corporations remain wary of committing to significant investment, and many are sitting on major cash reserves. So it’s a critical time for the banks who hold now excess liquidity in their cash vaults”, Chowdhury said.
AB Bank Limited is the first private sector bank was incorporated in Bangladesh that started operation in April 12, 1982 as Arab Bangladesh Bank Limited. The bank is known as one of leading banks of the country since its inception due to its pioneering role in technology based products and services.
On March, 2008, Shamim Ahmed Chaudhury joined AB Bank Limited as Deputy Managing Director and was promoted to the rank of Additional Managing Director in October 2013. He assumed the post of President and Managing Director of the bank in February 2014.
“Our mission is to be the trendsetter for innovative banking with excellence and perfection. We consider adherence to national policies and objectives a priority for giving our customers the best financial support with corporate integrity, meaning a fully compliant bank along with involvement in social development”, the bank’s CEO claimed.
“Technology platforms and outsourcing solutions are, of course, fundamental to the operations of all financial institutions. The entire financial services sector has been an enthusiastic (and, often, trail-blazing) adopter of successive waves of technology, both through in-house implementation and through outsourced service provision arrangements”, AB Bank chief said.
Shamim Chaudhury said his bank has successfully completed its automation project in mid 2008. It envisages enabling customers to get banking services and products within the comfort of their homes and offices.
Being the market leader in the private banking industry of Bangladesh, AB Bank has thus been able to keep its consumer’s and client’s trust upholding its reliability and strong footage. The Credit Rating Agency of Bangladesh Limited (CRAB) awarded the Bank an AA3 rating on long term and ST-2 rating on short Term.
Currently AB Bank has 89 branches, one foreign branch in Mumbai, India; 6 subsidiary companies including one exchange company in UK, Off-shore Banking Unit and Custodial services. The Bank re-opened its Representative Office at Yangon, Myanmar and at London, UK extending its foreign operations.
Despite the adverse market conditions, the bank earned profit amounting to Taka 146 crore in 2013 which is 5 per cent higher than that of previous year.
The asset base of AB Bank Limited and Its subsidiaries grew by 14 per cent from 2012 to stand at over Tk 17,552 crore at the end of 2013.
Deposit of the bank rose by 21 per cent to Tk. 2,408 crore while the diversified Loan Portfolio grew by over 11 per cent during the year.
Foreign Trade Business handling stood at Tk 16,615 crore resulting a growth of over 21 per cent in 2013.
“We believe in modernization. We are committed to the nation taking a lead in the banking sector through not only our strong financial position, but also through innovation on products and services”, AB Bank Managing Director said during the talk with the daily. Source: Daily Observer, 02,09,2014

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