Trade Bill Settlement and Nostro Account operations of Standard Bank Limited

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Standard Bank Bangladesh Ltd

“Trade Bill Settlement and Nostro Account operations of Standard Bank Limited”

Introduction

· Origin of the Repot

· Objective of the Report

· Scope of the Report

· Methodology of the Report

· Limitations of the Report

The Standard Bank Limited witnessed record achievement in its business performance during the year 2010. The Bank was incorporated as a Public Limited Company on May 11, 1999 under the Companies Act, 1994 and it achieved satisfactory progress from its commercial operation since June 03, 1999. SBL introduced several attractive products and extended loans and credits to different sectors of the economy. Besides, the Bank has already introduced real on-line banking and it is now fully auto-mated. Through all these myriad activities, SBL has created a positive impact in the banking sector of the country.

Origin of the Report

Stamford University is the most popular and well known University in Bangladesh. It provides many courses. Masters of Business administration (MBA) is one of the most important courses of this University. The internship program is compulsory for MBA students of the faculty of Business Administration. This program is for three months duration. However that was assigned to Head office of SBL to complete the program. During this period worked in the office. After completing the practical work prepare the report. Standard Bank Ltd is one of the leading private banks of Bangladesh which recruit me in its Head office as internee and help me to prepare this report. Under the efficient supervision of experienced teacher, staff and executives of SBL this report is made. This paper is entitled “Trade Bill Settlement and Nostro Account operations of Standard Bank Limited” originated from the fulfillment of the internship program. I have prepared the report on this topic by counseling with my honorable course supervisor and the staffs of PBL.

Objectives of the Report

The objectives of the study are:

· To know about the trade Bill settlement process of Standard Bank Ltd.

· To know the process of Nostro account operations of Standard Bank Ltd.

· To know the trend of inflow and outflow of money through Nostro accounts of Standard Bank Ltd.

· To know the trend of inflow of remittance through of Standard Bank Ltd.

· To know the Import and Export position of Standard Bank Ltd.

Scope of the Report

The scope of this report is limited to the overall description of the company, its services, and its position in the industry and its marketing strategies. The scope of the study is limited to organizational setup, functions, and performances.

Methodology of the Report

Exploratory method of research has been applied for this research study. The data has been used for this research is mainly secondary data collected from Standard Bank Ltd.

DATA COLLECTION METHOD

For attaining the objectives, mainly secondary data has been collected. Secondary data are collected from International Division, Treasury Division of Head Office and Foreign Exchange Division of Principal Branch of Standard Bank Ltd. The data includes the Nostro Account Statements, Inward and outward remittance record, data of monthly payment of LC by different Foreign Banks, Foreign Exchange Manual of Standard Bank Ltd. Besides, interview method has been used to have a clear view about the Trade Bill Settlement process and Nostro Account Operation process. Dealing Officers of the relevant field were interviewed for gathering knowledge.

ANALYSIS OF THE DATA

The data is analyzed through using the Microsoft-Excel to get a clear idea about the impact of recession on the transaction i.e. payment and incoming export proceeds and remittance.

Limitations of the Report

The main limitations of the study are as follows:

· Total amount of transaction through each account were not found in accumulated form.

· The data of more number of banks may not give a clear idea about the present impact of recession on the Nostro account transactions.

· Most of the data are related to the Fiscal Year 2009-2010 and 2010-2011, because SBL don’t call AGM (Annual General Meeting) for the Fiscal Year of 2011-2012. As a result I can’t input any recent information to my study.

· International Division of SBL is so small. They keep their previous information in the external Storage because their internal storing facility is poor. As a result I can’t take previous information like FY 2006-07, FY2007-08, FY2008-09 whose are relate to my study.

Standard Bank Limited: An Overview

· Location and address of Standard Bank Limited

· Objectives of standard bank limited.

· Company Profile

· Organizational structure of Standard Bank Limited.

· Nature of products and business of Standard Bank Ltd

· Function of Different Departments

Standard Bank Bangladesh Ltd

Standard bank Ltd: In A Brief

The Standard Bank Limited witnessed record achievement in its business performance during the year 2010. The Bank was incorporated as a Public Limited Company on May 11, 1999 under the Companies Act, 1994 and it achieved satisfactory progress from its commercial operation since June 03, 1999. SBL introduced several attractive products and extended loans and credits to different sectors of the economy. Besides, the Bank has already introduced real on-line banking and it is now fully auto-mated. Through all these myriad activities, SBL has created a positive impact in the banking sector of the country.

Location and address of Standard Bank Ltd.

Vision, Mission and Core values of Standard bank Ltd.

Vision of the Bank

To be a modern Bank having the object of building a sound national economy and to contribute significantly to the Public Exchequer.

Mission of the Bank

To be the best private commercial bank in Bangladesh in terms of efficiency, capital adequacy, asset quality, sound management and profitability.

Core Values

Shareholders: By ensuring fair return on their investment through generating stable profit.

Customer: To become most caring bank by providing the most courteous and efficient service in every area of our business.

employee: By promoting the well being of the members of the staff.

Community: Assuring our socially responsible corporate entity in a tangible manner through close adherence to national policies and objectives.

Objectives of Standard Bank Limited

The motto of Standard Bank Limited is to explore a new horizon of innovative modern banking creating an automated and computerized environment providing one stop service and prepare itself to face the new challenges of globalization and 21st century. One of the main objectives of the Bank is to be provider of high quality products and services to attract its potential market. The Bank also caters the needs of its corporate clients and provides a comprehensive range of financial services to national and multinational companies. The dimension of responsible corporate behavior of the Bank is the maintenance of ethical standard in its functioning.

Apart from these objectives, SBL has some extra objectives such as:

• To be a dynamic leader in the financial market in innovating new products as to the needs of the society.
• To earn positive economic value addition (EVA) each year to come.
• To top the list in respect of cost efficiency of all the commercial Banks.
• To become one of the best financial institutions in Bangladesh economy participating in the most significant segments of business market that we serve.

Organizational structure of Standard Bank Ltd

Training Research and Planning

The training institute of the bank has been set up with a view to planning, designing the courses, developing the training materials for arranging training to the officers and staff of the bank. It has also to organize, co-ordinate/conduct seminar, symposium and workshop for the Executives/In-Charge of the branches of the bank. In addition to that research works is inevitable for sustainable growth of the bank and setting a new standard in banking activities to face the challenges of the free economy and globalized world market where survival of the fittest is the common phenomena. In this behalf research and planning strategy will go parallel with the training program of the bank to fulfill the desired goal of our esteemed institution. Now, banking industry demands well educated, well-behaved and quality man-power as they require dealing with money, men, materials, market, mobility of funds and over all national development. Training now a days is inevitable to develop the human resources of the Bank to meet the challenges of the age. As such, the training institute has chalked out an academic activities for the year 2011 and incorporated 22 Training Courses and 8 Workshop through which about 1000 Executives/Officers will be trained to met up the desired demand of time for building

up capability of the officials of the bank for implementation of vision and mission of the Bank.

MANAGEMENT

Among the living creatures on earth the greatest creation of the Almighty is mankind. Allah has given human being immense power of knowledge, wisdom, intelligence, consciousness and so on. These qualities have made them different from others. By the best use of these qualities in men it has been possible for our world of today to reach this stage of modern science and technology. Of all existing powers, human resources are the most invaluable productive power in our daily life, in organizational needs and in diversified fields of action towards advancement. So, Human Resources Division of Standard Bank Limited plays a very vital role in formulating policies, developing practices and in achieving its goal by properly utilizing the existing skilled manpower and also hunting best hands through an abstract and absolute recruitment policy in the right dimension. Proper recruitment policy lays the solid foundation for strong erection towards establishment of an institution in initial stage and subsequent stable growth for its consecutive enrichment. The division has been performing this job of recruitment from the very inception of the institution maintaining 100% transparency for free & fair selection under a well-regulated system. Total numbers of 244 Executives, Officers and Staffs have been successfully recruited and total human resources of the bank stood at 1020 as on 31.12.2010 including male employees 888 and female employees 132. In the 2010 total 52 employees of Standard Bank Limited resigned from the services and 04 employees went on retirement after completion of their retirement age.

SBL has consistently remained focused on efficient customer service by providing wide range of products and services. SBL focused on diverse products and services. Our customer group range from individuals, big corporate clients, NGOs and nonresidents. Different types of products and services are as follows:

Deposit Products

DEPOSITS

SBL always tried to provide the highest return on the deposits of the customers. The deposits of SBL reached the level of Tk.5834.44 crore during 2010 from Tk.4255.55 crore of previous year. The growth rate is 37.10%. Cost of deposit for the year stood at 7.83% compared to the previous year’s cost of 9.33%. The increase in deposit was possible due to superior customer service delivered at the branch level. SBL is offering different types of deposit products for the customers. Among the products, Current Deposit, Fixed Deposits, different types of Scheme Deposits, Savings Deposits, Short-term Deposits and Foreign Currency Deposit from customers remained the core deposits of the Bank. SBL Regular Income program (SRIP), Double Income Plus (DI+), SBL Regular Deposit Program (SRDP), and Life Secured Double Income Program (LSDIP) etc. are some attractive products, which contributed to the growth of deposit.

LOAN AND ADVANCES

Total loans and advances figure of the bank has raised up-to Tk.51, 757.69 million as on December 30, 2010 in comparison to Tk.38, 399.43 million as on December 31, 2009, which indicates an increase by 36% over the figure of last year. During this time the Bank has concentrated to explore new and diversified avenues for investment with the objective of developing and maintaining a sound portfolio ensuring profitability and risk mitigation. In recent time the Bank has given emphasis on service sector like telecommunication, tourism, hotel, motel, housing and ship breaking and other emerging sectors like pharmaceuticals, power, steel re rolling and ceramic etc. Credit has also been extending in those sectors for contributing into GDP of the economy. The Bank is also looking for financing in the rising sectors like ship building, aviation and information technology.

For setting a big size project Syndication Finance has become popular mode of financing from the viewpoint of both sides that means borrower and lender. SBL are entering in to the window of Syndication Financing with a slow and steady manner. Total participation in the Syndicated loan at the end of December 31, 2010 is about Tk.1, 168.72 million including telecommunication, airlines, power generation, pharmaceuticals, steel rerolling and ceramic sectors. All loans and advances under syndication loan are performing well. For upcoming year some potential clients have been solicited to extend the credit facility and our bank will act as lead bank which enhance our position in the banking sector of the country.

The Bank is also giving emphasize on Agricultural sector, other rural activities and small and medium enterprise loan and allocated fund of Tk.3,395.74 million Agricultural sector toward contributing to poverty alleviation program. More funds will be allocated considering the requirement in future.

Bank’s careful and continuous effort in operation of credit has resulted in a very negligible percentage of nonperforming loan which is 1.96% i.e. TK.1,016.67 million as on December 31, 2010 out of total loan of Tk.51,757.69 million, Last year this percentage was 1.81%. The bank is very much aware of this marginal increasing trend of NPL and recovery effort has been to reduce the non performing loan amount. Furthermore our bank has good effort to recover loans and advances which is invaluable part of the banking operation. The Bank is also aware of the ongoing world economic recession, accordingly careful and due steps are being taken to maintain asset quality.

Import & export business:

IMPORT

During the year-2010, the import volume of the Bank was USD 782.51 million equivalents to BDT 54777.70 million. Import volume decreased with a growth rate of 39% then the previous year 2009 with import volume of USD 564.33million equivalents to BDT 40411.16 million.

Figure: Import Statement of SBL, FY 2009-2010 & 2010-2011

EXPORT

During the year 2010, total Export volume of the Bank stood at USD 612.87 million equivalents to BDT 41894.20 million which compares to previous year 2009 of USD 428.51 million equivalents to BDT 29177.10 million. This reflects a sound growth of 43.59%. Bank has given emphasis on export of traditional items like Raw Jute, Jute goods, readymade garments & leather etc. and also on non-traditional items like Tiles, Bi-Cycle, Shrimp, Handicraft, Betel-leaf, Betel-nut, Coriander seed etc.

Figure: Export Statement of SBL, FY 2009-2010 & 2010-2011

FOREIGN REMITTANCE

Presently, the bank has remittance drawing arrangement with Wall Street Finance, USA and Money Gram Inc., USA. Wall Street Finance covers remittance from USA, Canada & UK sent by Bangladeshi expatriates. Remittance also comes through the Money Gram incorporation. These facilities are made by the Bangladeshi expatriates all over the world by using their Global network. Remittance drawing arrangement with Wall Street Exchange Centre, LLC, and UAE is near to finalization which is expected to commence early 2011. The bank continues its efforts to make remittance arrangements with different exchange houses in the potential countries. In addition, bank has signed agreement with Economic Exchange Center and Universal Exchange Center in UAE.

REMITTANCE RECEIVED FROM EXCHANGE COMPANIES

During the year 2010, SBL have received USD 14.88 million equivalents to BDT 1043.78 million through exchange companies including remittance of USD 13.37 million equivalents to BDT 937.62 million from Standard Exchange Co. (UK) Ltd. In 2009, remittance received through exchange companies was USD 5.10 million equivalents to BDT 263.11 million received from Standard Exchange Co. (UK) Ltd.

OTHER REMITTANCE

The bank received remittance from other sources amounting to USD 10.20 million equivalents to BDT 704.65 in the year 2010 while it was USD 3.59 million equivalents to BDT 250.72 million in 2009.

TOTAL REMITTANCE

In total, Foreign Remittance Business of the bank stood at USD 25.08 million equivalents to BDT 1748.43 million for the year 2010, which is higher by 192.04%, compared to previous year-2009 remittance (BDT). The same for 2009 was USD 8.69 million equivalents to BDT 598.70 million.

EXCHANGE HOUSE

Standard Exchange Co. (U.K.) Ltd” on 20th August 2009 at 101 White chapels Road, London E1 1DT, U.K.; 100% owned subsidiary company of Standard Bank Limited. SBL have received remittance of BDT 937.62 million through Standard Exchange Co. (U.K.) Ltd. in 2010 as against BDT 263.11 million in 2009 reflecting an increase of BDT 674.51 million. With the approval of Bangladesh Bank, opening of exchange Co. (USA) Inc, DBA (Doing Business As) “Standard Express” is at the final stage. The license for the exchange company in USA is expected to be obtained soon. On receipt of the license and completion of in structural works, commencement of the business will take place. The bank also processing opening of exchange companies in Australia, Spain, and Italy etc. subject to Bangladesh Bank approval. As a result, Bangladeshi expatriates will be able to remit their earnings easily and with ease and comfort.

TREASURY

SBL Treasury is an important and unique banking unit and it is one of the best earning sources of the Bank at the Head Office level. The Treasury Division comprises with two wings. One is Money Market dealing with the Local Currency for managing and utilizing fund and the other is Foreign Exchange dealing with the Foreign Currency. SBL have a skilled Treasury Team working for prudent fund management with excellence in performance and skill. During the Year 2010 total income from the Treasury was Tk.61.61 Crore from which Tk.30.57 Crore earned from the Foreign Exchange Transactions and Tk.31.04 Crore earned from the Local Currency Transactions in the money market.

STRATEGIC BUSINESS OUTLOOK

Standard Bank Ltd. has put in strong endeavor to involve in banking sectors of the country with the vision to grow with the economy of the country. It considers the entire spectrum of businesses activities irrespective of size, not only for the better service to its clients, but for all stake holders and people as a whole.

The changing scenario at banking sector is experiencing different attention on different perspective. The priorities are also taking new style in recent development of Regulatory structure and market condition in Bangladesh. Thus Standard Bank Ltd. has taken numbers of steps to diversify its business avenue. Special attention is being given to finance in Infrastructure, Power Generation, Pharmaceutical, Ship-Building, and Iron & Steel industries. Due attention is now being given to Agri & Agri based sector. SME and other micro credit operations are new areas for SBL for uplifting national economy at large.

Besides, business concentration is being addressed in many ways like opening of one exchange house in the UK and similar other exchange houses to be opened in the USA, Italy and Canada within the shortest possible time.

At home some more Branches are being opened considering potentialities and demand of the economic needs of the concerned areas. Its ultimate goal is to cover more areas with technology based delivery channels.

Dynamic decision making process, Moderate Risk based Management, Diversified and peoples friendly business model, Dedicated IT infrastructure, Technology base product, Strong Internal Control System and Efficient Performance of the Management team are most effective tools in attaining better outcome at Standard Bank Ltd

Our strategic management is a process that evaluates and controls our business in the total Banking industries, in which we are exactly involved. SBL also assess the market environment to set goals and strategies by taking into consideration of all potential Competitors.

RISK MANAGEMENT

Commercial operation in every aspect is very much inherent to risks and for Banks especially credit risk is inevitable to be managed to reduce the possibility of loss and maximize the profit. Accordingly the Bank is now following various risk management tools. In order to ensure soundness in credit portfolio, Bank is giving due importance to Credit Risk Guidelines of Bangladesh Bank. Credit Risk Grading, GAP Analysis are also being given due attention. Asset-Liability of the Bank is now being managed effectively through ALCO (Assets Liability Management Committee) to address Liquidity Risk, Foreign Exchange Risk, Interest Rate Risk, Operational Risk, Market Risk & all other risks related to Balance Sheet. The Bank is arranging adequate training, facilitating, equip for enlighten of its human resources with the objective to make loan portfolio healthy by minimizing risk and earn acceptable level of return. The management is giving effort to restructure the Bank as per Prudential Guidelines provided by Bangladesh Bank for bringing harmony in banking operation and in order to protect interest of the Bank by maintaining good asset quality by strengthening monitoring and follow-up of credit portfolio. In recent time the Bank has given importance on implementation of BASELL II, which has been introduced and effective from January 2010 by arranging Training & Workshop among the officers and executives to equip with the program.

INFORMATION TECHNOLOGY DIVISION

Information Technology (IT) plays a vital role in achieving the business objectives of any financial institution keeping this in view, Standard Bank Limited has taken a comprehensive automation plan to provide cost effective sophisticated electronic services to customers.

Under state-of –the-art automation program, SBL implemented the Real Time Online Core Banking System (CBS) through STELAR. For this centralized system, we are quite able to system is helping us to fulfill Basel-11 requirement as well.

SBL’s dedication to innovation has driven our growth and helped our clients and partners grow their business. It has allowed SBL to create products, systems and services that are alternative to Cash and Cheque. Instead of providing the services through bank counter, customers are encouraged to enjoy the service through various electronic delivery channels like ATM, POS, Internet, cell phone etc. keeping the above in mind, we implemented SBL Debit Card project for our existing customers with a reasonable investment. SBL have already soft launched the SBL Debit Cards and also installed ATM Booths at Principal, Agrabad, Kotalipara and Cox’s Bazar Branch.

As SBL ATM Switching Software is capable to integrate Third Party Interface, SBL is implementing Third integration with DBBL and Q-Cash that will cover whole Bangladesh ATM network. By completing this ATM project we will ensure prompt and efficient payment mechanism for the end users and will increase low cost deposits and new retail customers.

For Exchange House automation purpose we procured “Infinity Foreign Remittance Management Software” that will enable the bank to bring the foreign remittance without support of other exchange services. Moreover, we have procured “MBank”-Merchant Banking Software in order to undertake day to day operations of Merchant Banking Division. At the same time, we have modernized the payment system of SBL through BACH (Bangladesh Automated Clearing House) by implementing BACPS (Bangladesh Automated Check Processing System) for which we procured NEWGEN Check Processing System. Moreover we have successfully opened Two Islami Banking Windows by “Hikmah” the core Islami Banking System for providing Shariah Based banking Services to our clients.

SBL have implemented centralized robust Data Center by keeping all type of redundancy in place at Head Office that will run 7*24 hours. Now SBL are able to maintain proper environmental conditions necessary to keep central servers running smoothly. SBL have introduced the concept of Green Datacenter by putting the end to end energy efficiency mechanisms by changing the voltage of power distribution and by taking advantage of new, high efficiency, multimode uninterruptible power systems.

By the year 2010, SBL opened 17 new branches including SME/Krishi Branch with Agriculture Loan module where we deployed lot of new PCs and structured communication network with redundant link. It is also mentioned here that we also put into place strong IT security measures by implementing Cisco Firewall on the SBL network and latest ESET NOD32 Antivirus for protecting and securing the core network and centralized banking systems. Beside this, Banking Data has been stored and maintained with high priority and security at daily, monthly and yearly basis. At the same time, we took initiative for insurance Convergence for Sensitive IT equipments like Servers, Routers and Server Rack at Head Office as per compliance of Bangladesh Bank.

SBL have modernized the payment system through BACH (Bangladesh Automated Clearing House) by implementing BACPS (Bangladesh Automated Check Processing System) with EMICR Check Processing System from ERA InfoTech. SBL also delivered MICR check scanner at different branches for acceleration of clearing process following the prudent line of Bangladesh Bank.

In addition to above, SBL have already obtained approval of our IT Policy Version 2.0 from Board for putting systematic procedure and policies to guide the users of the system to ensure proper usage of customer information along with the proper protection of the Information System assets. SBL also started IT training for users for familiarizing the new STELAR System and as well as making them responsive of ICT Security related issues. Now SBL are in a better position to comply with maximum observations/findings of the Inspection team of Bangladesh Bank.

The year 2010, SBL have started innovative banking services like Internet Banking, SME Banking, and Mobile Banking with the cooperation of Telecommunication faster and documented, we will be introducing Corporate E-mail Facility at SBL.

Standard Bank Limited will able to develop new products and new delivery channels, to reach new customer base and create the opportunity for greater value proposition. IT objectives are to achieve maximum use of tried and tested technology, with greater value proposition. It is time for business and technology to work more intimately in achieving banking goal for products and services.

ICT (INFORMATION & COMMUNICATION TECHNOLOGY) – AUDIT

The SBL has designed its ICT Audit system based on the guidelines framed by Bangladesh Bank as per guideline on Information and Communication Technology for Schedule Banks and Financial Institutes, which include a part of overall audit process for good Corporate Governance in the Bank. An Information and Communication Systems Audit is an examination of the controls within an Information Technology infrastructure. It is the process of collecting and evaluating evidence of Bank’s Information System practices, and operations to evaluate the Bank’s ability to protect its information assets and properly dispense the same to relevant parties.

The primary functions of an ICT audit are to evaluate the system’s effectiveness and security protocols, in particular, to evaluate the organization’s ability to protect its information assets and properly dispense information to authorized parties. All activities and operations required to ensure data security including facility design, physical security, network security, disaster recovery and business continuity planning, use of hardware and software, data disposal, and protection of copyrights and other intellectual property rights. The Purpose of ICT Audit is to improve the reliability, security and efficiency of information systems and thus contribute to the realization of a healthy Information System. The ICT audit focuses on determining risks that are relevant to information assets and in assessing & suggesting controls in order to reduce or mitigate risks and threats to acceptable level in regards of Hacking, Virus, Spam, Worm, Communication failure, Hardware failure, Software bugs, and Non-professional users. SBL ICT audit has achieved its level of operation for the year 2008 adhering with the continue enhancement activities of the platform with the improved and satisfied performance in comparison with the cumulative year by setting & performing its ideal and real-time contribution to achieve the banks growth and development.

CREDIT RATING REPORT

Standard Bank Limited has been rated by Credit Rating Agency of Bangladesh (CRAB) on the basis of Financial Statement as on December 31, 2009. The summary of the rating is presented below:

CRAB has rated Standard Bank Limited as “A1” (pronounced as Single “A” One) rating in the long term and “ST-2” rating in the short term which has been stable as before. Commercial Banks rated A1 in the long term belong to ‘Strong Capacity & High Quality’ Cohort. Banks rated A1 have strong capacity to meet their financial commitments but are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions. A1 is judged to be of high quality and is subject to low credit risk.

Commercial Banks rated in the short term ST-2 category are considered to have the strong capacity for timely repayment of obligations. Banks rated in this category are characterized with commendable position in terms of liquidity, internal fund generation and access to alternative sources of funds.

INTERNAL CONTROL AND COMPLIANCE DIVISION (ICCD)

Internal Control is the process, initiated by a company’s Board of Directors, the Management and other personnel, and it is designed to provide reasonable assurance regarding the achievement of objectives, the reliability of financial reporting and compliance with applicable laws, regulations and internal policies.

The bank has designed its internal control system based on the guidelines framed by Bangladesh Bank in managing Core Risks in Banking. In order to have effective, efficient and complaint Internal control system the bank has segregated its Internal Control & Compliance Division into three separate departments namely:-

1. Audit & Inspection Department

2. Monitoring Department

3. Compliance Department

Functional obligation of Audit & Inspection Department

i) Audit of the branches including ICT.

ii) Audit of different Department / Division of Head Office.

iii) Vigilance & Complaint Investigation

Functional obligation of Monitoring Department

Audit function of Internal Control & Compliance lies in objective and impartial and independent analysis i.e. it has to perform its assignment free from bias and interference. Audit is not involved in the operations of the Bank.

Internal audit is part of the ongoing monitoring of Bank’s internal control system. Internal audit provides an independent assessment of the adequacy and compliance to the Bank’s established policies and procedures. As such, the internal audit functions assist the senior Management and the Board of Directors in the efficient and effective discharge of their responsibilities.

Internal Control & Compliance Division prepared an audit plan for 2010 for all the assignments to be performed. The audit plan included the timing and frequency of planned audits. Accordingly 43 (Forty three) branches have been audited in the year 2010 including branches which were opened on or before 30th June, 2010 and were reported major irregularities or lapses to the Management. As per decision of the higher Management corrective measures have been taken so as to stop recurrence of such lapses or irregularities.

Besides, Bangladesh Bank Inspection teams conducted inspection on 59 (Fifty nine) branches and 6 (Six) Divisions of Head Office during the year 2010 which included Comprehensive Inspection, Inspection on Foreign Exchange Transaction and Core Risk Inspection on Anti Money Laundering Activities, Credit Risk Management, Information Technology and Internal Control & Compliance.

The Management Committee (MANCOM) of the Bank monitors the effectiveness of internal control system time to time. The MANCOM provided certificate on overall adequacy & effectiveness of internal control system based on Bank’s policy & procedure to the Board of Directors in the year – 2010.

ANTI MONEY LAUNDERING (AML)

Standard Bank Limited has an effective Anti Money Laundering Division (AMLD) and Central Compliance Unit (CCU) to look after Anti Money Laundering issues. It has been maintaining some specific policy and process in line with National and International best practices, to address Money Laundering (AML) and Combating Financial Terrorism (CFT) affairs. Bank has a separate Division sufficiently equipped to look after the AML and CFT issues. There is also a central compliance unit (CCU) Headed by Chief Anti Money Laundering Compliance Officer (CAMLCO) to ensure proper implementation of its AML and CFT program. The CCU has been ensured close monitoring and supervising function among the Branches and all operational parts of the bank to strictly enforce its AML and CFT affairs.

The bank follows Risk based approach to address AML issues. Bank also follows standard Customer Due Diligence (CDD) and /or expanded Due Diligence (EDD) process in accordance with domestic regulatory framework and international Standard best practices. Besides, the Bank also ensures Due Diligence in its all subsidiaries and correspondences home and abroad. With the intention of adhere to national and international AML and CFT program. Bank has a precise policy not to establish or continue any relationship with any Entity listed by United Nations (UN).

SBL ensure proper compliance of Laws, Regulations, Policies and Guidelines relating to Anti Money Laundering activities. Our Anti Money Laundering Division has been maintaining regular communication with Bangladesh Bank and all our Branches for feedback on all required/ relevant affairs, information, queries, circulars and letters etc.

Merchant Banking Wing (MBW)

The creation of Merchant Banking Wing (MBW) in the year 2009 proved to be a very effective step for the Bank to demonstrate its commitment to enlarge the service horizon through product diversification. Within one and half year of operation MBW became actively involved in capital market arena and established itself as a reputable institution through introduction of investment schemes which broadened the clientele base and also made substantial contribution towards the profitability of the Bank.

Initiative taken to form a Subsidiary Company to continue Merchant Banking Operation

As per Directive of Bangladesh Bank the Board of Standard Bank Limited initiated steps to form a separate Subsidiary Company named SBL Capital Management Limited with an Authorized Capital and Paid Up Capital of Tk.500.00 Croe (Five Hundred Crore) and Tk.150.00 crore (one hundred fifty crore) respectively. Bangladesh Bank accorded approval towards formation of the said subsidiary company under Standard Bank Limited. The Registrar of Joint Stock Companies and Firms have also issued the Certificate of Incorporation and the Certificate of Commencement of business in favour of the said Subsidiary Company. We have approached the Securities and Exchange Commission (SEC) for issuance of a full fledged Merchant Banker license in favour of SBL Capital Management Limited. On receipt of the license from the SEC we expect to launch the operation of SBL Capital Management Limited from early January 2011 to continue our merchant banking operations through this subsidiary company.

Performance of Merchant Banking Wing

The clientele base as well as the operation of Merchant Banking Wing (MBW) registered a significant growth in 2010 and as a result this wing earned the highest profit amongst all the branches of the Bank in the Year 2010.

Islami Banking

For clients full satisfaction Vis-à-vis our sponsors’ also, we have introduced Islamic Banking alongside our conventional Banking at the end of the year 2009. Currently we are operating Islamic Banking by two Windows at Topkhana Road Branch, Dhaka & Agrabad Branch, Chittagong under a separate high profile Islami Banking Software which is known as HIKMA Software. We are following & maintaining properly the Guidelines for Islamic Banking issued by Bangladesh Bank. We are maintaining separate

CRR/SLR with Bangladesh Bank for our Islamic Banking also. Standard Bank Limited has formed Shariah Supervisory Committee for its Islamic Banking consisting of 5 (five) honorable members including some eminent Islamic scholars of the country. We are doing our Islamic Banking activities as per Islamic Shariah.

We are offering the following Deposit, Investment, Foreign Trade & Foreign Exchange products to our clients under Islamic Banking:

Deposit products

01.Al-Wadiah Current Account 02.Mudaraba Savings Account(MSA) 03. Mudaraba Special Notice Deposit Account (MSND) 04.Foreign Currency Account 05.NFCD Account 06.RFCD Account 07.Mudaraba Term Deposit Receipt Account (MTDR)

08. Mudaraba Monthly Savings Scheme (MMSS) 09. Mudaraba Hajj Savings Scheme (MHSS)

Investment products

01. Bai-Murabaha 02.Bai-Muajjal 03. Bai-Salam 04.Hire Purchase under Shirkatul Melk (HPSM)

Foreign Trade & Foreign Exchange:

01. Import 02. Export 03. Remittance

In our above 02(two) Islami Banking Windows, we are providing all the above products, Services & facilities to our clients and we are receiving very good response from them.

Our vision of Islami Banking is to open more Islami Banking Windows/Branches soon and also to conversion the whole Bank into Islami Banking from conventional Banking by obtaining permission from Bangladesh Bank.

Capital Management

Capital Management strategy of the Bank is based on the Risk Based approach. Bank’s risk profile complies with the regulatory requirement and implies, among other things, that the Bank must have sufficient capital to cover both Balance Sheet growth and current fluctuations in the Risk exposures. The allocation of financial resources, in general, and capital, in particular, favors business portfolios with the highest positive impact on Bank’s profitability and Net Asset Value. Finally it’s endeavor is to provide highest possible return to the honorable shareholders.

A) Capital

Authorized Capital of the Bank is Tk. 880.00 crore. The Paid-up Capital of the Bank stood at Tk. 317.29 crore in 2010.The Statutory Reserve stood at Tk. 151.24 crore. The total equity of the shareholders of the Bank at the end of the 2010 stood at Tk. 562.51 crore. In future we have a plan to enhance both the authorized capital & paid-up capital of the Bank to cope with financial growth and regulatory constraint.

B) Capital Adequacy

In terms of Bangladesh Banks’ revised Guidelines from January to June 2010, the Minimum Capital Requirement (MCR) was 8% on Risk Weighted Assets (RWA) and from July to onward 2010 the MCR was fixed at 9% on RWA. The Tier-1 Capital of SBL stood at Tk.557.67 crore which is increased by Tk. 136.91 crore than 2009. While MCR needed to be covered 50% from Tier-1 Capital. It includes the equity such as Paid-up

Capital, Reserve & Retained Earnings. Besides Tier-II, another part of the Capital Structure enhanced by Tk.26.32 crore and stood at Tk.79.42 crore at the end of 2010 which includes General Provision on unclassified loans & advances.

Total Capital increased by Tk. 163.24 crore during the year 2010. Capital Adequacy Ratio is measured by the ratio of the total Capital to the Risk weighted asset. Capital

Adequacy Ratio (CAR) is stood at10.32% of RWA at the end of 2010, where requirement was 9% of RWA.

SCHEMES AND PRODUCTS OF THE STANDARD BANK LIMITED

SBL has different types of Schemes and Products. By these Schemes and Products they try to hold their current position and also hold the customer’s confidence.

SBL provides different types of Schemes such as:

SBL REGULAR DEPOSIT PROGRAM (SRDP)

If any monthly installment remains unpaid for 5 (five) consecutive months, the account will be closed automatically and the account will be settled as detailed below:-

If failure to pay monthly installment on due dates he/she will pay penalty of Tk. 20/-(Twenty) next subsequent installment.

Monthly Installment, Tenure and Maturity Value will be as per following Schedule:-

SBL REGULAR INCOME PROGRAM (SRIP)

1. SBL Regular Income Program is an income program, which helps you to earn a monthly fixed amount on your deposits at SBL for period of 3 years.

2. Deposit of Tk. 50,000/- (Fifty Thousand) and multiples thereof but maximum limit of

Tk. 25, 00,000/- (Taka Twenty Five Lac) at a time and depositor will earn 36 equal monthly profit.

Depositor can earn money due date as per following schedule:-

N. P: This schedule changeable.

SBL REGULAR DOUBLE INCOME PLUS (DL+) PROGRAM

Deposit of Tk. 10,000/- (Ten Thousand) and multiples thereof will be acceptable under this program.

A specially designed receipt shall be issued for the deposit under this program.

The instrument shall be issued for 6 years.

At maturity after 6 years the depositor will be get double plus (DI+).

If any depositor intends to withdraw his deposit before maturity, the following rules will apply:-

– No benefit including interest/profit shall be allowed for pre-mature encashment within 1 (one) year.

– If the accounts/deposits are closed/en-cashed after 1 (one) year of its opening interest shall be allowed on the deposit at prevailing FDR Interest Rate.

The instrument will be acceptable as collateral security against any investment subject to registering lien with the issuing Branch.

In case of instrument get lost, the procedure for the issuance of a duplicate receipt will be the same as applicable in case of loss of FDR

SBL FIVE (5) LACS SAVINGS SCHEME

Anybody can open this scheme by Deposited Tk.5, 000/-(five thousand) only per Month.

The tenure of the scheme is 6 (six) years.

After Six Years Depositor will get Tk. 5, 20,000/-.

4. If failure to pay monthly installment on due dates he/she will pay penalty of Tk. 20/-(twenty) on next subsequent installment.

5. In case of premature close of the account the account holder will get savings rate interest but not interest less than 6 (six) months.

6. If 4 (four) consecutive monthly installment unpaid the account will be closed automatically.

SBL TEN (10) LACS SAVINGS SCHEME

Anybody can open this scheme by deposited Tk. 4,500/- (four thousand five hundred) only per month.

This scheme tenure 10 (Ten) years.

After 10 (Ten) years depositor will get Tk. 10, 00,000/.

If failure to pay monthly installment on due dates he/she will pay penalty of Tk. 20/- (twenty) next subsequent installment.

5. In case of premature close of the account the account holder will get saving rate interest but not interest less than 6 (six) months.

6. If 4 (four) consecutive monthly installment unpaid the account will be closed automatically.

SBL LAKHPOTI PLUS (SLP+) PROGRAM

1. The depositor will have the option to choose any installment size at the time of opening of the account and will not be allowed change the size of installment afterwards.

2. In case of premature closing of the account minimum after 1 (one) year completion, the account holder will get Saving Rate of Interest only. But no interest will be paid before 1 (one) year completion of continued payment.

3. In case of premature close of the account the account holder will get savings rate interest but not interest less than 6 (six) months.

4. If any client fails to pay monthly installment on due dates in maximum 4 (four) months he/she will pay penalty of Tk. 20/- (Twenty) per month to the next subsequent installment.

5. If any client fails to pay 4 (four) consecutive monthly installments the account will be closed automatically.

Monthly Installment, Tenure and Maturity Value will be as per following Schedule:

SBL MILLIONAIRE PLUS (SMP+) PROGRAM

1. The depositor will have the option to choose any installment size at the time of opening of the account and will not be allowed change the size of installment afterwards.

2. In case of premature closing of the account minimum after 1 (one) year completion, the account holder will get Saving Rate of Interest only. But no interest will be paid before 1 (one) year completion of continued payment.

3. In case of premature close of the account the account holder will get savings rate

interest but not interest less than 6 (six) months.

4. If any client fails to pay monthly installment on due dates in maximum 4 (four) months he/she will pay penalty of Tk. 20/- (Twenty) per month to the next subsequent installment.

5. If any client fails to pay 4 (four) consecutive monthly installments the account will be closed automatically.

Monthly Installment, Tenure and Maturity Value will be as per following Schedule:

SBL provides two types of Products such as:

CONSUMER CREDIT SCHEME

Lending rate has been shown in the following table where fixed rate (Bangladesh bank instructed rate) and mid-rate are given. Bank may re-fix ±1.50 over the mid rate considering the risk involvement. These rates are effective from January 01, 2010.

1.00% additional interest rate will be charged for default in payment/ adjustment. All other charges, commissions and fees shall remain unchanged.

HOUSE BUILDING LOAN

Lending rate has been shown in the following table where fixed rate (Bangladesh bank instructed rate) and mid-rate are given. Bank may re-fix ±1.50 over the mid rate considering the risk involvement. These rates are effective from January 01, 2010.

1.00% additional interest rate will be charged for default in payment/ adjustment. All other charges, commissions and fees shall remain unchanged.

Standard Bank provides different types of card facilities such as:

VISA CREDIT CARDS

Fees & Charges for VISA Credit Card (Classic Card) of Standard Bank Limited are following:

SPECIAL NOTE:

• FOR OUR OWN EMPLOYEES AND OTHER BANKERS, ANNUAL/RENEWAL FEE IS 50% OF THE PRESCRIBED AMOUNT.
• FOR OUR OWN EMPLOYEES, LIMIT IS TWICE OF NET SALARY.
• FOR CLIENTS, LIMIT DEPENDS ON BRANCH MANAGER’S RECOMMANDATION AND CREDIT COMMITTEE’S ASSESSMENT.
• 15% VAT SHOULD BE APPLICABLE ON ANNUAL/RENEWAL FEE AND CASH ADVANCE FEE.

GOLD CARD

Fees & Charges for VISA Credit Card (Gold Card) of Standard Bank Limited is following:

SPECIAL NOTE:

• FOR OUR OWN EMPLOYEES AND OTHER BANKERS, ANNUAL/RENEWAL FEE IS 50% OF THE PRESCRIBED AMOUNT.
• FOR OUR OWN EMPLOYEES, LIMIT IS TWICE OF NET SALARY.
• FOR CLIENTS, LIMIT DEPENDS ON BRANCH MANAGER’S RECOMMANDATION AND CREDIT COMMITTEE’S ASSESSMENT.
• 15% VAT SHOULD BE APPLICABLE ON ANNUAL/RENEWAL FEE AND CASH ADVANCE FEE

CLASSIC CARD

Fees & Charges for VISA Credit Card (Classic Card) of Standard Bank Limited are following: