General Banking and Financial Performance of UCBL (Part-2)

2.11     UCB decision making & risk management

Risk is inherent in all the core business areas of a bank. Managing risks properly is one of the main pillars of banking business. To ensure sustainable growth and performance, proper and sound risk management practice is vital importance, as a commercial band United Commercial Bank Ltd (UCBL) attaches fill importance to manage the risk involved in its business. The risk management of the bank covers a wide spectrum of risk issue but the five core areas of Banking are—Credit risk, Foreign Exchange risk, Internal control and Compliance risk, Laundering risk and asset liability management. The principle objective of risk management is to safeguard the bank’s capital, financial resources, profitability and market reputation. To this effect, the bank took the following steps under guidelines of Bangladesh bank:

1. Credit Risk Management: Credit risk is the possibility that borrower or counter party will fail to meet its obligations in accordance with agrees terms. The failure may result from unwillingness of the counter party or decline in his/ her financial condition. Credit risk, therefore, arises from the bank’s dealing with or lending to corporate, individuals, other banks or financials institutions. A separate credit division has been formed at head office since the inspection of the bank, which is assigned with the duties of marketing and assessment of credit products, maintaining effective relationship with the customer and exploring new business opportunities. The credit risk management includes borrower risk analysis, financial statement analysis, industrial analysis, and historical performance of the customer, security of the proposed credit facility and market reputation of the borrower. UCB takes its lending decision based on the credit risk assessment report by appraisal team.

2. Foreign Exchange Risk: Foreign exchange risk is defined as the potential change in earning arising due to change in market prices. The market directly affects each country bond, equities, private property, manufacturing and all assets that are available to foreign investors.

Foreign exchange rates also play a major role in determining who finance government deficits, who buys equities in companies and literally affects and influences the economic scenario.

Due to high risk market the role of treasury operations is crucial. As per Bangladesh Bank guidelines the bank has segregated the front and back office for treasury operations. Front office independently conducts the transactions and the Back Office is responsible for verification of the deals and passing of their entries in books of accounts. All nostro accounts are reconciled on monthly basis and all foreign exchange transactions are revalued at Market-to- Market rate as determined by Bangladesh Bank

3. Internal Control and Compliance Risk Management: Internal control and compliance (ICC) is a critical component of bank management and foundation of the safe and sound operation of banking organization. A system of strong internal control and compliance can help to ensure that the goals and objectives of a banking organization will be met, that the bank will achieve long term profitability targets, and maintain reliable financial and managerial reporting. Operational loss may arise from error and fraud due to lack of strong internal control and compliance culture. Effective internal control and compliance can help to ensure that the bank will comply with laws and regulation as well policies, plans, internal rules and procedures, and decreases the risk of unexpected losses or damage to the bank’s reputation. To this effect, the bank an ICC Division headed by senior executives. The ICC Division has been segregated to three departments, which are Audit & Inspection Dept, Compliance Dept and Monitoring Dept. The bank has also developed an internal control and compliance policy duty approved by the board of directors. The Audit & Inspection team undertakes periodic and special audit. The audit committee of Board of Directors plays an effective role in providing between the board and management. The committee reviews the financial reporting prices, the system of internal control, the audit process and the bank’s process for compliance with laws, regulations and code of conduct.

4. Money Laundering prevention: Money laundering has been identified as a major thereat to the financial services community, it is important that the management of banks and other financial instructions view prevention of money laundering as part of their risk management strategies and not simply as a stand alone requirement that is being imposed by the legislation. The management of UCB is fully aware that the financial system shall not be and cannot be used as channel for criminal activities. Therefore, co-ordination and co-operation between concerned parties are essential for its success. The bank has designated Chief Anti Money Laundering Compliance Officer (CAMLCO) at head office and compliance officers at braches to review the transactions of the accounts to identify suspicious transaction profile (TP) has been incorporated in the Account Opening Form (AOF) along with other KYC related issues.

5. Asset Management: Asset/liability management has become al almost universally accepted approach to risk management. Since capital and profitability are intimately linked, United Commercial Bank Ltd. Is managing its asset/liability in order to ensure sustained profitability so that the bank can maintain and augment its capital resources. The assets/liability management committee (ALCO) usually makes decisions, which is reasonable for the financial direction of the bank. The ALCO’s goal is to manage the sources and uses of funds, identify balance sheet management issues like balance sheet gaps, interest rate gap. ALCO also reviews liquidity contingency plan and implements liability pricing strategy for the bank.

2.12    Human Resources

Needless to say, skilled and efficient manpower is the prerequisite of success to any organization. Human Resources Division deals with issues related to UCB staff members such as compensation, hiring, performance management, organization development, safety, wellness, benefits, employee motivation, communication, administration and training.

To this end UCB Human Resources Division always focuses on employee development, employee retention, facilitating organizational development initiatives and thus contributes to the achievement of organizational goals. UCB attaches topmost priority to ensure congenial working environment for the staff members to maintain team spirit and promote a high level of integrity, loyalty, commitment and devotion among the staff members.

In order to maintain transparency and accountability in the process of recruiting staff members, UCB engages reputed and independent institutions to conduct competitive written test for the bank apart from organizing Job Fair in BBM and other reputed institutions. Besides, professional bankers are also recruited through a selection committee for lateral recruitment.

In addition, UCB Training Institute organizes various banking and professional trainings that include foundation course, anti money laundering, foreign remittance, customer service, information technology, workshops and seminars to equip staff members to contribute efficiently for the overall growth of the bank.

HR Division prepares annual training calendar in assistance with the training institute. Trainings are being offered after assessing the training need of the individual staff member. HR division assists training institute to conduct the time befitting training for identified staff members. Nonetheless, UCB also sends participants to BIBM and other reputed institutes for attaining relevant banking and professional knowledge.

HR Division also does annual performance appraisal to every individual and accordingly promotion and increment is being made.

2.13 Outlook for 2010

The economy of Bangladesh is likely to rebound after the downturn in economy caused by two consecutive floods and the deadly cyclone SIDR. The inflow of worker’s remittance as well as increase of exports and imports is a good sing for the economy. The high international prices of crude oil and continuing upward trend in prices of many other commodities are creating inflationary pressure on the global economy and the economy of Bangladesh as well. The monetary policy stance of Bangladesh Bank is expected to rein in inflation and continue facilitating smooth credit flow.

The objective of United Commercial Bank Limited is geared towards the changing needs of its customers. The bank is on a strong footing to impart tailored services. The focus of the bank lies on its large clientele base and their expectations from the bank. The bank will continue to explore the opportunity of retail banking, credit card as an extension to the existing debit card, SME and remittance services. The growth of the banking industry poses challenges for this sector. In order to face the ensuring challenges, the bank will institutionalize corporate governance together with culture, sound risk management policies and stringent monitoring procedure.

The importance of microfinance is gaining ground day by day and the bank is equally prepared to exploit this opportunity. The bank is penetrating in the SME will enable the bank to carry out its commitment towards corporate social responsibility.

Members of the Board seize this opportunity to express the heartfelt gratitude and sincere thanks to the shareholders and well-wishers for their continued support and trust. We are also grateful to the Government of Bangladesh. Bangladesh Bank and other regulatory Authorities for their valuable cooperation and guidelines imparted to us on various occasions. The Board also acknowledges the contribution of the devoted workforce whose sincere service has led the bank to a commendable position.

General Banking Sections, Types of Accounts, Products

General Banking

Financial institution/ intermediary that mediates or stands between ultimate borrowers and ultimate lenders is knows as banking financial institution. Banks perform this function in two ways- taking deposits from various areas in different forms and lending that accumulated amount of money to the potential investors in other different forms. General Banking is the starting point of all the banking operating and aids in taking deposits and simultaneously provides some ancillaries services. It provides those customers who come frequently and those customers who come one time in banking for enjoying ancillary services. In some general banking activities, there is no relation between banker and customers who will take only one service form Bank. Since bank in confined to provide the service everyday general banking is also known as retail banking.

General Banking consists of the many sections in the branch.

Customer Service.

Account Opening/Closing.

Remittance.

• Payment Order Issue
• Demand Draft Issue/Collection
• T.T. Issue/Collection
• Endorsements
• IBC/OBC Collection.

Deposit Department.

Locker Service.

Account’s Department.

° Clearing.     ° Transfer.        ° Cash.

Customer Services of UCBL:

Professional merit and Competency, Flexibility, Determination and Dedication are the core resources that UCBL consider to be of paramount importance for building a client oriented modern banking. Customer satisfaction is UCBL foremost professional undertaking. Therefore, a satisfied client is UCBL precious product and they consider them UCBL ambassador in the market.

Account Opening of UCBL;

Under this department, UCBL officer opens different types of account on the request of clients. The procedure of opening account is given bellow:

Types of Accounts:

General Products are:

Current Deposit:

Interest Rate 0.00%

° Individual Account

° Joint Account

° Proprietor Ship Account

° Limited Company Account

UCB Interest Rates on Deposit

Fixed Deposits:

Fixed deposit is one, which is repayable after the expiry of a predetermined period fixed by him. The period varies form 1 month to 12 months. These deposits are not repayable on demand but they are withdrawing able subject to a period of notice. Hence, it is a popularly known as ‘Time Deposit’ or ‘Time Liabilities”. Normally the money on a fixed deposit is not repayable before the expiry of a fixed period.

Before opening a Fixed Deposit Account a customer has to fill up an application form which contains the folio wings:

° Amount in figures

° Beneficiary’s name and address

° Period

° Rate of interest

°Date of issue

° Date of maturity

° Instructions:

– To be renewed automatically with interest for the next period.

– Not to be renewed for next period.

– Pay interest to account no. (———-) on maturity

^– Special instruction

° How the account will be operated (singly or jointly)

° Signature (s)

° FOR no.

Then a FOR account is opened and it is recorded in the FDR Register which contains the following information,-

°FDRA/C no.

° FDR (Fixed Deposit Receipt) no.

° Name of the FDR Holder with address

° Maturity period

° Maturity date

° Interest rate

In case of Fixed Deposit Account the Bank needs to maintain a cash reserve. So UCBL offers a high interest rate in Fixed Deposit accounts.

Source: GB Department & Banking Operations Division, circular REF: IC#BOD/21/07,

Updated Last on 01-03-2010

Festival Sanchay Prokalpa are:

Eid-Ul-Azha Sanchaya Prokalpa: £

Interest Rate 10.00% Eid-Ul-Fitre Sanchaya Prokalpa: £

Interest Rate 10.00% Durga-Puja Sanchaya Prokalpa: £

Interest Rate 10.00% Buddha-Purnima Sanchaya Prokalpa: £

Interest Rate 10.00% Boro-Din Sanchaya Prokalpa: £

Interest Rate 10.00%

UCB Interest Rates on Lending

UCBL Consumer Banking Products are:

1. UCB DPS Plan Scheme

2. Monthly Benefit Plan

3. Save Everyday Plan

4. Children Education Plan

5. Consumer Credit Scheme

6. Best invest Plan

7. Unique Savings Plan

Some of UCBL Consumer Products

l. UCB DPS Plan Scheme:

Monthly Installment 5 Years* 10 Years*

* The maturity value is an indicative figure. Tax/Excise Duty will be deducted as per govt. rules. 80% Loan Advantage on deposited amount. Thereafter in multiples of   Tk. 5000 up to a limit of Tk. 100,000.

2. UCB Monthly Benefit Plan:

Deposit Amount Income Amount for 3-year plan* Income Amount for 5-year plan*

* The maturity value is an indicative figure. Tax/Excise Duty will be deducted as per govt. rules. 90% Loan Advantage on deposited amount.

3. Save Everyday Plan:

Saving money for the future is a common practice in any society. Savings help you to build a better tomorrow. Regular saving makes a man become disciplined, self confident and successful.

UCBL offers you “Save Everyday” Plan. The primary advantage of this plan is that you are absolutely free to choose your own time for depositing money into this account. You can deposit daily, weekly or monthly. The choice is yours, but the transactions will have to be within the Bank’s transaction hour.

This is a 5 year plan and you will be required to open the account with an initial deposit of Tk. 2500/= only. We offer you very attractive interest rate which is accrued in this account on a daily basis.

4. UCB Education Plan:

Monthly Installment 4 Years* 7 Years* 9 Years*

* The maturity value is an indicative figure. Tax/Excise Duty will be deducted as per govt. rules. 80% Loan Advantage on deposited amount.

5. Consumer Credit Scheme:

In order to make a significant contribution in the living standards of the people of medium and low income category, UCBL has introduced a scheme called “Consumer Credit Scheme”. With a view to materialize the dreams of those who are unable to make one time investment from their own savings, one can now afford to buy necessary household equipments and thus improve the standard of living.

All sorts of household durables e.g. Television, Refrigerators, Computers, Air Conditioners, Video Cameras, Washing/ Drying Machines and Furniture’s are allowed under this scheme. One can buy Motorcycle too under this programme.

The collateral security is minimum and the interest rates are one of the lowest in the market. Please contact the nearest branch for details.

6. Best invest:

Bestlnvest offers you efficient high return investment plan. This plan helps you to build up a sizeable income in easy and affordable installments. This plan allows you to own 5 times the initial invested amount. Bestlnvest offers two separate and convenient term deposit periods for 4 years and 6 years respectively.

Bestlnvest is available in units worth Tk.50,000/- each. You will invest Tk. 10,0007/- as down payment for purchasing 1 (one) unit and the Bank will provide loan for Tk.40,0007/-. The customer also has the option to buy units in multiples of Tk. 50,0007/- but maximum up to Tk. 1,00,00,0007- (one crore).

This is a unique high return plan catering to all income group. So do not miss the opportunity.

Customized Products are:

UCB Double Saver Plan: Deposit Amount Maturity Value after 8 Years*

* The maturity value is an indicative figure. Tax/Excise Duty will be deducted as per govt rules. 90% Loan Advantage on deposited amount.

UCB Triple Saver Plan: Deposit Amount Maturity Value after 12 Years*

* The maturity value is an indicative figure. Tax/Excise Duty will be deducted as per govt. rules. 90% Loan Advantage on deposited amount.

UCB Millionaire Plan: Monthly Installment Year Maturity Value*

* The maturity value is an indicative figure. Tax/Excise Duty will be deducted as per govt. rules. 90% Loan Advantage on deposited amount.

7. UCB Unique Savings Plan:

Unique Savings Plan is an any day, any amount savings plan. The beauty of this plan is that a customer can deposit any day, any time and any amount.

Unique Savings Plan offers you to deposit any amount of your choice but not less than Tk. 5007- for 3/4/5 years. This is a high income plan with withdrawal facilities. The withdrawal facility will help you at the time of any emergency. You can withdraw

50% of the deposited balance for once a month. At maturity you will get a handsome amount.

Procedure of Account Opening, Interest Posting, Cheque Book issuing & Account Closing

Procedure of Account Opening:

Account Opening (Normal Account):

• Collect an Account opening form from the Bank.
• Fill all the requirements of the form.
• Nominee is must be specified.
• Photograph is most important for any account.
• The account holder sign of his/her own self in front or the specific bank principle Officer in the account opening form. ?

Account Opening (Saving Account):

• Collect an Account opening form from the Bank.
• Fill all the requirements of the form.
• Nominee is must be specified.
• Photograph is most important for any account.
• The account holder sign of his/her own self in front or the specific bank principle
• Officer in the account opening form.
• To open this account the most important things is that Passport Photocopy or the Word Commissioner Certificate must have to add with the account opening form.

Account Opening (Current Deposit Account):

• Collect an Account opening form from the Bank.
• Fill all the requirements of the form.
• Nominee is must be specified.
• Photograph is most important for any account.
• To open this account the most important things is that Passport Photocopy or the Word Commissioner Certificate must have to add with the account opening form and also enclose the form 12 with the account opening form.

Checklist of Documents to be obtained for various types of ACCOUNTS:

Sole Proprietorship:

1. Signature Card.

2. Photograph of signatories attested by introducer.

3. Copy of valid Trade License.

4. TIN Certificate.

5. 18-A permission from Bangladesh Bank (for GSA & Agents only).

 Partnership:

1. Signature Card.

2. Photography of signatories attested by introducer.

3. Partnership Deed.

4. Partners letter of authority to open account and authorization for operation.

5. Copy of valid Trade License. ?

6. 18-A permission from Bangladesh Bank (for GSA & Agents only).

 Limited Liability Company:

1.   Signature Card.

2. Photograph of signatories attested by introducer.

3. Copy of Memorandum and Articles of Association (Certified by RISC).

4. Copy of Certificate of Incorporation and commencement of business (In case of public Ltd. Co.).

5. Copy of Board Resolution to open the account and authorization for operation.

6. List of Directors and signatories along with addresses.

7. Latest copy of From XII.

 Association/Trust/Society:

1. Signature Card.

2. Photograph of signatories attested by introducer.

3. Copy of Resolution of governing body to open the account and authorization for operation.

4. Copy of consolation / bylaws/ rules.

5. Certificate of registration.

6. List of authorized signatories and members of the governing bodies along with address.

7. Trust Deed (for Trust account only).

Interest Posting to Client’s account:

Bangladesh Government has circulated that, 10%D deduction from the Bank’s Internal Account’s. This 10% tax deduction from the client’s interest.

Other wise another circulation is that, from the OBCD collection every bank cut off there OBC commission as income account, here Bangladesh Bank said that 15% money cut off from the OBC collection as Vat on Others.

Cheque Book Issues:

• Types of Cheque Book’s:
• Savings Account – 20 Leaves
• Current Deposit Account – 25 Leaves
• Current Deposit Account – 50 Leaves