Asset Liability Management (ALM) of Commercial Banks
&
The HSBC Approach
The World’s Local Bank
Introduction:
The scope of this report is limited to the overall description of the company, international network& brand, its product and services. The scope of the study is limited to organizational setup, functions, and performances Since HSBC is still in its growth stage in Bangladesh; it has still to go a long way to achieve its destination. To achieve the long-term goal it must take each step very carefully. The report will mainly focus on asset liability management of Commercial Bank and the HSBC approach.
Objective of the Study
The objectives of the study are summarized below in two sub categories:
Broad Objectives
The broad objectives of the report are:
§ To present an overview and brief introduction of HongKong and Shanghai Banking Corporation Ltd.
§ Providing a clear idea about Asset Liability Management (ALM) of Commercial Banks and HSBC Approach.
Specific Objectives
The specific objectives are providing:
Ø For Organization Part:
- HSBC’s history in local and global markets
- HSBC’s mission, vision, objectives, strategies and organization Structure
- HSBC’s operations in Bangladesh
- General idea of the products of HSBC for Bangladeshi customers
- Overview of the functional departments
- HSBC’s organogram , management.
Ø For Project Part:
§ To define asset liability management
§ Background of Asset liability management
§ Techniques of Asset liability risk
§ Asset liability Management approaches
§ Procedure of examining ALM
§ BB guideline on ALM
§ HSBC Bangladesh ALM practices
Organization part
Part 1: Organization Synopsis: The HSBC
A. An overview and Historical Background of the Organization
A.1. The HSBC Group
Who they are The Hongkong and Shanghai Banking Corporation Limited popularly known as HSBC HSBC is one of the largest banking and financial services organizations in the world, with well-established businesses in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa.
Head office HSBC Holdings plc is incorporated in England, with its head office in London.
Strategy HSBC’s strategic direction reflects its position as ‘the world’s local bank’ with its uniquely cosmopolitan customer base. Group strategy is aligned with the key trends shaping the global economy. HSBC recognizes that emerging markets are growing faster than developed economies, world trade is expanding at a greater rate than GDP, and life expectancy is increasing virtually everywhere. HSBC is, therefore, reshaping its business by investing primarily in the faster growing emerging markets and, in developed markets, focusing on businesses which have international connectivity.
Assets US$2,354 billion (£1,172 billion HK$18,359 billion) at 31 December 2007.
Profit before tax US$24,212 million (£12,106 million HK$188,878 million) for 2007.
Capital strength Tier 1 capital ratio: 9.3%
Total capital ratio 13.6% at 31 December 2007
International reaches Around 10,000 offices in 83 countries and territories.
Staff 330,000 employees worldwide.
Customers About 128 million worldwide, with a total of 46 million customers registered for internet banking.
Share listings HSBC Holdings is listed on the London, Hong Kong, New York, Paris and Bermuda stock exchanges. The company’s US$0.50 ordinary shares are traded on the London, Hong Kong, and Paris and Bermuda stock exchanges and are traded in New York in the form of American Depositary Shares, each of which represents five ordinary shares. Shares in HSBC Holdings are held by more than 200,000 shareholders in over 100 countries and territories.
Technology HSBC is a major user of advanced information technology, with an annual spending of US$5.9 billion. Its e-business channels include the internet, PC banking and telephone banking. HSBC maintains its own private telecommunications network – one of the worlds largest – to deliver IT services to customers and to staff around the world. HSBC web sites attracted 2.1 billion visits during 2007.
A.2. Historical Background
Beginnings, 1865 The HSBC Group’s name is derived from The Hong Kong and Shanghai Banking Corporation Limited, the founding member of the modern Group. The bank owed its origins to the business communities of the China coast in the 1860s. At that time, the finance of trade in the region was not well developed and most transactions were still handled by the European trading houses, or hongs, rather than by professional banks. By the early 1860s, local businessmen needed larger and more sophisticated facilities. In Hong Kong, in particular, business leaders required specialist-banking services — preferably from a bank that was locally owned and managed.
The founding of the bank in 1865 answered this need. The new company was the inspiration of Thomas Sutherland, then the Hong Kong Superintendent of the Peninsular and Oriental Steam Navigation Company, who produced a prospectus for a locally based bank operating on sound ‘Scottish banking principles’. The prospectus attracted the support of a broad spectrum of Hong Kong interests, including American and Indian trading houses as well as European firms, and the initial capital of HK$5 million was quickly taken up in Hong Kong, Shanghai and Calcutta. On this basis, the bank opened for business in Hong Kong on 3 March 1865. Then, as now, the bank’s headquarters were at 1 Queen’s Road. One month later, on 3 April 1865, the bank’s Shanghai office opened for business. Initial response from customers in the two cities was favorable, both from the foreign business community and from the compradors, the influential Chinese intermediaries in charge of local staff and business dealings in the Chinese community.
Throughout the late nineteenth and the early twentieth centuries, the Bank established a network of agencies and branches based mainly in Chaina and South East Asia but also with representation in the Indian sub- continent, Japan, Europe, and North America. In many of its branches the Bank was the pioneer of modern banking practices. From the outset, trade finance was a strong feature of the Bank’s business with bullion, exchange and merchant banking also playing an important part. Additionally, the Bank issued notes in many countries through the Far East.
During the Second World War the bank was forced to close many branches and its head office was temporarily moved to London. However, after the war the Bank played a key role in the reconstruction of the Hong Kong economy and began to further diversify the geographical spread of the Bank.
This brief history describes the origins and evolution of the companies that make up the HSBC Group. The history concludes with a summary of the far-reaching changes in recent years that have given HSBC its special place in today’s major financial markets.
A.3. Growth of HSBC Group
The HSBC Group evolved from The Hong Kong and Shanghai Banking Corporation Limited, which was founded in 1865 in Hong Kong with offices in Shanghai and London and an agency in San Francisco. The HSBC Group expanded primarily through offices established in the bank’s name until the mid-1950s when it began to create or acquire subsidiaries. Below are some key developments in the Group’s growth since 1959.
1959 The Hong Kong and Shanghai Banking Corporation acquire The British Bank of the Middle East (formerly the Imperial Bank of Persia, now called HSBC Bank Middle East Limited).
1965 The Hong Kong and Shanghai Banking Corporation acquires a majority shareholding in Hang Seng Bank Limited, now the second-largest bank incorporated in Hong Kong.
1972 Midland Bank acquires a shareholding in UBAF Bank Limited (now British Arab Commercial Bank Limited).
1978 The Saudi British Bank is established under local control to take over The British Bank of the Middle East’s branches in Saudi Arabia.
1980 The Hong kong and Shanghai Banking Corporation acquires 51% of New York State’s Marine Midland Bank, N.A. (now called HSBC Bank USA, N.A.). Midland Bank acquires a controlling interest in leading German private bank Trinkaus & Burkhardt KGaA (now HSBC Trinkaus & Burkhardt AG).
1981 Hongkong Bank of Canada (now HSBC Bank Canada) is established in Vancouver.
1982 Egyptian British Bank S.A.E. is formed, with the Group holding a 40% interest. The Group now holds 94.5% in the renamed HSBC Bank Egypt S.A.E.
1983 Marine Midland Bank acquires Carroll McEntee & McGinley (now HSBC Securities (USA) Inc.).
1986 HongkongBank of Australia Limited (now HSBC Bank Australia Limited) is established.
1987 The Hongkong and Shanghai Banking Corporation acquire the remaining shares of Marine Midland and a 14.9% equity interest in Midland Bank plc (now HSBC Bank plc).
1991 HSBC Holdings plc is established; its shares are traded on the London and Hong Kong stock exchanges.
1992 HSBC Holdings purchases the remaining equity in Midland Bank.
1993 The HSBC Group’s Head Office moves to London.
1994 Hongkong Bank Malaysia Berhad (now HSBC Bank Malaysia Berhad) is formed.
1997 In Brazil, the Group establishes Banco HSBC Bamerindus S.A. (now HSBC Bank Brasil S.A.-Banco Múltiplo), and acquires Roberts S.A. de Inversiones in Argentina (now HSBC Argentina Holdings S.A.).
1999 Shares in HSBC Holdings begin trading on a third stock exchange, New York. HSBC acquires Republic New York Corporation (now integrated with HSBC USA Inc.) and its sister company Safra Republic Holdings S.A. (now HSBC Holdings (Luxembourg) S.A.). Midland Bank acquires a 70.03% interest in Mid-Med Bank p.l.c. (now HSBC Bank Malta p.l.c.), Malta’s largest commercial bank.
2000 HSBC acquires CCF (now HSBC France), one of France’s largest banks. Shares in HSBC Holdings are listed on a fourth stock exchange, in Paris.
2001 HSBC acquires Demirbank TAS, now HSBC Bank A.S., Turkey’s fifth largest private bank; and signs anagreement to purchase an 8% stake in Bank of Shanghai.
2002 Acquisitions include Grupo Financiero Bital, S.A. de C.V. (now Grupo Financiero HSBC, S.A. de C.V.), one of Mexico’s largest financial services groups.
2003 HSBC acquires Household International, Inc. (now HSBC Finance Corporation), a leading US consumer finance company; and Losango Promotora de Vendas Ltda in Brazil. Four French private banking subsidiaries combine to form HSBC Private Bank France. HSBC Insurance Brokers Limited forms a joint venture, Beijing HSBC Insurance Brokers Limited, in which it has a 24.9% stake. Hang Seng Bank acquires 15.98% of Industrial Bank Co Ltd, a mainland China commercial bank.
2004 HSBC acquires The Bank of Bermuda Limited and shares in HSBC Holdings are listed on a fifth stock exchange, in Bermuda. The Hongkong and Shanghai Banking Corporation acquires 19.9% of Bank of Communications Limited, China’s fifth largest bank, since reduced to 19%.
2005 HSBC acquires 9.91% of Ping An Insurance (Group) Company of China, Ltd, subsequently increased to 16.8%. HSBC Finance Corporation acquires Metris Companies Inc. making HSBC the fifth largest issuer of MasterCard and Visa cards in the US.
2006 HSBC acquires the Panama-based Grupo Banistmo S.A., the leading banking group in Central America.
2007 In China, HSBC is one of the first foreign banks to incorporate locally under the name HSBC Bank (China) Company Limited, and HSBC Rural Bank opens for business in Hubei Province. In Vietnam,HSBC increases its stake in Techcombank to 14.4% and acquires 10% of Bao Viet, the country’s top insurer.In South Korea, HSBC agrees to acquire 51% of Korea Exchange Bank, subject to regulatory approval. In Taiwan, HSBC obtains agreement to acquire certain businesses and operations of The Chinese Bank Co., Ltd.
B. Banks under the HSBC Group and Customer Segments
B. 1.Banks under the HSBC Group
Many of the members have changed their name into HSBC, The Hongkong and Shanghai Banking Corporation Limited to introduce the whole group under one brand name.
| Midland Bank | HSBC Holdings acquired Midland Bank one of the principal UK clearing banks in 1992. Headquartered in London, the bank has a personal customer base of five and a half million, business customers of over half a million, and a network of almost 1,700 branches in the United Kingdom. Midland has offices in 28 countries and territories, principally in continental Europe, with a number of offices in Latin America. |
| Hang Seng Bank | Hang Seng Bank, in which Hongkong Bank has a 62.1% equity interest, maintains a network of 146 branches in the Hongkong SAR, where it is the second largest locally incorporated bank after Hongkong Bank. Hang Seng Bank also has a branch in Singapore and two branches and two representative offices in China. |
| Marine Midland Bank | Marine Midland Bank headquartered in Buffalo, New York, has 380 banking locations statewide. The bank serves over two million personal customers and 120,000 commercial and institutional customers in New York State and, in selected businesses, throughout the United States. |
| Hongkong Bank of Canada | Hongkong Bank of Canada is the largest foreign-owned bank in Canada and the country’s seventh-largest bank. With headquarters in Vancouver, it has 116 branches across Canada and two branches in the western United States. |
| Banco HSBC Bamerindus | Banco HSBC Bamerindus was established in Brazil in 1997. The bank has network of some 1,900 branches and sub-branches, the second largest in Brazil. |
| Hongkong Bank Malaysia | Hongkong Bank Malaysia is the largest foreign-owned bank in Malaysia and the country’s fifth-largest bank, with 36 branches. |
| The British Bank of the Middle East (British Bank) | The British Bank of the Middle East (British Bank) is the largest and most widely represented international bank in the Middle East, with 31 branches throughout the United Arab Emirates, Oman, Bahrain, Qatar, Jordan, Lebanon and the Palestinian Autonomous Area, including an offshore banking unit in Bahrain. The bank also has branches in Mumbai and Trivandrum, India, and Baku, Azerbaijan, as well as private banking operations in London and Geneva. |
| HSBC Banco Roberts | HSBC Banco Roberts was acquired in 1997. Based in Buenos Aires, it is one of Argentina’s largest privately owned banks, with 60 branches throughout the country. |
| Hongkong Bank of Australia | Hongkong Bank of Australia has 16 branches across Australia. It is the flagship of the HSBC Group’s businesses there, operating under the name HSBC Australia, and providing a complete range of financial services. |
| The Saudi British Bank | The Saudi British Bank, a 40%-owned member of the HSBC Group, has 63 branches throughout Saudi Arabia and a branch in London. |
B. 2. Customer segment of HSBC Group
Customer groups and global businesses Personal Financial Services (including Consumer Finance)
HSBC provides its personal customers worldwide with a full range of personal financial services, including current and savings accounts, mortgages, insurance, credit cards, loans, pensions and investments. Consumer part of Personal Financial Services, facilitates point-of-sale credit to consumers, and lends moneyand provides related services to meet the financial needs of everyday people.
Pre-tax profit for 2007 was US$5.9 billion, a decrease of 38% on the previous year, due to higher impairment charges, particularly in the US. Excluding US consumer finance, pre-tax profit increased by18%, driven by exceptionally strong net operating income growth in Asia and Latin America. As Asian stock markets grew in value, HSBC delivered a wider array of products and services to meet demand. The HSBC Insurance brand was launched as part of a strategy to accelerate growth in the insurance business.
Commercial Banking
HSBC is a leading provider of financial services to small, medium-sized and middle-market enterprises.Pre-tax profit increased by 19% to US$7.1 billion, driven by strong results in Asia, Latin America and theMiddle East. Customer numbers grew faster than in previous years, by 8%, to 2.8 million. HSBC continuedto improve its capacity to meet customers’ cross-border business requirements. International banking centers covering a further 38 countries and territories were opened, increasing their coverage to 54 countries and nearly the entire customer base.
Global Banking and Markets
This global business provides tailored financial services to corporate, institutional and government clientsand reported an increase of 5% in pre-tax profit to US$6.1 billion. Record revenues were reported in foreign exchange, equities, securities services, payments and cash management, and HSBC Global Asset Management. In 2007, the implementation of the ‘emerging markets-led and financing-focused’ strategy was
Completed and Corporate, Investment Banking and Markets was renamed Global Banking and Markets.
Private Banking
HSBC is one of the world’s top private banking businesses, providing financial services to high net worthindividuals and their families in 93 locations. Pre-tax profits increased by 24%, to US$1.5 billion, primarilydue to an outstanding performance in Hong Kong, and strong growth in Switzerland and throughout the
Americas. Client assets increased by 26% to US$421 billion, of which US$35.9 billion related to net new money, reflecting strong investment performance and increased marketing expenditure.
C. HSBC’s International Network & International Brand
C.1. HSBC’s International Network
The HSBC Group now comprises a unique range of banks and financial service providers around the globe where it operates into 3 categories: the large, the major and the international. These classifications are a function of sustainable, attributable earnings, the number of retail clients, balance sheet and size of operation. The HSBC Groups international network comprises of over 10000 offices in 83 countries. A brief list is presented below:
| Asia Pacific | |||
| Offices | Offices | ||
| Australia | 35 | Malaysia | 48 |
| Bangladesh | 9 | Maldives | 1 |
| Brunei Darussalam | 12 | New Zealand | 10 |
| Chaina | 103 | Pakistan | 9 |
| Cook Islands | 1 | Philippines | 28 |
| Hong Kong | 345 | Singapore | 26 |
| India | 70 | Srilanka | 15 |
| Indonesia | 14 | Taiwan | 19 |
| Japan | 7 | Thailand | 1 |
| Korea | 4 | Vietnam | 4 |
| Macau | 7 | ||
| Europe | |||
| Offices | Offices | ||
| Armenia | 8 | Manico | 2 |
| Belgium | 3 | Italy | 4 |
| Czech Republic | 10 | Luxembourg | 4 |
| Channel Islands | 35 | Malta | 48 |
| Cyprus | 2 | Netherland | 1 |
| France | 833 | Poland | 17 |
| Germany | 13 | Russia | 5 |
| Hungary | 11 | Spain | 2 |
| Greece | 27 | Sweenden | 3 |
| Ireland | 12 | Switzerland | 18 |
| Isle of Man Turkey | 8 | United Kingdom | 1678 |
| Turkey | 242 | ||
| America | |||
| Offices | Offices | ||
| Argentina | 248 | Cayman Islands | 15 |
| Bahamas | 8 | Honduras | 84 |
| Bermuda | 16 | Mexico | 1625 |
| Brazil | 1722 | Panama | 83 |
| British Virgin | 3 | Peru | 11 |
| Canada | 313 | Urguey | 5 |
| Chile | 2 | United states of America | 1651 |
| Colombia | 35 | Venezuela | 1 |
| Costa Rica | 40 | ||
| Middle east and Africa | |||
| Offices | Offices | ||
| Algeria | 1 | Mauritius | 12 |
| Bahrain | 6 | Mozambique | 6 |
| Egypt | 54 | Oman | 6 |
| Ghana | 4 | Autonomous Area | 1 |
| Jordan | 3 | Qatar | 6 |
| Kuwat | 3 | Saudia Arabia | 79 |
| libya | 2 | South Africa | 5 |
| lebanon | 6 | United Arab Emirates | 18 |
C.2.International Brand
A key part of the Group’s business strategy, announced in 1998, is the creation of a global brand featuring the HSBC name and hexagon symbol. The symbol is now a familiar sight around the world. The Group has embarked on the next phase — making the HSBC brand universally synonymous with its core values of integrity, trust and excellent customer service.
HSBC Brand & Corporate Identity
The Hexagon logo of HSBC derives from HSBC’s traditionally flag, a white rectangle divided diagonally. Like many other Hong Kong company flags in the last century, the design of the flag was based on the cross of ST.Andrew, The Patron Saint of Scotland.
HSBC brand & corporate identity represents what HSBC wants its brand to mean to its customer. It is derived from the group:
Corporate Character
HSBC is a prudent, cost conscious, ethically grounded, conservative, trustworthy international builder of long-term customer relationships.
Basic Drives
HSBC’s basic drives are Higher Productivity, Team Orientation, and Creative Organization & Customer Orientation.
The essence of HSBC brand is integrity, trust and excellent customer service. It gives confidence to customers, value to investors & comfort to colleagues. Through the process of listening to individual needs and then acting in partnership to deliver the right solutions, HSBC is committed to help the clients make the most of their financial assets.
HSBC operates on a global basis, but also work on a local level to ensure the cros border differences are identified and any related benefits exploited. HSBC teams of specialists ensure that if customer needs solutions across the world, regionally, or locally , they has the skills, expertise and resources to deliver them. They automate as many functions as possible, even as ensuring retains control.
HSBC claims that they are the people to talk to if anyone wants the following-
§ Global cash flow co-ordination
§ Enhanced risk management
§ Improved security and audit controls
§ Minimized costs and reduced operating expenses.
§ Maximized liquidity, returns and interest benefits.
D. Mission, Vision, Objectives and Strategies and Organization Structure of HSBC
D. 1.Mission – Vision
HSBC’s mission statement-
“We aim to satisfy our customers with high quality service that
reflects our global image as the premier international bank”.
HSBC’s mission statement is embodied in the Group’s business principles and values. The HSBC Group is committed to five cores Business Principles:
Ø Outstanding customer service
Ø Effective and efficient operations
Ø Strong capital and liquidity
Ø Conservative lending policy
Ø Strict expense discipline.
HSBC also operates according to certain Key Business Values:
Ø The highest personal standards of integrity at all levels
Ø Commitment to truth and fair dealing
Ø Hands-on management at all levels
Ø Openly esteemed commitment to quality and competence
Ø A minimum of bureaucracy
Ø Fast decisions and implementation
Ø Putting the Group’s interests ahead of the individual’s
Ø The appropriate delegation of authority with accountability
Ø Fair and objective employer
Ø A merit approach to recruitment/selection/promotion
Ø A commitment to complying with the spirit and letter of all laws and regulations wherever we conduct our business
Ø The promotion of good environmental practice and sustainable development and commitment to the welfare and development of each local community
D.2. Objectives of HSBC
HSBC’s objectives are to provide innovative products supported by quality delivery of systems and excellence customer services, to train and motivate staffs and to exercise social responsibility. By combining regional strengths with group network HSBC’s aim is to be the one of the leading banks in its principle markets. HSBC’s goal is to achieve sustained earnings growth and to continue to enhance shareholders value.
D.3.Strategies
HSBC’s broad strategies can be brought into being here below. With products and imaging, the strategies are being categorized. A key part of the Group’s business strategy, announced in 1998, is the creation of a global brand featuring the HSBC name and hexagon symbol. The symbol is now a familiar sight around the world. The Group has embarked on the next phase — making the HSBC brand universally synonymous with its core values of integrity, trust and excellent customer service.
Brand: The Hexagon logo of HSBC derives from HSBC’s traditionally flag, a white rectangle divided diagonally. Like many other Hong Kong company flags in the last century, the design of the flag was based on the cross of ST.Andrew, The Patron Saint of Scotland. Brand makes HSBC and its hexagon symbol one of the world’s leading brands for customer experience and corporate social responsibility;
Personal Financial Services (‘PFS’): drive growth in key markets and through appropriate channels to make HSBC the strongest global player in PFS;
Consumer Finance: extend HSBC’s new business to existing customers and penetrate new markets;
Corporate, Investment Banking and Markets: accelerate growth through enhanced capital markets and advisory capabilities focused on the client;
Commercial Banking: make the most of HSBC’s international customer base through effective customer relationship management and improved product offering in the entire Group’s markets;
Private Banking: serve the Group’s highest value personal clients around the world, utilizing the investments already made; Attract, develop and motivate HSBC’s people, rewarding success and rejecting mediocrity; and
TSR: Fulfill HSBC’s TSR target by achieving strong competitive performances in earnings per share growth and efficiency.
D.4. Organization Structure
Headed by the Chairman and Deputy Chairman, the HSBC Holdings Plc has 20 (twenty) members in its board of directors position with one Advisor to the Board and one Group Company Secretary. Their names are given in “Table 1: Names and Positions of the Members of Board of Directors of the HSBC” (Appendix 1: Tables):
E. An overview, Functional Difference & Operations of HSBC Bangladesh
E.1. HSBC Bangladesh
The HSBC Asia Pacific group represents HSBC in Bangladesh. HSBC opened its first branch in Dhaka in 17th December 1996 to provide personal banking services, trade and corporate services, and custody services. The Bank was awarded ISO9002 accreditation for its personal and business banking services, which cover trade services, securities and safe custody, corporate banking, Hexagon and all personal banking. This ISO9002 designation is the first of its kind for a bank in Bangladesh. The Hongkong and Shanghai Banking Corporation Bangladesh Ltd. primarily limited its operations to help garments industry and to commercial banking. Latter, it is extended to pharmaceuticals, jute and consumer products. Other services include cash management, treasury, securities, and custodial service.
Realizing the huge potential and growth in person banking industry in Bangladesh, HSBC extended its operation to the personal banking sector in Bangladesh and within a very short span of time it was able to build up a huge client base. Extending its operation further, HSBC opened a branch at Chittagong, two branch offices at Dhaka (Gulshan and Motijheel) and an offshore banking unit on November’1998. Another branch has been opened at Dhanmondi on 1st March 2003. Recently they further expanded their banking services by opening up branches in Uttara and Sylhet.
HSBC Bangladesh is under the strict of supervision of HSBC Asia Pacific Group, Hongkong. The Chief Executive Officer of HSBC Bangladesh manages the whole banking operation of HSBC in Bangladesh. Under the CEO, there are heads of departments, who manage specific banking functions e.g. Personal banking, corporate banking, etc.
Currently HSBC Bangladesh is providing a wide range of services both two individual and corporate level customers. In 2000 the bank launched a wide array of personal banking products designed for all kinds of (middle and higher middle income) individual customers. Some such products were Personal loans, car loans, etc. The bank also possess different kinds of personal banking products – Personal Secured Credit, Personal Secured loan & Automated Tele Banking (ATB) service, Credit Cards, ATM, Day& Night Banking Service and Easy Pay Machines. These products are designed to meet the diverse customer needs more completely. HSBC in Bangladesh also specializes in self-service banking through providing 24-hour ATM services.
| Name of the Organization | The Hong Kong Shanghai Banking Corporation Bangladesh LTD |
| Year of Establishment | 1996 |
| Head Office | Anchor Tower, 1/1-B Sonargaon Road Dhaka 1205, Bangladesh |
| Nature of the organization | Multinational company with subsidiary group in Bangladesh |
| Shareholders | HSBC group shareholders |
| Products | Savings & deposit services
Loan products Corporate and Institutional services Trade services & Hexagon |
| Management | Mr. Steve Banner
Chief Executive Officer Head of Personal Financial Services Mr. Adil Islam Head of Corporate Banking Mr. Syed Akhtar Hossain Uddin Human Resource Manager Mr. Munir Hussain Marketing Manager Mr. Wasim Adnan Wahed Chief Operating Officer |
| Number of Offices | 7 (Dhaka, Motijheel, Gulshan, Dhanmondi, Chittagong, Uttara and Sylhet) |
| Number of ATM’s | 10 |
| Number of employees | 350+ |
| Technology | Offers full online banking from branch to branch and from Dhaka to Chittagong.and now to Sylhet |
| Service Coverage & Customers | Serves individual and corporate customers within Dhaka , Chittagong and now to Sylhet. |
Table 3: Brief Overview of HSBC in Bangladesh
Location, address, contact to HSBC is given in Appendix 2
E.2. Functional Difference(s)
Except one branch (Amanah) there is no functional difference between branches of HSBC in Bangladesh. HSBC Amanah is the global Islamic financial services division of the HSBC Group, responsible for the development of Islamic financial products for distribution to customers of the HSBC Group. It was established in 1998 and is now based in Dubai, UAE with regional offices in the UK, the US, Saudi Arabia, Malaysia, Indonesia, Bangladesh, Singapore and Brunei. HSBC Bangladesh currently offers Amanah Current Account and Amanah Import finance. The Gulshan branch of HSBC Bangladesh is the Amanah branch.
E.3. Operation of HSBC in Bangladesh
As one of the largest international banks in Bangladesh, HSBC has a long-term commitment to its customers and provides a comprehensive range of financial services: personal, commercial and corporate banking; trade services; cash management; treasury; consumer & business finance; and securities, and custody services. The range of services offered by HSBC in Bangladesh is as follows:
Personal Banking
The Hongkong and Shanghai Banking Corporation Limited offers a full range of personal banking products and services designed to take care of its customers’ growing needs and requirements. HSBC in Bangladesh has launched a number of loan products during 2000.
Personal Installment Loanis an unsecured loan that does not require any personal guarantee or cash security;
Car Loan, also, does not require any down payment or personal guarantee.
The Bank has already launched Phone banking, a state-of-the-art automated telephone banking service available 24 hours a day, 7 days a week, and 365 days a year, which allows customers to access their account from the comfort of the office or home.
HSBC is the market leader in the local Auto pay service with which the company can initiate bulk Taka payments to, or Taka collections from, any HSBC current or savings accounts of counterparts for a specified sum at a specified date, regardless of the branch.
HSBC also offers Power vantage, a unique all-in-one package of products and services designed to give total financial control to the customer; a unique savings account, which allows the customer to do any number of transactions without any charges being incurred or credit interest lost.
To satisfy the growing needs of real estate HSBC Bangladesh recently launched Home Loan Scheme and a special type of deposit product named “Bangladesh International” for non-resident Bangladeshi.
Corporate Banking Services
The Hongkong and Shanghai Banking Corporation Limited offers a wide range of cash financing, working capital, short and medium-term loans and guarantee facilities from its Head Office and Chittagong branch. The Offshore Banking Unit (OBU) provides US Dollar denominated working capital as well as short-term finance for capital imports to eligible businesses. Using high-speed communication links, HSBC connects customers to international payment systems.
Trade Services: Trade finance and related services are a long-standing core business of HSBC based on the depth and spread of its corporate customer base and highly automated trade-processing network. As the leading provider of trade finance and related services to importers and exporters in Asia, HSBC in Bangladesh operates a highly automated trade-processing network and offer an Electronic Data Interchange (EDI) capability through Hexagon. The Bank also uses SWIFT, an efficient and secure mechanism for bank-to-bank global communications used for all trade related activities including fund transfers and issuance of DC’s (Documentary Credit).
Financial Institutions HSBC provides global trade services and cash management services to local banks. HSBC’s worldwide network strength, with over 7000 offices in 81 countries and territories, coupled with a world class reputation in Trade Finance (“Best Trade Documentation Bank” – Euro money) and an unparalleled presence in Asia (“Best Bank in Asia” — Euro money), places HSBC in an ideal position to render unmatched correspondent banking services.
HSBC’s commanding presence in the USA (5th largest USD clearing bank globally), UK (largest GBP clearing bank globally), and the Euro land (largest Euro clearing bank in the UK) both in terms of network strength and clearing ability allows the Bank to provide first class cash management solutions in 3 major global currencies; US dollar, Pound sterling, and the Euro.
Hexagon
Hexagon, a proprietary computer-based software package, provides customer with an instant link into the HSBC Group’s international computer networks, allowing them to perform transactions and obtain a diverse range of up-to-date information 24 hours a day, 365 days a year.
Payments and Cash Management (PCM)
HSBC is the pioneer in introducing electronic cash management solutions in Bangladesh, by introducing its state-of-the-art proprietary software, Hexagon, back in 1997. This was initially made available to corporate clients only but has since been expanded to include banks and retail clients.
With Hexagon, the Bank’s proprietary cash management system, corporate customers can access banking services from anywhere in the world to view account balances and statements, make transfers and international payments, and to open documentary credits, by using only a PC, a modem, and a telephone line. Payment & cash Management services include:
Ø Account opening for companies
Ø Countrywide receivables management solutions
Ø Countrywide payables management solutions
Ø Cross border remittance services
Ø Internet banking solution
Custody and Clearing:
HSBC is a leader in custody and clearing in the Asia Pacific region and the Middle East. The network uses advanced securities clearing system, which was developed in-house and provides round-the-clock online real-time access to clients’ securities portfolios.
Investment banking and markets
This division together the advisory, financing, asset management, equity securities, private banking, trustee, private equity, and treasury and capital market activities of the HSBC Groups.
Treasury and Capital Markets
HSBC’s treasury and capital markets business ranks among the largest in the world and serves the requirements of supranational, central banks, international and local corporations, institutional investors, and financial institutions as well as other market participants.
Amanah
HSBC Amanah is the global Islamic financial services division of the HSBC Group, responsible for the development of Islamic financial products for distribution to customers of the HSBC Group. It was established in 1998 and is now based in Dubai, UAE with regional offices in UK, the US, Saudi Arabia, Malaysia, Indonesia, Bangladesh, Singapore and Brunei. HSBC Bangladesh currently offers Amanah Current Account and Amanah Import Finance.
F. Products and Services at HSBC
HSBC is always working with product developments. Products and services from HSBC are briefly shown below:
Under Personal Financial Services
? ATM Service ? Hexagon
? Savings Account ? Phonebanking
? Current Account ? Time Deposit
? Car Loan ? Home Loan
? Credit Card ? Call Centre
? Personal Secured Credit ? Personal Secured Loan
? Personal Installment Loan ? Bangladesh International
? Day & Night Banking ? Power Vantage
? Traveler’s Cheques ? Investment Watch
? Corporate Employee Privilege Scheme (CEPS)
? Monthly Interest Bearing Time Deposit
Under the name My Loan HSBC offers:
? Professional Loan, Lifestyle Loan, Furniture Loan, Wedding Loan
? Student Loan ? Travel Loan ? Motorbike Loan
? Car Loan ? Home Loan
Corporate banking
Ø Corporate Credit
Overdraft, Import and Export Finance, Documents Against Acceptance (DA)/ Documents Against Payments (DP) purchase, Long-term Loans, Guarantees and Bonds, etc.
Ø Payments and Cash Management
Account Management Services, Countrywide Payments/Countrywide Collections, etc.
Ø Electronic Banking:
Cash Management Services, Trade Services, Salary Payments, Information Services, Hexagon Report Writer, Offline Hexagon operationos, Hexagon Cheque Writer, etc.
Ø Trade Services
include Export Services, Import Services, Trade Express, Document Tracker, Electronic DC Advising, etc.
Treasury Service
Ø Spot Foreign Exchange
Ø Forward Foreign Exchange
Ø Competitive Forex Rates for Remittances, Export and Import
Ø Weekly Currency Newsletter
Ø Market Outlook from our Global Desks
Amanah – Shariah Compliant Solutions
Ø Amanah Current Account
Ø Amanah Import Finance
Ø Amanah Day & Night Banking
G. An overview of Management and Major Functional Departments of HSBC Bangladesh
G.1. Management of HSBC Bangladesh
HSBC Bangladesh is such a company that has to overcome a lot of hurdles to reach the position it now holds. At present, Mr. Steve Banner is the CEO; Mr. Mahbubur Rahman is the chief of Corporate Banking; Mr. Arjun Surya is COO, Mr. Mamoon Mahmud Shah is the Chief of Personal Banking or as known in HSBC, Personal Financial Services (PFS) Head, and Mr. Mostofa Aolad is the financial controller of FCD ,Mr. Syed Akhtar Hossain is the Human Resource Manager at HSBC Bangladesh.
These six men at the top carried out their management roles comprehensively and systematically. They equally contributed to HSBC’s superior leadership, by carrying out their unique roles. They worked well together, respecting each other’s abilities, & arguing openly, & without any resentment when they disagreed.
To maintain a close touch with the organization each man works in separate area of HSBC’s complex. Their offices are indistinguishable from all other cubicles where HSBC’s junior executives & secretaries work in. There are no office walls in HSBC and all the staff starting from the CEO to the lower operating level employees shares the same premises under one roof. There are no specialized cabins for top management and executives and also no executive dining rooms. This has created a management team that is unified, cohesive, & energetic.
Each and every employee of HSBC takes pride of being an employee at HSBC and his or her pride comes from the freedom of direct communication with the top management. The management of HSBC is supportive in the sense that the top management deliberately supports the suggestions, values, ideas, innovation, and hard work of the employees and officers. Again high amount of employee participation is encouraged in the management process. There are also systems for awards, incentives, and status for innovative ideas and hard works. Again the management style can also be termed as collegial as high amounts of teamwork and participation exists between the top and bottom parts of HSBC. Management style at HSBC Bangladesh should falls somewhere between supportive and collegial. A graphical presentation is shown below:
HSBC follows a 4 layers management philosophy in Bangladesh. These are Managers, Executives, Officers, and Assistant Officers. The CEO is the top most authority of all the levels. Managers are the departmental heads who are responsible for the activities of their departments. They are the heads of the department who formulate strategies for that department. e.g. Human Resources Manager. Executives have the authority next to managers. They are basically responsible for certain activities & organizational functions. e.g. Admin Executive. These two layers represent the management level of HSBC Bangladesh.
Officers are the next persons to stand in the hierarchy list. They are the typical mid-level employees of HSBC organizational hierarchy. These officers are responsible for managing the operational activities and operating level employees. The operating level employees of HSBC who are ranked as Assistant Officer fill the last layer of this hierarchy. They perform the day-to-day operational activities of HSBC. An organizational hierarchy chart is shown below:
Chief Executive Committee
The organizational structure of HSBC Bangladesh is designed according to the various service and functional departments. The Chief Executive Officer (CEO) heads the chief executive committee, which decides on all the strategic aspect of HSBC. The CEO is the person who supervises the heads of all the departments and also is the ultimate authority of HSBC Bangladesh. He is responsible for all the activities of HSBC Bangladesh and all its consequences. He administers all the functional departments and communicates with the department heads for smooth functioning of the organization. The HSBC Chief Executive Committee is formed with the heads of all departments along with the CEO. Besides the CEO the CEC is staffed with 6 more managers: Manager of Human Resources, Manager of Services, and Manager of Financial Control Department,
HSBC Functional Department
HSBC activities are performed through functional departmentalization. So, the departments are separated according to the functions they perform (HR, Marketing, Personal Banking, etc.). There are 6 major functional departments at HSBC: Human Resources Department, Financial Control, Personal Banking, Corporate Banking and Marketing. Within these major departments there are some other subsidiary departments that allow smooth operation of their own major departmental function. A graphical presentation of all the departments (Major & minor) is shown below. Brief functional descriptions of these departments are-
Human Resource Department (HR)
The Human Resource Manager currently heads this department. The major functions of this department are strategic planning and policy formulation for Compensation, Recruitment, Promotion, Training, and Developments, Personnel Services, and Security. The HR department is very much concerned with the discipline that is set up by the HSBC group. HSBC group has got strict rules and regulations for each and every aspect of banking, even for non-banking purposes; i.e. the Dress Code. All these major personnel functions are integrated in the best possible way at HSBC, which results in its higher productivity. The Human resource officer monitors the employee staffing and administration activities. The Training officer supervises training, development, & rotation activities. The structure of the HR department is shown below:
HSBC activities are performed through functional departmentalization. So, the departments are separated according to the functions they perform. Within the major departments there are some other subsidiary departments that allow smooth operation of their own major departmental functions.
Personal Financial Services (PFS)
PFS is the most flourishing department of HSBC Bangladesh. This department basically deals with the management of products and services offered to the individual consumers. Within a span of only five year HSBC PFS has grown tremendously and is still growing with its innovative products and service offerings. The 3 branches and 2 booths of HSBC basically deal with the personal banking activities and provide various accounts services to individual customers. The departments under PFS are shown in the following diagram:
Operations
Ø Manages daily operation
Ø PlaMns and directs sales and marketing
Ø Plans for service development
Ø Top-level authority for customers’ dealings and transaction
Ø Provides required service to the customers directly
Ø Maintains documentation and report flow vary rapidly
Ø Helps in planning in field level
Ø Assists PFS Head in decision-making process
Ø Assists PFS Head in different level of research
Ø Assists PFS Head day-to-day work
Ø Keeps track and inform PFS Head in present condition of the competition in the market
The Financial Control Department
The COO (Chief Operating Officer) of HSBC directly controls the FCD (Financial Control Department). COO also supervises other departments of the bank like HSBC Universal Banking (HUB), Network Support Center (NSC), Administration, Information Technology (IT), and Management Internal Control (MIC). The FCD is under taut security in the bank and it deals with all the sophisticated information (i.e. financial planning, payments, etc.) of the bank.
FCD is especially controlled by dividing it into five sub departments that are shown below:
Figure 2: Partial Organogram of HSBC Depicting FCD
The primary purpose of FCD is to maintain a rigorous financial control environment
- To ensure the maintenance of proper accounting records and the preparation of appropriate financial reports for GHQ, regulators and management
- To ensure compliance with tax and company law and regulations and
- Contribute to the effective planning and control of profitability and risk through the Asset and Liability Management Committee (ALCO) process.
- FCD has got some important responsibilities. These are:
- Financial accounting and reporting to the appropriate Head Office in accordance with prescribed reporting procedure
- Financial reporting as required by local regulations and law
- Asset and liability performance analysis
- Management accounting
- Use of management information system
- Co-ordination of planning
- Financial planning, including capital budgeting
- Cost control
- Setting tax, investment and administration policy
- Monitoring exchange rate and interest rate exposures and
- Tax compliance and planning
Brief descriptions of the above FCD sub departments have been endowed here:
Treasury Back Office
The treasury department of FCD is the treasury back office. It acts as a support function of treasury front office that is the Capital market