Chapter 1

Introduction

Now a days Industries as well as the Non Resident Bangladeshis and persons working outside are the real assets of the remittance business of the country. To motivate and also to ensure increased remittance flow, NCC Bank has made a number of arrangements with various exchange companies. NCC Bank considering taking steps so that the beneficiaries here in Bangladesh can receive the money at their door steps. The total amount received by Bank in 2006 was more than US $ 52.56 million. Most large remittance comes from foreign exchange business including Import and Export. Bank largely depends in its Foreign Exchange Business to ensure profitability. To look after the Business and also to ensure prompt service to the Import and Export, officers having exposure and expertise in Foreign Exchange Business have been posted both at Head Office & Authorized Dealer Branches. During 2006, the Bank handled Export and Import business to the tune of TK. 8557.03 million and TK. 17646.84 million respectively. Banks wide network of correspondence plays vital role in facilitating its international trading. At present, total number of correspondents is 335. With a view to facilitating homebound remittance, the Bank made arrangements with a number of exchange companies during the year. This arrangement brought significant development in remittance business. NCC Bank is going to expand this network in near future. Corporate Governance establishes specific responsibility to ensure accountability. With a view to ensuring accountability and fairness in functions of the company and also to comply with the requirements of regulatory agencies, care has been taken to improve Corporate Governance. Due to these practices the remittance department of NCC Bank has been growing to provide a good participation in the profitability of the Bank. 1.1 Origin of report:

For any business school student only curriculum activities are not enough for handling the real business situation. So it is an important opportunity the students to know about the field of business through the internship program. Internship program is a perfect blend of the theoretical and practical knowledge. This report is originated to fulfill the requirement of the assign project internship report on Remittance as Bank Product: Its Handling and Impact on Profitability of the Bank : A NCC Bank Perspective. which has been assigned by NCC Bank . In this regard, I have been working as an internee in NCC Bank Limited, International division, Head Office. Dhaka from September 24, 2007 to till today. During this period I leaned how the host organization works with the help of the internal supervisor. On the basis of

working experience for this period I have prepared this report and I have tried my best to relate the theoretical knowledge with the practical work situation. 1.3 Objectives of Study: The objectives of this report are as under: Primary objective: The primary objective of this report is to fulfill the requirement of MBA program contains for two-month internship. For this reason I had to be attached with an organization so that I can have some practical job related experience along with the academic knowledge. Secondary objectives: To gain a relationship between theoretical and practical learning and real situation of the remittance of NCC Bank Ltd. To know the history of NCC Bank Ltd. To understand the major banking activities which a banker performs. To get an idea about the overall performance of NCC Bank Ltd. To have the idea of reporting system by each branch to its Head Office. To know about the rules and regulation of the bank. To Know about present remittance possession of NCC Bank Limited. To study different product handled by NCC Bank. To evaluate customers views about the services offered by commercial banks. To determine the inward and Outward remittance and wage earner remittance that impact on the profitability of NCC Bank. To show the relationship of Bank profitability and different remittance services. SWOT analysis of National credit and commerce Bank Limited. Finds and probable solutions. 1.4 Methodology of Study: a). Study Design: The study was fully a descriptive in nature. The study was conducted using the participatory method. To know the in-depth information, the topic was discussed with the expert professionals related to bank for several times and review of record of NCC Bank Limited and

The study was conducted to achieve the following secondary objectives:

other related secondary information. The purpose was to get an idea about the whole activities of International division where I did my practical orientation. Statistical data and other relevant information were gathered from secondary sources including several journals and booklets. b). Data Collection method: Data have been collected from two sources. These are as under: Primary source Secondary source

i). The Primary sources of data include the followings: 1. Face to face conversation with the bank officers and staffs 2. Tele conversation with the clients. 3. Study of different files of different sections of the bank. 4. Practical Deskwork. ii). The Secondary sources of data include as under: 1. Annual report of NCC Bank Limited 2. Different publications of NCC Bank Limited 3. Unpublished data received from the treasury division. 4. Different text books Different circulars sent by Head Office of NCC Bank Limited and Bangladesh Bank 1.5 Scope of the report: National Credit and Commerce Bank Limited (NCCBL) is operating widely with 51 branches all over Bangladesh. This report is strictly confined NCCBLs Head office, Remittance department, Dhaka. 1.6 Limitation of study: The main constraint of the study was insufficiency of information that was highly required for the study. Since the bank officials are very busy with their activities, as a result it was thought to have proper knowledge as was required for the study.

The duration was not enough to cover all aspects of banking.

1.7 Historical Background: National Credit and Commerce Bank Limited bears a unique history of its own. The organization started its journey in the financial sector of the country as an investment company back in 1985. The aim of the company was to mobilize resources from within and invest them in such ways so as to develop countrys industrial and trade sector and playing a catalyst role in the formation of capital market as well. The company operated up to 1992 with 16 branches and thereafter with the permission of the central bank converted into a full fledged scheduled private commercial bank in May 1993 with paid capital of Tk. 39.00 Crore to serve the nation from a broader platform. During last 12 years of its operation NCC Bank has acquired commendable reputation by providing sincere personalized service to its customers in a technology-based environment. The bank has up a new standard in financing in the industrial trade and foreign exchange business. Its various deposit and credit products have also attracted the clients both corporate and individuals who feel comfort in doing business with the bank. The initial authorized capital of the bank was Tk. 75.00 crore and Paid up capital was Tk. 19.520 crore at the time of conversion who is now raised, to Tk. 39.00 crore. The present authorized capital is Tk.250.00 crore and paid up capital is Tk.60.00 crore. The sponsors of the new bank consisted of 26 members, who comprised the first Board of Directors. The share price of the bank is currently being quoted at both Dhaka and Chittagong Bourses at an average price of Tk.320/- against per value of Tk. 100.00. NCC Bank based upon its commendable business performance for the year ended 2004 has meanwhile declared stock dividend 30%. The bank which started with 16 branches in 1993, has at present 41 branches and 03 booths are located in prime commercial areas of Dhaka, Chittagong, Sylhet, Feni, Khulna, Jessore, and Rangpur district head quarters, The initial authorized capital of the bank was Tk. 75.00 crore and Paid up capital was Tk. 19.520 crore at the time of conversion who is now raised, to Tk. 39.00 crore. The present authorized capital is Tk.250.00 crore and paid up capital is Tk.60.00 crore. The sponsors of the new bank consisted of 26 members, who comprised the first Board of Directors. The share price of the bank is currently being quoted at both Dhaka and Chittagong Bourses at an average price of Tk.320/- against per value of Tk. 100.00. NCC Bank based upon its commendable business performance for the year ended 2004 has meanwhile

declared stock dividend 30%. The bank which started with 16 branches in 1993, has at present 41 branches and 03 booths are located in prime commercial areas of Dhaka, Chittagong, Sylhet, Feni, Khulna, Jessore, and Rangpur district head quarters, out of which as many as 17 are authorized dealer branches, fully equipped for dealing in direct foreign exchange business. NCC Bank is now positioned to best suit the best financial needs of its customers and makes them partner of progress. 1.8 Vision: The vision of the bank is to become the bank of choice in the communities they serve. The bank accomplishes this by offering to their customers the financial services which are expected by their customers while providing a return to their owners. In accomplishing this mission, the bank has now been free from all the natures of a problem bank though full filling all the conditions set by the central bank. They proudly say NCCBL is profit making and problem free. 1.9 Mission: NCC Bank shall be at the forefront of national economic development by: i) ii) iii) Anticipating business solution required by all NCC Banks customers everywhere and innovatively supplying them beyond the expectation. Setting industry benchmark of world class standard in delivering customer value through the comprehensive product range, customer service and all the activities. Building an exciting team based working environment that will attract, develop and retain employees of exceptional ability who help celebrate the success of banks business, of banks customers and of national development. iv) v) Maintaining the highest ethical standards and a community responsibility worthy of a leading corporate citizen. Continuously improving productivity and profitability and thereby enhancing share holder value.

Chapter 2

NCC Bank at a glance

2.1 NCC Bank At present: Like clothes, shops, bakeshops, food shops, NCC Bank is not a debt shop. The term being used by many to call the present say banks. It is now being called a modern bank that undertakes all its operations at an international standard. Having started its operation as a commercial bank in 1993, recovering from some primary difficulties, NCC Bank has now emerged as a major player in the financial sector. The bank has been able to attain a commendable CAMEL rating and its performance has been outstanding in terms of profitability for the year ended 2000. Listed in both the Dhaka and Chittagong Bourses since 1993 with an IPO that raised the paid up capital of the bank to Tk.39.00 Crore, the current price level of its share and turn in trading is evidence of its high rating among investors. Banks are the pillars of the financial system. Specially, in Bangladesh, the health of the banking system is very vital because the capital market is little developed here. As the banks are still the major source of credit and exercise great influence on the financial system, it is extremely important that the countrys banking system should be in good health in the interest of investment activities, meeting the needs of all kinds and related matters. Over the years NCC Bank has built itself as one of the pillars of Bangladeshs financial sector and is playing a pivotal role in extending the role of the private sector of the economy. The bank is pledged-bound to perform even better in the coming year, opening new branches, adding new and better products and services to its customers at their doorsteps. The bank has a strong branch network nation wide with 51 branches and on booth to effectively address the needs of its cross-segment customer base. 2.2 Target Company: Due to the predecessor Companys involvement remittance sector of the country the bank inherited its top corporate customers. Moreover the bank is involved in import trade financing. Bulk importers of consumer durable, food gains industrial raw materials are its customers. The bank has financed in textile and apparels sectors. The bank has a tread of choosing customer from diversified groups. The bank has first class customers in the construction sectors involved in high-rise building, heavy construction and roads and high way construction.

2.3 Authorized Capital The authorized Capital of the bank remained unchanged at TK. 2500 Million in the year 2006. 2.3 Paid- up capital The bank raised its paid-up capital from TK 975.04 million to TK 1201.79 million, the capital based of the bank has become strong. 2.4 Reserve fund and other reserve The reserve fund of the Bank increased of TK. 330.68 million in the year 2006 as against TK. 884.90 million of previous year. 2.5 Deposit Year 2002 2003 2004 2005 2006 Take (In million) 16062.35 14673.42 16069.23 21478.22 28147.34

35000 30000 25000 20000 15000 10000 5000 0 2002 2003 2004 2005
16062.35 14673.42 16069.23 21478.22

28147.34

Deposit Year

2006

Deposit of the bank at the end of the year 2006 was TK 28147.34 million, which is more than deposit of 2005. From 2002 the bank had a rising position. It had happened for increase

competition in banking sector and NCC Bank took a good position in comparison with other banks. This is happen because increasing confidence of customer to NCCBL inspires people to make more and more deposited to NCCBL. 2.5.1 Foreign currency deposit account There are two types of foreign currency deposit account: a) Resident foreign currency deposit account. b) Non Resident foreign currency deposit account. 2.5.1 (a) Resident Foreign Currency Deposit Account Persons ordinarily resident in Bangladesh may open and maintain Resident Foreign Currency Deposit (RFCD) accounts with foreign exchange brought in at the time of their return from travel abroad. Any amount brought in with declaration to Customs Authorities in form FMJ and up to US $ 3000 brought in without any declaration, can be credited to such accounts. Balances in these accounts shall be freely transferable abroad. Fund from these accounts may also be issued to account-holders for the purpose of their foreign travels in the usual manner. These accounts may be opened in US dollar, pound sterling Euro or Japanese yen and may be maintained as long as the account holders desire. Interest in foreign exchange shall be payable on balances in such accounts if the deposits are for a term of not less than one month and the balance is not less than US $1000 or 500 or its equivalent. The rate of interest shall be one quarter percent (0.25 percent) less than the rate at which interest is paid on balances of bank in their foreign currency clearing accounts maintained with the Bangladesh Bank. The head offices/principal offices of the banks shall prepare currency-wise consolidated monthly statements of transactions in the RFCD accounts in all their AD branches and send the same to Foreign Exchange Policy Department, Bangladesh Bank, head office by the 15th day of the following month.

2.5.1 (b) Non-Resident Foreign Currency Deposit Account: All non-resident Bangladesh nationals and persons of Bangladesh origin including those having dual nationality and ordinarily residing abroad may maintain interest bearing time deposit accounts named "Non-Resident Foreign Currency Deposit (NFCD) Account" with the ADs. The accounts are in the nature of term deposits maturing after one month, three months, six months and one year. The accounts may be maintained in US dollar, pound sterling, Euro or Japanese yen; initially with minimum amount of US$ 1000 or pound sterling 500 or equivalent. Accounts may be opened against remittances in other convertible currencies after conversion of those into US Dollar, Pound Sterling, Euro or Japanese yen. These Accounts may be maintained as long as the Account-holders desire. Eligible Bangladesh nationals may send application along with a set of specimen signatures of the opener of the account to an AD in Bangladesh duly verified by Bangladesh Mission abroad, or a reputable batik or any other person known to the AD in Bangladesh. The application forms may be had from Bangladesh Missions abroad and from the ADs in Bangladesh or their branches abroad. The ADs will pay interest on deposits into the accounts at the euro currency deposit rates. The ADs in Bangladesh may at their option sell foreign exchange deposits (in US Dollars only) to the Bangladesh Bank without any lower limit at the Bangladesh Bank's buying rate and repurchase the principal and interest at the Bangladesh Bank's selling rates prevailing on the day of repurchase. Separate monthly statements summarizing currency wise the transactions in the NFCD accounts of all AD branches of a bank should be submitted from the head offices/ principal offices of the banks to the FEPD at the head office of Bangladesh Bank, as per proforma at appendix 5/5, by the 15th of the month following that it relates.

2.6 Trade Finance & Correspondent bank Successful companies today are fully aware that they need to be able to rely on the services of a bank that can handle international trade with a good hand. Ever since its conversion into a fullfledge bank in 1993, NCC Bank has been an accomplished Trade Finance bank. With a highly professional team experienced and competent professionals we are able to provide a wide range of services to companies engaged in international trade. 2.7 Credit In line with the policy guideline issued by the central bank from time to time, the bank formulates its own credit policy keeping it flexible to accommodate changes that are taking place. At present, several credit schemas are on the offer, which received quit well responses from the customers and may help the bank to expand its customer base. The bank also engaging in syndication with other banks for allowing large loans converging Bangladesh banks rules and regulation.

Year 2002 2003 2004 2005 2006

Taka (In million) 13,147.72 12,850.85 15,211.15 20533.13 24678.36

24678.36 20533.13 15,211.15 13,147.72 12,850.85 Series1 Series2

2002 1

2003

2004

2005

2006

Credit of the bank at the end of the year 2006 was TK. 24678.36 million, which is more than the preceding year. Credit investments of bank are increases as increases in the deposit amount.

Chapter 3

REMITTANCE

3.1 REMITTANCE OF NCCBL: Foreign exchange remittance takes place in NCCBL, as in other commercial banks, in two forms: Outward remittance and Inward remittance 3.1.1 Outward Remittances: Outward remittances may be offered under open general permission or under specific sanction from Bangladesh Bank. Application is required for this remittance to the Bangladesh Banks IMP, TM forms. Application for remittances against import is to be made on IMP form, for

travel on TM form and for miscellaneous changes on TM form. As per Exchange Control Regulation a traveler cant take a draft along with him under official rate of exchange. An outward remittance can be affected either under Wage Earners Scheme or at rate depending on the kind of sanction. 3.1.1(a) Procedure of Outward Remittances Of NCCBL: Most outward remittances are approved by the ADs, on behalf of the Bangladesh Bank following declaration of Taka as convertible for current accounts payments from March, 1994. Only a few remittances of special nature require Bangladesh Bank's prior approval. All remittances from Bangladesh to a foreign country or local Currency credited to on resident Taka accounts of foreign banks or Convertible Taka account constitute outward remittances of foreign Exchange. ADs must exercise utmost caution to ensure that foreign currencies remitted or released by them are used only for the purposes for which they are released; they should also maintain proper records for submission of returns to Bangladesh Bank as also for the latters inspection from time to time. In all cases of purchase of foreign currency an application must be made to an AD and, wherever necessary to Bangladesh Bank. For Payments against imports into Bangladesh, the prescribed application form is form IMP and for other types of remittances form TM . TM form must be used for reporting by the ADs even when remittance is approved by Bangladesh Bank in any other manner, for instance by issuing a special permit. On receipt of the application in the prescribed form, the ADs may affect the sale of foreign exchange if they are empowered to approve the application. If the transaction requires prior approval of the Bangladesh Bank, the form should be forwarded by the AD to the Bangladesh Bank for Consideration. Applications for Bangladesh Bank's prior approval for outward Remittances, wherever required, should be submitted to Bangladesh Bank only through the ADs and not by their customers directly; all such applications should be forwarded by the ADs to Bangladesh Bank by their own messengers or by post.

 In respect of the forms or permits etc. approved from the Bangladesh Bank, the ADs should see that these have been approved by duly authorized officers and that they bear the Bangladesh Bank's Embossing seal. In case the authorization is signed by an official of Bangladesh Bank whose specimen signature may not be available with them such authorization should be resented to the nearest office of the foreign Exchange Policy Department and the signatures authenticated. It is most important that, once forms have been approved by or on behalf of the Bangladesh Bank, the ADs carry out the transactions only on behalf of the original for whom the forms were approved. Permits issued (where applicable) by the Bangladesh Bank must be utilized within the period of its validity indicated in the permits. The amount released must not exceed the authorized limit. Also, the instructions, if any, given in the permits with regard to the amounts to be released periodically e.g. monthly or quarterly must be strictly adhered to. Remittances made against permits or approval letters of Bangladesh Bank should be reported on TM form. The AD must state on the TM form the number of the permit against which the remittance has been made by him and must certify that the remittance has been endorsed by him on the permit. The remittance must be endorsed on the back of the permit giving the date of the remittance under the stamp and signature of the AD. When the permit is exhausted or no longer required, it should be returned to the Bangladesh Bank by the AD along with the TM form on which the last remittance is reported. All authorizations excepting TM forms approved by the Bangladesh Bank or by the ADs on behalf of the Bangladesh Bank remain valid for a period not exceeding 30 days from the date of approval unless they are expressly stated as valid for a specified longer period or unless they have been revalidated for a further period. TM form approved by the Bangladesh Bank will, however, remain valid for a period of three calendar months from the date of approval by the Bangladesh Bank. Permits issued by the Bangladesh Bank are also valid for specified periods as stated on the permits. The ADs should not affect any remittance against approved Forms or Permits which have lapsed unless they have been duly revalidated. applicants

 Original copies of all IMP forms, TM forms covering remittances affected by the ADs must be submitted to the Bangladesh Bank along with the appropriate returns for the disposal of the remaining copies of the IMP forms. In the event of any remittance, which has already been reported to the Bangladesh Bank on the prescribed return being subsequently cancelled either in full or in part, the ADs must report the cancellation of the outward remittance as an inward remittance. The return in which the reversal of the transaction is reported should be supported by a letter giving the following particulars: a) The date of the return in which the outward remittance was reported. b) The name and address of the applicant. c) The amount of the sale effected originally. d) The amount cancelled. e) Reasons for cancellation. 3.1.2 Inward Remittances: Inward remittances may be affected in the above-mentioned process. All such inward remittances are to be reported to Bangladesh Bank on form if the amount is above $2000 and no IRV. In case of Wage Earners Scheme the remittance is to be reported on schedules WSR 1 to 4 and WSP 1 to 10. 3.1.2 (a) Procedure of Inward remittance of NCCBL: The term "Inward Remittances" includes not only remittance by T.T., M.T., Drafts etc., but also purchases of bills, purchases of drafts under Travellers' Letters of Credit and purchases of Travellers' Cheques. The ADs may freely purchase foreign currencies or raise debits to non-resident Taka Accounts of the respective bank branches and correspondents. Remittances equivalent to US$ 2000 and above should be reported oil Form C attached to the appropriate schedule However, declaration on Form C by the beneficiary is not required against remittances sent by Bangladesh nationals working abroad. The purpose of remittances should be clearly stated on the Form C. Where the country of origin of funds and

currency in which remittances received are the same, the ADs may submit a consolidated Form C in respect of those remittances attaching therewith a separate list showing details of remittances comprising the amount reported on Form C. Remittances received against exports should be certified and reported on EXP Forms. In case of remittance received in advance for exports the AD should obtain a signed declaration from the beneficiary on the back of the "Advance Receipt Voucher certifying the purpose of remittance. There is no objection to the ADs obtaining reimbursement from non-resident banks in freely convertible foreign currency in respect of Taka bills and drafts purchased by them under instructions from such a non-resident bank whether under Letters of Credit or under other arrangements. If an inward remittance already reported to the Bangladesh Bank is cancelled, either in full or in part, because of non-availability of beneficiary, the ADs must report the cancellation of the inward remittance as an outward remittance on TM form. The return in which the reversal of the transaction is reported should be supported by a letter giving the (a) reference of the return in which the inward remittance was reported (b) name and address of the beneficiary (c) amount and the reason for cancellation and (d) amount of the purchase as effected originally.

3.2 Members of Remittance department:

E e

V a

P d o f I D

I n S ( U A E , P X O P R E S S

S A V h a r g P ON O E N

P e

R ( eT

m R

S A Ei t t A a Sn S I O O N

V P cU e R

M ( MO

Y E

)Y

A ( O M

P )

I T

S ( T

S L

I S E E

A M

NA

S O S F I FS I T C A E A N R S T ) S O I S F T F A I A N SE T S O I S F T F A I A N SE T S O I S F T F A I C N C R C R O( T N E E L YE ) M O N ( EI T Y ) ) ( D H A K A ( PJ A L NA A TI D A , ) A C

3.3 Types of remittance: Remittance is basically two types: Local remittance. Foreign remittance.

3.3.1 Local remittance: Remittance is significant part of the general banking the bank receives and transfers various types of bills through the remittance within the country. Obviously the bank charges commission on the basis of bills amount. NCCBL remittances are safe, swift, inexpensive and simple.

3.3.1(a) Types of local Remittance: a) Pay Order(PO) b) Demand Draft(DD) c) Telegraphic Transfer(TT) d) Mail Transfer(MT) a) Pay Order (PO) : Pay Order is an instrument that contains an order for payment to the payee only incase of local payment whether on behalf of the bank or its constitution. Unlike cheque there is possibility of dishonoring Pay Order. NCCBL charge different amount of commission on the basis of Pay Order amount. b) Demand Draft : By DD any person can send money from one branch to another branch of NCCBL. To send the money he/she must fill up the NCCBLs prescribed form of DD and paid charge/commission and receives DD block. The following information are included in the DD block:

Name of the sender branch Name and account of the party who receives the money. For security purpose a confidential test number are included in the DD block Amount of money to be transferred Name of receiver branch

The sender sends this block to the receiver branch of DD. When this DD block is received by the receiver branch, the authorized officer of the receiver branch tests the DD confidential number and if the test number is proofed then he /she gives the money to the payee. C) Telegraphic Transfer : To send money urgently NCCBL may be requested for TT on payment of a nominal charge and telegram charge. Any person urgently sends money from one branch to another branch within NCCBL through TT. When a message of TT sends through phone from one branch to another branch in that time the message received by the authorized officer who has a right of power of attorney. After that, he/she fills up the TT form. Following things are included in the TT form: i). TT number ii). TT test number iii). Name and account number of the payee iv). Power of attorney number of the sender and receiver of TT. v). The amount to be transferred. After fill up the TT form, he tests the test number of TT. If he ensures through testing the test number then he credits the account of the payee. On the other hand, if the test number is not proved then he calls back to the sending branch of TT and request to send a new TT. d) Mail Transfer : Money can be sent through mail transfer to any body who has an account in any other branch of the same bank for this purpose the sender shall have to furnish the details like:

The name of the beneficiary and his account number The amount to be transferred The name of the branch where the account is maintained

3.3.2 Foreign remittance : NCC Bank is the member of Money Gram and SWIFT networks. Using the services of this global network, non-resident Bangladesh nationals can send money from abroad to their home country within a few minutes without any risk. NCC Bank has also arrangement with foreign money exchange companies like USE Exchange Co., Redha-Al-Ansari Co. etc.

a) Money Gram : Money Gram is represented in over 115 countries and is available at more than 25,000 locations worldwide. In the USA alone Money Gram is available at more than 15,000 locations. Besides, in the UK Money Gram is available through 1700 Postal Branches and 500 Thomas Cook travel shops making is the UKs largest money transfer network. Finally using the Money Gram service could not be simpler. All one has to do is to visit a conveniently situated Money Gram agent anywhere in the world and to hand over they money they want to send their relatives or friends along with the one-off transaction fee: Sender completes a send form and gets a receipt. Money Gram Agent gives a Ref. No. Which has to be passed to the receiver. NCC Bank makes an enquiry on the Money Gram computer network to obtain authorization to pay recipient and recipient receives the fund. Money Gram is one of the fastest ways to transfer money. Customers using Money Gram can send or receive money usually within 10 minutes from anywhere in the world. To get the money the recipient need not to have a bank account with NCC Bank Ltd. NCCBL does not levy extra charge. It gives better exchange rate to the recipient. The recipient can approach at any branches of NCC Bank at his convenience with the reference No. and a photocopy of pass port /Voter ID/Citizenship Certificate.

2006

2007

MONTH JAN FEB MAR APRIL MAY JUNE JULY AUGUST SEP OCT NOV DEC 2914668 2026188 2229523 2499231 2814864 2604191 2590995 3014572 2585223 3377450 3023698 4884748 2930230 3247919 3715061 4072484 4475606 4215015 4309852 3908198 4931475

Graphical presentation of Money Gram in 2006 and 2007 :

5000000 4500000 4000000 3500000 3000000 Amount in 2500000 Taka 2000000 1500000 1000000 500000 0

2006 2007

JAN

APRIL

JULY Months

OCT

Operation of Money Gram: (Receive remittance instantly over the counter) Sender goes to Send Agent Send Agent received Money and enter information into Money Gram System via MW Software and give a Reference Number. Sender provide the Reference Number to the Receiver

Receiver comes to Receive Agent (our bank) with that Reference Number and fill up a form supplied by Money Gram. Received Agent gets connected with the Money Gram System via MW Software with that Reference Number, if find OK then pay cash on counter. Received Agent (we) keep copy of valid ID (Valid passport, bank certificate) from the receiver. Cover Fund is credited to our account with SCB, NY on the following day equivalent to

the payment made by our branches i.e. we pay first and next day get the fund. b) PLACID EXPRESS NY : In March 2002, the bank has entered a Taka drawing arrangement with Placid Express NY, for home remittances of Bangladeshi expatriates in the United States. The beginning was good and the bank offered ideal customer services but the volume of remittance through this channel has been reduced very soon because of the following reasons:

Removal of one of the Top executives for activities that caused huge losses of the bank; Increase in the number of competing companies; Longer transaction time in servicing beneficiaries of remote areas beneficiaries where NCCBL does not have any branches; Lack of Liquidity; and Absence of online mode of payment, which is however sometimes hazardous for transactions.

Graphical presentation of Placid:

800000 700000 600000 500000 Value in Taka 400000 300000 200000 100000 0 JAN APRIL JULY Months OCT 2006 2007

Operation of Placid : Bank receive list of invoices via e-mail at the morning and place for test. Each invoice contains information about the beneficiary such as his name, bank & branch name, account number, phone/address etc. Then Bank separate the invoices according to the location of beneficiarys bank branch and nearest branch and prepare branch-wise statement and fax statement to the respective branch by 11:30 am. If beneficiary maintains account with NCC bank than it credited the fund to his account by noon. If beneficiary maintains account with other bank than issue P/O in favor of him and sent it by hand/courier service to his bank. Beneficiarys bank present the P/O at the clearing house and collect the fund from our bank for further credit to the beneficiarys account. Generally it takes 2-4 days for crediting the fund to the beneficiarys account. Cover Fund is credited to our account with Citi NA, NY first then we pay against that fund. c) X-press money : The X press Money Services would like to welcome NCCBL to their network. X press Money (XM) is a web-based person-to-person money transfer system that allows an individual to send/receive money through any of our network agents instantly. All transactions are done through secure servers using 128-bit encryption technology so as to provide maximum security System Operation Requirements: PC (Operating system Windows 98 or higher) with connection to Internet and preferably a LaserJet Printer for taking prints. MAM works well with Internet Explorer version 5.50 (Build 4522.1800) and above. Flash Player is required (user will be prompted to install when visiting the site, if its not already in the computer) Wingdings 2 and Wingdings 3 fonts should be installed for best viewing the icons. d) Al Fardan:

Al FARDAN Exchange, the pioneer in money exchange and worldwide remittance services in the U.A.E., established in 1971, is a trusted name for millions of residents and expatriates. A modern exchange house with advanced infrastructure and courteous staff, has an extensive network of correspondent banks all over the world to facilitate faster, completely reliable transactions. Al FARDAN Exchange offers the most competitive rates on its array of money exchange services and offers need-based services that cover all transactional needs. Worldwide remittances, purchase and sales of foreign currency banknotes and traveller cheques, cash advance against credit cards are just a few services to mention from a wide range of financial services offered.

e) Habib express: Habib express is another important medium through which wage earner remittance is accepted by NCC Bank. Here head office at first enter in system server and received necessary information about the amount of remittance, beneficiary who will receive the amount and any reference number which work as security for Bank as well as beneficiary. Head office gives information through fax to it respective branch from where receiver will receive money. Another way, when customer comes to bank than, respective branch where online system is activate, they enter in terminal to get necessary information to pay money. Bank receive list of invoices via e-mail at the morning and place for test. Each invoice contains information about the beneficiary such as his name, bank & branch name, account number, phone/address etc.

Then Bank separate the invoices according to the location of beneficiarys bank branch and nearest branch and prepare branch-wise statement and fax statement to the respective branch by 11:30 am.

If beneficiary maintains account with NCC bank than it credited the fund to his account by noon. If beneficiary maintains account with other bank than issue P/O in favor of him and sent it by hand/courier service to his bank. Beneficiarys bank present the P/O at the clearing house and collect the fund from our bank for further credit to the beneficiarys account. Generally it takes 2-4 days for crediting the fund to the beneficiarys account.

f) Dhaka Janata: Dhaka Janata are introduces to provide remittance facilities to emigrant and other people of Bangladeshi who work as contractual basis in the Italy. Here Dhaka Janata also maintain same procedure of getting information from system server including the name, referance number, amount, Phone number etc. But difference with other product is that its respective branch cannot get information from using software. Here head office sends information through fax to all respective branch. All receivers when come to bank, than respective branch check his information with information received from head office. Operational Procedure: Hear office ID receive list of invoices via e-mail at the morning . Invoice contains information about the beneficiary such as his name, bank & branch name, account number, phone/address etc. Then Bank separate the invoices according to the location of beneficiarys bank branch and nearest branch and prepare branch-wise statement and fax statement to the respective branch by 11:30 am. If beneficiary maintains account with NCC bank than it credited the fund to his account by noon. If beneficiary maintains account with other bank than issue P/O in favor of him and sent it by hand/courier service to his bank. Beneficiarys bank present the P/O at the clearing house and collect the fund from our bank for further credit to the beneficiarys account. Generally it takes 2-4 days for crediting the fund to the beneficiarys account. g) Tele money: Tele money is another important product for remittance services. Large number of people of our country works in Saudi Arab. Tele money help those people to send their money within

very short moment through Arab National Bank. The operational procedure of this product is same as other. Here through a software head Office collect the invoice including name, address, secret code etc. People those who have account with NCC Bank, are credited in their account. In tele money bank inform to beneficiary about their money everyday to provide them more facilities. NCC Bank have no branch in all places where beneficiary stay. So tele money provide this services through third party. Here mostly Sonali Bank work as third party and a specified commission from this services. Operational procedure: Hear office ID receive list of invoices via e-mail at the morning . Invoice contains information about the beneficiary such as his name, bank & branch name, account number, phone/address etc. Then Bank separate the invoices according to the location of beneficiarys bank branch and nearest branch and prepare branch-wise statement and fax statement to the respective branch by 11:30 am. If beneficiary maintains account with NCC bank than it credited the fund to his account by noon. If beneficiary maintains account with other bank than issue P/O in favor of him and sent it by hand/courier service to his bank. Beneficiarys bank present the P/O at the clearing house and collect the fund from our bank for further credit to the beneficiarys account. Generally it takes 2-4 days for crediting the fund to the beneficiarys account.

h) Export proceed: Export Proceed are very vital part in remittance services, as it cover large portion of total remittance of NCC Bank. Most of remittance received from corporate level for their exporting business. Here several types of Bank are engaged with these services. Payment is made through Nostro and Vostro Account. Here Nostro account means, NCC Bank have an account with listed foreign bank. Foreign remittance come to bank through those foreign bank. Foreign importer pay the money to that foreign bank. Foreign bank credited necessary amount to NCC Bank account. All of remittance come in export proceed as foreign currency. Head office convert this foreign currency into

home currency and pay to his respective branch. Foreign Bank who are engaged with this bank are ----Non-interest bearing: Standard Chartered Bank, Singapore. Standard chartered bank, Japan. American Express Bank, New York Sumitomo Mitsui Banking Corp. Bank of Tokyo Mitsubishi, Japan Bank of Tokoy Mitsubishi, kolkata. American Express Bank, Colombo

Interest bearing: Standard Chartered Bank, New Yourk Mashreq Bank, New York Citi Bank N.A, New York. Standard chartered bank, London. Uni Credio Italiano spa. Commerge bank AG, Frankfurt.

SWIFT: NCC Bank is a member of society for inter bank financial telecommunication. Through this fast, secure, and global communication NCC Bank has gained 24 hours connectivity with 7000 financial institutions in 200 countries for transmission of LCs, Guarantees, funds transfers, payments etc. SWIFT is a bank owned non-profit co-operative based in Belgium servicing the financial community worldwide. It ensures secure messaging having a global reach of 6495 Banks and Financial Institutions in 178 countries, 24 hours a day. SWIFT global network carries an average 4 million message daily and estimated average value of payment messages is USD 2 trillion. SWIFT is highly secured messaging network enables Banks to send and receive fund transfer, L/C related and other free format messages to and from any bank active in he network.

Having SWIFT facility, Bank will be able to serve its customers more profitable by providing L/C, payment and other messages efficiently and with utmost security.

Chapter 4

Treasury Operation

The Treasury operation has been devised in NCC Bank Ltd. as a very effective center for earning profit as well as to ensure efficient fund management taking into consideration of all market risks. The entire foreign Exchange and Money market dealing operations in NCC Bank Ltd. are performed through dealing room (Front Office) and Back office. Considering the smaller organizational structure, NCC Bank Ltd. at this moment does not keep space for any 'Mid Office' between these two, although it recognizes that the ideal standard is to maintain such a center. The position may be reviewed in future with the increase of volume of business and strength of manpower. OBJECTIVE: The success of the trading business depends on the ability to manage effectively the various risks encountered in the trading environment. The key risk areas of a financial institution can be broadly categorized as a. Credit risk b. Market risk and c. Operational risk In view of the significance of the market risk and in order to combine handling of all such risks at a single department and to bring expertise in such functions, the concept of "Treasury" has evolved. To day's financial institutions engage in activities starting from import, export and remittance to complex derivatives involving basic foreign exchange and money market and complex structured products. All these require high degree of expertise, which is difficult to achieve in the transaction originating departments, and as such the expertise of the Bank is housed in a separate department called "Treasury". The Treasury Department has been devised to manage and monitor mainly the credit risk i.e., settlement of transactions and minimizing market risk, which include liquidity risk and price risk. However, the main function of the Dealing Room is to manage market risks, at the same time to increase bank's profitability maintaining sound liquidity. The Dealer's job is very much sensitive because of market volatility and its nature of transaction. That is why an effective controlling system is required over Dealing Room operation. In the following few pages the different aspects of Dealing Room operation and Back Office functions of NCC Bank Ltd. have been specified in conformity with the Guidelines provided by the Bangladesh Bank.

RISKS: Some of the risks that are to be monitored and managed by a treasury can be defined as follows: Credit risk: Arises from an obligor's failure to perform as agreed, i.e. the risk that a customer or counter party will not settle an obligation for full value, either when due or at any time thereafter. This risk exists in loans and advances, off-balance sheet commitments and balances due from other banks/entities. As in the case of other risks, the concentration of bank's exposure to any one customer, industry or geographic area increases this risk. Interest rate risk: Arises from movements in interest rates in the market. The interest rate exposure is created from the mismatches in the interest re-pricing tenors of assets and liabilities of an organization, i.e. this is the risk of a mismatch between the interest rates relating to amounts borrowed and those relating to amounts lent. Liquidity risk: Arises from an organization's inability to meet its obligations when due. The liquidity exposure is created by the maturity mismatches of the assets and liabilities of the organization. This risk is measured through tenor wise cumulative gaps. Price risk: Arises from changes in the value of trading positions in the interest rate, foreign exchange, equity and commodities markets. This arises due to changes in the various market rates and/or market factors. Currency risk: Risk of loss from movements in exchange rates. Market risk: Risk of loss from movements in market prices of investments. Compliance risk: Arises from violations of or non-conformance with laws, rules, regulations, prescribed practices, or ethical standards. Operating risk: Risks relating to day-to-day operations which arise from failure of internal controls in the bank e.g. risk of loss arising from embezzlement of cash by employees, risk of failure to process the executed transactions on a timely basis. Strategic risk: Arises from adverse business decision or improper implementation of them. Reputation risk or franchise risk: Arises from negative public opinion. Revaluation of FX Position: Revaluation of FX Position to be done quarterly. The Bank's prescribed rate to be used in the revaluation process. On the basis of the predetermined rates position of all Foreign Currencies will be translated into BDT currency at quarterly intervals in order to assess the actual Foreign Exchange position at a particular time. AREA OF OPERATION OF TREASURY: The activities of Treasury are categorized into four major functions as follows: Foreign Exchange Money market Asset liability Management and

Fixed Income

Typical products under treasury functions: Some of the typical products that would fall under Treasury's functions can be listed as below: a. Spot foreign exchange b. Forward foreign exchange c. Currency SWAP d. Interest rate SWAP e. Forward rate agreement f. Non-deliverable forward exchange g. Fx options h. Overnight deposits i. Term deposits J. Coupon securities k. Discounted securities Common function of the treasury: Following is a list of some of the common functions that the Bank's treasury will perform. a. Statutory requirement management b. Limits monitoring and management c. Adherence to various internal as well as regulatory policies d. Minimization of risk e. Optimization of risk return through specialization. f. Monitoring and management of various foreign exchange and money market positions g. Monitoring and management of various cash flows and cash positions h. Funding of the balance sheet at optimum prices i. Act as the main driver of the ALCO activities/discussions (The head of the treasury department) j. Propose interest rate matrix to the ALCO. k. Propose various investment options to the ALCO. I. Analyze various economic trends and propose Balance sheet strategy to the ALCO m. Provide quotation of various foreign exchange rates to customers n. Deal in foreign' exchange for position covering as well as for own account trading o. Handle various funding activities through currency SVVAPs p. Maintain close liaison with regulators q. Provide structured treasury solutions to customer r. Remain vigilant for any arbitrage opportunities s. Undertake marketing activities for future business growth t. Submit proposals/renewals for various internal limits. u. Estimate daily P&L and work with reporting unit in resolving any deference v. Record/maintain all foreign exchange and money market positions and check for differences with system generated/back office reports. To support the activities of treasury, an independent treasury back-office would function reporting through a different hierarchical chain. Some of the major functions of a treasury support unit are as follows: a. Input, verification and settlement of deals b. Preparation of currency positions (of previous day-end) and report to dealers prior to commencement of day's dealings c. Reconciliation of currency positions d. Rate appropriateness function for all deals done.

e. Revaluation of all foreign exchange positions at a pre-determined frequency f. Managing Discrepancies and disputes g. Daily calculation for adherence to statutory maintenance h. Reconciliation of Nostro accounts i. Claim/pay good value date effect of late settlements j. Monitor for dealer's adherence to various internal and regulatory limits k. Monitor for dealer's adherence to various counter party limits I. Prepare and 'Monitor all Balance sheet gaps m. Handle various internal and regulatory reporting n. Report any limit excesses POLICY: Dealing Limit: As a dealer develops his/her expertise and dealing instincts over time, the management will assess his/her dealing capabilities and based on that a specific dealing limit will be allocated to an individual dealer. In doing this, the management will keep in mind the dealer's dealing limit requirement in relation to the market and according to the organization's own size, need and market risk appetite. Mandatory Leave: The dealing functions are extremely sensitive involving wholesale and large amounts with exposures to adverse market movements. There is also risk of mistakes not being unearthed. As a result, for a particular dealer's functions to be run by a different dealer, all dealers will be kept away from their desks for a certain period of time at one stretch during a year. During this period, dealers will not be expected to be in contact with their colleagues in the treasury area. Typically, this period may be a continuous two weeks period. The Head of Treasury will ensure compliance in this regard.

Position Reconciliation: All dealers' positions must be reconciled with the positions provided by the treasury backoffice. This must be done daily prior to commencement of the day's business. Unrecognized positions may lead to real differences in actual positions exposing the organization to adverse market changes and real losses. 4.4. Nostro Account Reconciliation: Bank will maintain various nostro accounts in order to conduct operations in different currencies including BDT. The senior operations manager of the organization will set limits for handling nostro account transactions that include time limits for the settlements of transactions over the various nostro accounts and the time and amount limits for items that require immediate investigation after receipt of the account statements. In defining these limits, consideration must be given to the transit and processing times of the various types of transactions. 4.4.1. The time and amounts limits, if exceeded, require referral to the operations manager for appropriate action. Persons reconciling nostro accounts are to be independent of originating, responding to, authorizing or booking transactions and must not reconcile the same accounts for a continuous period of more than twelve months. However, after the lapse of at least the next monthly reconcilement process immediately following the twelve month period, these persons can be reassigned the same duties.

4.4.2 The process of matching open items must be performed each time statements are received and must ensure a true match (e.g. dates, amounts and transaction identity). All matches must be cross-referenced between "our accounts" and the statement. Entries that make up a partial or incomplete match are to be suitably cross-recorded so that a clear audit trail is provided. 4.4.3 The current "our account" records and statements are to be maintained under control and custody of persons in charge of reconcilements. 4.4.4. As frequently as deemed necessary but not less than once a month, a "reconcilement balancing report" which must include the "our account" balance, the related statement balance and a listing of all open items (all differences and unprocessed items). Tracers must be sent if the open item exceeds the established time or amount limits. The operations manager must review all reconcilement-balancing reports to evaluate the status and progress of eliminating open items and to ensure that investigation and follow-up efforts are satisfactory and tracers are sent on a timely basis. 4.4.5. The operations manager establishes limits for monthly accrual of interests on overdrafts in "our accounts" maintained with other branches and correspondents. Overdraft interest for "our accounts must be calculated for each day the branch is in overdraft in accordance with its records. 4.4.6. The operations manager will set the time and amount limits for liquidation of open items or differences found unreconcilable. These items must be investigated as far as is practicable and if they are found unreconcilable, the operations manager may authorize liquidation through appropriate entries as established as per their accounting policies. However, the items in question must be amply identified and corrective steps taken to prevent recurring differences 4.4.7. At least quarterly, a comprehensive review of all "our accounts" must be made by an ,officer independent of transaction processing and authorization functions to ensure that each account continues to be operated with a valid business purpose and that reconciliations and other controls continue to be in place and are effective. 4.4.8. The following table shows the maximum time limit after which unmatched items must be referred to the operations manager. Type of Transaction L/c payments Foreign exchange settlements TC encashments Outward remittances Draft payments ACU cover funds sent through Bangladesh Bank Credits to our accounts with insufficient details Correspondent bank charges recoverable from our customers or otherwise Any other credits to our accounts, where we have not passed corresponding debit entry Any other transactions where we have debited, but they do not credit Transit Time 3 days ACU 7 days Nil. Immediately notify respective department if settlement does not occur on value date. 21 days 3 days 30 days 7 days 20 days 30 days 7 days 7 days

Any other transactions where they have debited, but we do not credit Any other transactions where we have credited, but they do not debit

7 days 7 days

4.4.9. It would be appropriate if bank resolves that L/C related unmatched items equivalent to USD 200,000 and above outstanding for more than a day would be brought to the attention of the operations manager for review. 4.4.10. Similar process could be adapted for other than L/C related unmatched items equivalent to USD 50,000 and above outstanding for more than a day. 4.5. After hours dealing: After-hours dealing is that which initiated when the dealer's own trading room is closed. For specific business reasons, the Bank may decide to allow its treasury to engage in after-hours dealing. In such cases the Bank must have properly laid down procedures detailing the extent to which they want to take risk during after-hours and which dealers to have dealing authority and upto what limits they can deal during after-hours. For example, if in our market the business hour is till 5 PM, any deals done by dealers after that time would be considered as after-hours deals. The Bank must also have detailed laid down procedures for the accounting of the after-hour deals bearing in mind that during these times there would not be any treasury back-office staff available. 4.6. Stop Loss Limits: Based on the comfort on each dealer and / or the treasury as a whole, the management allocates dealing limits. However, there is always risk of adverse market movements and no organization is in a position to absorb/accept unlimited losses. This results in organizations putting in place "stop loss limits". As a result of this and considering the company's own financial strengths, the management determines loss limits for particular positions and / or for a portfolio of positions, where the dealer must close the position or the portfolio and book the loss and stop incurring further losses. Stop loss limit can both be dealer specific and specific to the treasury as a whole. 4.7. Mark-to-Market: This is a process through which the treasury back-office values all outstanding positions at the current market rate to determine the current market value of these. This exercise also provides the profitability of the outstanding contracts. The treasury back office gathers the market rates from an independent source i.e. other than dealers of the same organization, which is required to avoid any conflict of interest. 4.8. Valuations: The process of revaluing all positions at a pre-specified interval is known as valuation. Through this exercise, an organization determines that if they were to liquidate all the positions at a given time, at what profit or loss they would be able to do so. 4.8.1. This function is carried out by the treasury back-office by gathering revaluation rates. Ideally, the treasury back-office should gather such rates from sources other than from the dealers of the same organization to avoid any conflict of interest. 4.8.2. Dealers' are required to have their own P&L estimate, which must be tallied with the ones provided by the treasury back-office. Any unacceptable difference between these two must be reconciled to an acceptable level.

4.9. Model Control Policy: The Treasuries may use control models for the following: a. To generate valuations used in the various financial statements b. To produce market risk measurements used by independent risk management monitor risk exposures.

to

4.9.1. All financial models that are used for updating the organization's independent risk monitoring must be validated and periodically reviewed by qualified personnel independent of the area that creates such models. The models include valuation and risk measurement systems that are developed in-house, certain models on spreadsheets, and models within vendor systems. 4.9.2. Models should be evaluated and validated independently and comprehensively by reviewing the underlying assumptions, verifying mathematical formulae, testing the models to verify proper implementation and assessing any weaknesses and ensuring appropriate application. The validation process of a model reduces the risk associated with using a model that has flaws in the underlying assumptions, errors in its implementation and/or is used inappropriately. 4.9.3. Model Validation is generally performed only once on a model Subsequent re-validations on previously validated models are required only if analytic changes are made to the model that affect valuation and/or risk measurement calculations. Model Assumption Reviews must be conducted at least annually, or more frequently as warranted by business and market conditions. 4.9.4. The originator of a model must ensure that it is documented, resides in a control environment and any change to an existing model is reported. The Treasuries using the financial models, in conjunction with their systems support group, are ultimately responsible for ensuring that all models reside in control environments. 4.9.5. A model validation process is not applicable to financial models, which only performs simple arithmetic operations. These may include, but are not limited to, value-at-close calculations, earnings-at-risk calculations, interest accrual calculations, and arrgregation or consolidation of risk exposures to compare against risk limits. 4. 10. Internal Audit: Considering the complexities of the foreign exchange business, a process for an internal audit has been put in place to review the adequacy of the key control issues. This function includes checking for adherence to various limits, compliance requirements, statutory management, etc. In addition to regular audits at specified intervals, a concurrent audit process is put in place to ensure the treasury's functioning in an appropriate manner on a day-to-day basis.

6. ORGANIZATION STRUCTURE: NCC Bank Ltd. has drawn up its own organization chart for the treasury function as detailed below, according to their needs keeping in view its existing tools and manpower. MD/DMD

HEAD OF TREASURY

BACK OFFICE

FRONT OFFICE/ DEALING ROOM

FX. MARKET

MONEY MARKET

BOND MARKET

CONFIRMATION SETTLEMENT REPORTING RECONCILIATION (RELATED TO DEAL)

REMITTANCE

ACCOUNTS RECONCILIATION EXCH. POSITION

RETURNS & OTHERS

7. JOB DESCRIPTION: Based on the organizational structure, following is an overview of the various jobs depicting the key roles of each of these for an ideal treasury and a treasury back-office. 7.1. Head of Treasury: a. Overall responsibility of all treasury activities b. Responsible for the treasury financial plan c. Determine over all treasury business and risk strategy within internal and regulatory limits d. Set individual dealer dealing limits e. Monitor all dealers' positions and ensure dealers adhere to all internal, regulatory as well as dealer specific limits. f. Decide on particular positions during adverse situations g. Continuous development of systems, processes, business strategies etc h. Member of the ALCO i. Propose overall balance sheet strategy to the ALCO 7.2. Front Office: Front office consists with only dealers Foreign Currency Dealer and Money Market Dealer. The responsibilities of dealers would be as follows: 7.2.1. Cross Currency dealing: a. Forming Market Views b. Monitoring exchange positions c. Counter-part limits monitoring d. Collating all the cross currency exchange positions e. Remaining within all given internal and regulatory limits f. Remaining within all counter-party limits at all times g. Profitably trading/ squaring the positions 7.2.2. USD/BDT Dealing: a.Trading spot and forward positions arising from import/export/remittances etc. b. Collating the whole Bank's USD/BDT positions c. Remaining within all given internal and regulatory limits d. Profitably trading/ squaring the positions 7.2.3. Lcy & Fcy Money Market Dealing: a. Overnight investment activities b. Term Market activities c. Currency swaps d. Fcy placements e. MM pricing of Fcy f. Nostro funding g. Spot any arbitrage opportunities and take advantage h. Remaining within all co-unte-r-party limits at all times i. Operating within all given balance sheet gap limits j. Profitably trading/ squaring the positions 7.2.4. Money Market Dealing: a. Maintenance of CRR and SLR b. Operation of Inter Bank Call Money Market

c. Inter Bank term placement & borrowings (FDR) d. Investment in Treasury Bills Portfolio e. Investment in Bonds/ Bond Trading f. Repo/ Reverse Repo activities g. Primary Dealership activities h. Propose to the ALCO (through the head of treasury) of statutory investments i. If any new product arrives in relation with money market 7.2.5. Balance Sheet Management: a. MANAGING ALL BALANCE SHEET GAPS b. Monitoring of market factors c. Interest rate and market forecasts d. Analysis of risk reports for presentation to ALCO e. Daily reports to senior management 7.3. Treasury Back Office: 7.3.1. Foreign Currency Nostro Reconciliation: a. Reconcile all foreign currency nostro accounts on a day-to-day basis. b. Immediately advise USD/BDT or cross currency dealer of any discrepancy c. Track for reconcilement of any unmatched item d. Claim or arrange payment of good value date effects for any late settlements e. Send chasers for any unsettled items until it is settled 7.3.2. Local Currency Nostro Reconciliation: a. Reconcile all local currency nostro accounts on a day-to-day basis. b. Immediately advise money market dealer of any discrepancy c. Track for reconcilement of any unmatched item d. Claim or arrange payment of good value date effects for any late settlements e. Send chasers for any unsettled items until it is settled 7.3.3. Foreign Currency Position Reconciliation: a. Receive copies of USD/BDT and cross currency dealer's position blotters b. Reconcile all foreign currency positions between accounted for records and USD/BDT & cross currency dealer's blotters on a day-do-day basis. c. Immediately advise USD/BDT or cross currency dealer of any position discrepancy d, Investigate and match un-reconciled amounts e. Advise USD/BDT and cross currency dealer of correct currency positions prior to commencement of day's dealing activities. 7.3.4. Local Currency Position Reconciliation: a. Receive copies of position blotters from money market dealer b. Reconcile all local currency positions between accounted for records and money market dealers' blotters on a day-to-day basis. c. Immediately advise money market dealer of any position discrepancy d. Investigate and match unmatched amounts e. Advise money market dealer of correct positions prior to commencement of day's dealing activities. 7.3.5. Foreign Currency Settlements: a. Settle for all foreign currency deals done by USD/BDT, cross currency and the Fcy money market dealers.

b. Send and receive confirmations of all deals done by USD/BDT, cross currency and Fcy money market dealers. c. Check foreign currency nostro statements for settlements of major items. d. Advise dealers of any discrepancy in settlement for the prior dealing day e. All related accounting entries f. Generate various MIS 7.3.6. Local Currency Settlements: a. Settle for all local currency deals done by Lcy money market dealers b. Send and receive confirmations of all deals done by Lcy money market dealers c. Check local currency nostro statements for settlements of major items d. Advise dealers of any discrepancy in settlement for the prior dealing day e. All related accounting entries f. Generate various MIS. 7.3.7. Regulatory reporting: a. Send all required regulatory reports at required intervals b. Respond to various queries from regulators regarding reports c. Coordinate with other departments in receiving required information for reporting purpose d. Create awareness among various related departments of the importance of effective and accurate reporting. 7.3.8. Risk Reporting: a. Monitor limit utilizations against all internal and regulatory risk limits b. Reporting of limit excesses etc. c. Stop loss/ cumulative loss limits monitoring and reporting d. Monitoring of daily P&L e. Generate various MIS 8. RESTRICTIONS: It is important to note that there are certain activities that are restricted by traders and backoffice staff. These are listed below: 8.1. Treasury traders are restricted from: a. Deal processing b. Accounting entries c. Sending/ receiving deal confirmations d. Issuing/ receiving Bangladesh Bank cheques e. Sending settlement instructions i.e, swift messages/telexes. f. Generating revaluation rates Running the revaluation process Regulatory reportings Involvement in raising rate appropriateness Setting up/approving counter-party credit limits Setting up/ approving market risk limits 8.2. Treasury back-office is restricted from: Dealing activities a.. Decide on exchange rates/ quoting prices b. Striking deals with counter parties

c. Raising deal slips d. Altering deal details e. Updating position blotters f. Deciding on nostro funding g. Approving counter-party credit limits h. Approving market risk limits

9. THE DEALING PROCESS FLOWCHART:

Dealer strikes a deal

Enters deal into blotter, raises deal ticket, sends ticket to treasury back office

Treasury back office exchanges deal confirmations with counterparty

Passes all necessary entries

Advises treasury of accurate position

Reconciles exchange position

Settles the deal

9.1. Process: In a proper treasury setup, a dealer strikes a deal in the market and maintains his/ her own record for monitoring the exchange position. Within a reasonable time, He/ She pass on the detailed information of the deal to the treasury back office. The back office arranges for the deal confirmation with the counterparty, arranges settlement, reconciles exchange position and advises to treasury and runs the valuation on a periodic basis. A detailed flowchart of this function has been shown above. 9.2. The dealing function requires the dealers to make very quick decisions either for taking advantages of any market movements or for unwinding an unfavorable position. Also, the treasury dealing is a wholesale function that involves large lots. These together make the job of a dealer requiring: Proper information sources e.g. Reuters Money 2000, Bloomberg, financial TV channels etc. Adequate and dedicated communication tools e.g. Reuters Dealing System, telephone, fax, telex etc. Specially designed dealing desks to appropriately accommodate the various information and communication tools High level of dealing skills Quick decision making authority Independent decision making authority Specific task allocations

9.3. 1n order to achieve the optimum level of efficiency, returns and most importantly controls, there are certain processes that the organization's management must put in place. The very basic ones of these that would be related to our market are explained below: 9.4. Dealing Room: Since the dealers have access to global live prices of various products through their various communication tools, their desks are required to be access restricted. As a result, dealers are typically housed inside a covered room known as the "dealing room" where the access is generally restricted only to the dealers and the related personnel. 9.5. Taped Conversations: 9.5.1 In many occasions, the dealers conclude deals over the phone. This is particularly applicable where deals are done on the local market where dealers are mostly known to each other and they feel comfortable dealing by talking to other dealers over phone. Such deals over the phone do not have any hard evidence and in a fast dealing environment, there is risk of mistakes (of rates, amounts or value dates etc.) As a result, all telephonic conversations taking place in the dealing room are required to be taped. Taped conversations can assist in resolution of any disputes that may arise. 9.5.2. As such, all telephone lines of the dealing rooms, may it be a direct line or a connection through the PABX, must be taped. This means that dealing over the mobile phones must be restricted. However, if the management feels that there is any specific need for dealing on mobile phone(s), this must be properly documented where specific dealer(s) may be allowed to engage in dealing on mobile phone(s) under specific circumstances. 9.5.3. In some jurisdictions, it is required to advise all dealers (of other organizations) beforehand that their conversation would be taped.

9.6. Deal Recording: 9.6.1. The job nature of dealers is highly demanding and the environment of a dealing room is very active. In such an environment when a dealer continues to deal, his /her focus remains on the market. As such there is a risk of a dealer completely forgetting about a deal or part of a deal or making mistake in recording that deal. 9.6.2. To eliminate this risk, a dealer must record the deal immediately after it is concluded with the counterparty. The deal recording needs to be done in two ways. 9.6.2.1. Position Blotter: Immediately after a deal is done, the dealer should record the deal on the position blotter and update his position. It is of utmost importance to a dealer to remain aware of his /her position at all times. This is required to capture any immediate opportunity or to be in a position to immediately react to any adverse situation. A sample blotter has been shown on Annexure- A. 9.6.2.2. Deal Slip: A dealer must, at the earliest possible time, record the details of the deal on a slip or memo, which is known as the deal slip, or deal ticket. In some organizations, the deal slips are electronic and are through inputs into their automated systems. A typical deal slip would contain details such as, payment instruction, value date, currencies, amounts etc. 9.6.2.3. The deal slip should be passed on to the treasury back-office at the earliest for their further processing of the deal. Ideally, all deal slips should be pre-numbered for control reasons and the treasury back-office must monitor for any breakage in sequence. Where pre-numbered deal slips are in place, any cancelled deal slips must also be forwarded to treasury back-office for appropriate record keeping/ filling. A format of a typical deal slip has been shown on annexure B & C. 9.7. Deal Delay: 9.7.1 All deals done by dealers are required to be processed by the treasury back-office for which they need to be informed of the details of the deals within a certain time. In this process dealers raise deal tickets that need to be sent across to the treasury back-office within shortest possible time.) 9.7.2. The timeliness of raising deal slips/ inputting into the automated system as well as passing them on to the back-office is not only sound business practice but also critical for monitoring of credit risk, price risk and regulatory compliance. 9.7.3. The following table provides guidelines of deal capture standards-. Product Spot FX Forward FX FX Swaps Call/ Notice Money Money Market Term Foreign Currency Deposits Treasury Bills Purchase Repo Reverse Repo Deal-slip raising/ System Input Deal-slip to reach Time back-office Within 10 minutes Within 25 minutes Within 10 minutes Within 25 minutes Within 15 minutes Within 30 minutes Within 10 minutes Within 25 minutes Within 10 minutes Within 25 minutes Within 10 minutes Within 25 minutes By 10:30 am on payment day Within 30 minutes By 12:30 p.m. Within 30 minutes By 12:00 p.m. Within 30 minutes

9.7.4. The guidelines as per the above table may slightly vary depending on the distance of the physical locations of the treasury and the treasury back-office and degree of systems automation within the treasury organization. However, if the deviation from the above mentioned times are in excess of 10 minutes, the concept of the deal delay process would be defeated. 9.7.5. For monitoring of the proper functioning of this process, treasuries where manual dealslips are raised should use time stamping on deal tickets. In environments where treasury automated systems are used, the time stamping may not be required since the system should automatically take care of this. 9.8. Counterpart Limits: The issue of counterparty limits arises from the risk that a customer with whom an organization had a reciprocal agreement defaults. Credit risk is the risk that the counterparty to a financial transaction here a foreign exchange contract, may become unable to perform as per its obligation. The extent of risk depends on whether the other party's inability to pay is established before the value date or is on the same value date of the foreign exchange contract. 9.8.1. Settlement risk: The risk on the settlement day that one counterparty pays funds or delivers a security to fulfill its side of the contractual agreement, but the other counterparty fails on its side to pay or deliver. This occurs when items of agreed upon original equal values are not simultaneously exchanged between counterparties; and/ or when an organization's funds are released without knowledge that the counter value items have been received. Typically the duration is overnight/ over weekend, or in some cases even longer i.e., until the organization receives the confirmation of receipt of funds. The risk is that the organization delivers but does not receive delivery. In this situation 100% of the principal amount is at risk. The risk may be greater than 100% if in addition there was an adverse price fluctuation between the contract price and the market orice. 9.8.2. Pre-settlement risk: The risk that a client defaults on its agreement with the organization before the settlement day. Whilst the organization has not paid away any funds, it still has to replace the contract at the current market rates, which might have moved against it. In this case the organization is exposed to possible adverse price fluctuations between the contract price and the market price on the date of default or final liquidation. The organization's loss would then be the difference between the original contract price and the current market price on the date of default. 9.8.3. All banking organizations must have appropriate counterparty limits in place for their treasuries. The limit structure will depend on each organization's credit risk appetite, based on their credit risk policies as well as target market criteria. All such credit risk limits should be set by the organization's credit risk approving unit, which is independent of the treasury dealing function. 9.9. Triggers: A trigger is a level of a position at which an organization decides that the management should be made aware of. This may be in terms of a market value of a position or an unusual trading volume etc. This is a predetermined level given by the management. When a trigger is hit, the management needs to be informed of the same. Upon advised of a trigger, the management usually decides on closer monitoring of the particular situation. In cases of a loss trigger, the amount is generally set at a lower level than the stop loss limit (at which the position has to be un-winded). 9.10. Stop Loss Orders: A stop loss limit for a product is generally a certain percentage of the organization's prior year profit from that product. For example if an organization's FX trading

revenue for year 2002 was USD A, the management/ market risk management unit may decide to accept a maximum of 10% loss of that during the current year. In that case the stop loss limit for that organization for 2003 would be A X 10%. 9.10.1. In managing the business within the stop loss limit, treasuries running overnight positions (within their overnight limits) must leave appropriate overnight watch orders. 9.11. Appropriateness of Dealing: While transacting with a client, a dealer should be aware of the counterparty's dealing style & product mix and assess (prior to concluding a deal) whether the customer is dealing in an "appropriate" manner. A dealer should have the responsibility to ensure that the volumes of activity and types of products transacted by a client are appropriate for that particular client and the risks of these transactions are clearly understood by them. Prior to conclusion of deal, a dealer needs to assure that the counterparty is authorized to enter into such transaction (both from counterparty's internal and regulatory perspective).

9.11.1. To address the appropriateness issue, it might be a good idea for the organization to get a standard agreement signed by all its counterparties. For our case, such an agreement can be drafted by BAFEDA and can be made mandatory for all members to sign. 9.12. Rate Appropriateness: This exercise is carried out by the treasury back-office to check for whether all deals have .been dealt at market rates. Any deals done at off-market rates must be raised to the respective dealer for a satisfactory explanation bringing this to the notice of the chief dealer. In case of a nonacceptable justification provided by the dealer, the organization may decide to engage in further investigation. 9.12.1. This monitoring process needs to be in place to guard against application of any inappropriate rates. 9.12.2. Treasury front office primarily uses Reuters for pricing of its products and treasury operations should also collect most of the data for their independent verification process from the same source. Following is a guide that can be followed in the process of independent verification of prices for various products/ instruments:

Instrument Spot FX Forward FX/Swaps

Source Reuters/ National Newspapers Reuters

Frequency of Update Once Daily Pages: AFX=, FXXZ BD(F9) Once Daily Pages: AFX=, FXXZ BD(F9). ; LIBOR01, GBPF=, EURF=, JPYF=, CHFF= etc.

Note

In absence of an interbank USD/BDT forward market, banks should use spreadsheets to determine tenor wise forward premiums that should be used for the verification of USD/BDT forward rates.

Cross Currency Foreign Currency Deposits Call Notice Money Treasury Bills Purchase

Reuters Reuters Reuters/ National Newspapers

Once Daily Pages: FX= At Booking Pages: DEPO, GBPF=, EURF=, JPYF=, CHFF= etc. Once Daily Page: BD(F9) Independent price verification cannot be performed for this since the same is purchased from Central Bank only on primary auctions. On bids from different banks, central bank decides the cut-off point yield. There is no secondary market, at the moment and when a secondary market develops, this should be reviewed.

Repo Reverse Repo LCY Term MM

Reuters/ National Newspapers Reuters/ National Newspapers

Once-Daily on days repo transactions take place Page BD(F9) Once daily on days repo transactions take place Page: BD(F9) In absence of an inter-bank term money market, this cannot be judged against a market information. However, for clarity, all term borrowings/ placements should have sign-off from one level higher authority from the dealer doing the transaction.

9.12.3. The rate band for each instrument needs to be fixed depending on the market liquidity and volatility for each of them. An indication of the rate bands that may be used by Treasury Operations for their independent price verification process is as below: Instrument Spot Inter-bank FX Spot Customer FX Non BDT crosses Forward Inter-bank Swaps Rate band For currencies other than BDT, for contracts with USD on one side, a 1% on each sides of the mid market rate can be taken as guidance. For BDT it can be within 5 paisa on either side of the base rate. For Spot Customer FX, the bank can be 2% on either side. For CHF, EUR GBP, JPY this can be 50 pips on either side.

25 pips on either side of the base swap rate for currencies against FX USD other than JPY. 25 bps on either side of the base swap rate for JPY

FCY Borrowing/ 25 pips on either side of the base rate (quoted on Reuters for the Lending particular tenor) for on and off-shore deals. Call/Notice/Money 1% either side of mid rate of range reported on Reuters BD page/newspaper

9.12.4. The bank treasury will publish a rate sheet for retail FX transactions for various types of customer related transactions in various currencies. Buy and sell rates for all currencies for all types of transactions that are covered in the rate sheet is based on sufficient spreads taken from the bid/ offer of central bank's quote on USD/BDT for the day as well as spreads on cross currencies available from Reuters. It is primarily designed to cover retail and small corporate FX transactions. Correctness in preparation of rates for these transactions must be covered through maker-checker control (as well as the automated banking system through defined banks in the system). However, for certain customers, transaction rates might differ from the published rates. In these instances there should either be standing instruction issued by the head of treasury or the relevant rate exception signed by a treasury personnel. 9.12.5. On customer FX, the rate bands are higher to accommodate higher spreads. However, since all customer transactions are based on a principle of a positive spread, negative spreads for such, transactions must be highlighted as exceptions for explanations and approvals. 9.13. Deals Outstanding Limit: It is a good practice to monitor the total deals outstanding of the treasury. This exercise requires to be carried out by the treasury back office to check against any unusual volumes of activity. Each treasury would have its own volume trend and the treasury back office should monitor whether all activities are being carried out within usual trend. The management may decide to set a limit for all outstanding FX contracts at any given point of time. For example, in a fast dealing environment, a deal with an additional zero that would make the dealt amount much higher than intended. If a "deal outstanding" monitoring (by an independent unit) process is in place, this would be highlighted and brought to the attention of the senior management for any appropriate action. 9.14. Daily Treasury Risk Report: The treasury back-office is required to summarize all daily positions particularly the end-of-day positions on a report format for the information of the senior management. Such report should ideally contain information about outstanding open position against limit, different currency-

wise outstanding exchange position (against limits if applicable), outstanding foreign exchange forward gaps in different tenors, tenor-wise MCO report interest rate exposures of the balance sheet, counterparty credit limits usage, day's P&L against trigger & stop loss limit etc. 9.15. Code of Conduct: Due to the special nature of job that dealers engage in, they are expected to act in a professional and ethical manner. The principles constituting the ethical conducts for dealers are detailed in annexure-D. 9.16. Conversation Language: All dealing related conversations taking place in the treasury must be in an acceptable language for operational clarity. To elaborate, all conversations on the Reuters Dealing System must be in English and all conversions over telephone must be restricted to either in Bengali or in English. 10. CONCLUSION 10.1. The descriptions on the above pages depict a dealer's job as a highly demanding one requiring high degree of skills and specialization in their respective areas. Certain key positions in the treasury back office also require high level of skills and expertise. 10.2. The dealers of NCC Bank are responsible for risk management of the organization's overall balance sheet as well as managing the capital, which is a highly responsible function where the best possible decisions are expected to be made in split-second. 10.3. The senior management's responsibility will be to ensure appointment of the appropriate and deserving personnel as treasury and treasury-back office staff. They should also, on a continuous basis, identify the dealers training and development requirement and arrange for the same. The management should also put in place an overall trading policy for its treasury defining the scopes, policies, risk-limits as well as their control mechanisms. 10.4. A dealer's job is extremely stressful requiring them to devote high degree of continuous concentration and remain alert all the time. Also, due to the current global nature of a treasury's business, today's dealers require working for extended as well as unsocial hours. Many of the banks operating in the local market keep their dealing rooms operative for business reasons on Fridays, which is the local weekly holiday. Bearing this in mind, most advanced dealing rooms pay a special dealing allowance to its dealers. 10.5. The management appreciates that the nature of a treasury environment is ever changing where new market dynamics, products and as a result, new risks are evolving on a continuous basis. The NCC Bank's internal policies and structures are designed in such a manner that identification of new risk and control areas is possible at the earliest where control mechanisms can be implemented prior to taking up any significant risk.

Chapter 5

Trend and Time series analysis

4.1 Trend Analysis:

Trend analysis is a general term that embraces a variety of specific tools. For instance, trend analysis relies on the sequencing of movement in remittance of total inward and outward.

Year 2002 2003 2004 2005 2006

Export 4559 4967.33 5771.65 7776.3 8557

20000 18000

Import 13579.5 13089.94 13274.08 16296.3 17646.8

Remittance 1,455.90 1,162.10 1,961.60 2,492.30 3,856.00

Total 19594.4 19219.37 21007.33 26564.9 30059.8

Valuues in Taka million

16000 14000 12000 10000 8000 6000 4000 2000 0 2002 2003 2004 Years 2005 2006 Export Import Remittance

The movement of export is relatively increasing position in steady way. Here in 2003 and in 2004 the growth was stably increases and after that it rises in increasing scale. The position of import is different. Because in the year of 2003 and 2004 it declined and after that it increases in 2005 strongly and continue in 2006. The position of remittance is almost same as import because it also decreases in 2003 and 2004 . After that it increases in 2005 and 2006 which provide a good sign for future. Time series analysis: A time series analysis would show the patterns of change in statistics over time to the projected estimates for the future remittance of NCCBL. The time series analysis helps in locating the

scope of adjustments for uncertainty about the future. It is a set of observations taken at specific times, usually at equal intervals. Mathematically, a time series is defined by the values Y1 , Y2 of a variables Y at times t1, t2 Thus Y is a function of t; this is symbolized by Y = F(t). Time series has revealed certain characteristic movements, or variations, some or all of which are present to varying degrees. Analysis of such movements is of great value in many connections, one of which is the problem of forecasting future movements. It should thus come as no surprise that many industries and government agencies are vitally concerned with this important subject. Fundamental steps in Time Series analysis: Collect data for the time series, making every effort to ensure that these data are reliable. Always keep in mind the eventual purpose of the time series analysis, for example, if one wishes to forecast a given time series, it may be helpful to obtain related time series. If necessary, adjust the data for comparability, such as for leap years and holidays. Graph the time series, noting qualitatively the presence of seasonal variations and of long term trend and cyclic variations. Construct the long term trend curve or line, and obtain the appropriate trend values by using the least squares, freehand, moving averages or semi averages method. If seasonal variations are present, obtain a seasonal index and depersonalize the data. Adjust decentralize data for trend.

4.2.1Time Series Analysis of Export of NCCBL: The linear equation used for the estimated trend of export through NCCBL is Yc=bx +a; where Y is the return variable in each year, X=time/year, a=constant
Year Export (Y) Deviation from the Middle XY Year 1999 (X) X2 Trend Values Y C

2002 2003 2004 2005 2006

4559 4967.33 5771.65 7776.3 8557 Y= 31631.28

-2 -1 0 1 2

-9118 4 4165.26 -4967.33 1 5245.76 0 0 6326.26 7776.3 1 7406.76 17114 4 8487.26 XY = 10804.97 X2 = 10

Hence we get the equation of the export trend line is Y= 1080.5X+6326.26, where a= 6326.26 and b= 1080.5 (Appendix 9a) The time series analysis shows positive result in the year of 2002 as it is greater than expected position but in the year of 2003 the position is reversed. In this year expected amount exceed actual figure. Position improved in the year of 2005 and 2006 4.2.2 Time Series Analysis of Import of NCCBL:
Year Import (Y) Deviation from the XY Middle Year 1999 (X) X2 Trend Values Y C

2002 2003 2004 2005 2006

13579.5 13089.94 13274.08 16296.3 17646.8 Y= 73886.62

-2 -1 0 1 2

-27159 4 -13089.94 1 0 0 16296.3 1 35293.6 4 XY = 11340.96 X2 = 10

12509.14 13643.23 14777.32 15911.41 17045.5

From the above table a=Y/N, Here b=XY/X2 N=5 Hence we get the equation of the export trend line is Y= 1134.09X+14777.32, where a= 14777.62 and b= 1134.09

The time series analysis shows positive result in the year of 2002 as it is greater than expected position but in the year of 2003 the position is reversed. In this year expected amount exceed actual figure. Position improved in the year of 2005 and 2006 Mr. Jahangir Alam Managing Director Dhaka Janata Exchange srl. Milano-Italy

Dear Sir We have received your remittance instruction under SL # 493 containing total 82 transactions for BDT 5,961,697.00. All transactions have been released. To execute your payment instruction we have debited your EURO A/C for 28,326.63 and transferred equivalent Tk.2,646,557.00 to your TAKA A/C @ Tk.93.43 /EURO. Remaining partially Cash & Account payee SL#490 (BDT 3,315,140.00) is in held up due to shortage of cover fund. Today we havent received any of your cover fund.. The balance in your EURO A/C is 4,827.79 and in your TAKA A/C is Tk.500, 000.00. Payment Status and Accounts Statement are attached herewith. Please inform immediately if any discrepancy found. Thanks and regards Salahuddin Ahmed International Division, Head Office NCC Bank Ltd. Bangladesh

4.2.3Time Series Analysis of Remittance of NCCBL:

Year

Export (Y)

Deviation from the Middle XY Year 1999 (X)

X2

Trend Values Y C

2002 2003 2004 2005 2006

1,455.90 -2 1,162.10 -1 1,961.60 0 2,492.30 1 3,856.00 2 Y= 10927.9

-2911.8 4 -1162.1 1 0 0 2492.3 1 7712 4 XY = 6130.4 X2 = 10

959.5 1572.58 2185.58 2798.62 3411.66

From the above table a=Y/N, Here b=XY/X2 N=5 Hence we get the equation of the export trend line is Y= 613.04X+2185.58, where a= 2185.58 and b= 613.04 Remittance in the year of 2002 are in better position in comparison with expected position. Here in 2003 the position is reversed as the expected earning are exceeded the actual earnings. Same condition are faced by bank in the year of 2004 and 2005. but in 2006 due to better performance the position is reversed and the bank earn much more amount than its expected amount.

Chapter 6

SWOT Analysis

Service oriented business organizations possess some weakness as time elapse. The weaknesses of an organization can be turned into opportunities if recognized on time. Moreover, overlooking any threat may result in loosing valuable business opportunities. For this reason, an assessment of every business organization is required to judge the performance from the

aspects of its Strength, Weaknesses, Opportunities and Threat (SWOT). These four factors reside under: Internal environment External environment

The important factors of these environments are as follows: Internal environment: The internal environment refers to all the factors within an organization which impart strengths or cause weaknesses of a strategic nature. They are:

Potential internal STRENGTHS Quality service than competitors.

Potential internal WEAKNESSES Centralized authority delegation resulting decreased employee morale. Lengthy process. credit proposal evaluation

Qualified and experienced management team. SWIFT membership. Strong goodwill regarding bank. among customers

Absence of employee evaluation and performance appraisal system. Lack of marketing and promotional effort. Limited ATM coverage. Limited tech. employees. efficiency among

Ability to retain valuable customer base.

Absence of R&D facilities.

Table: Strengths and Weaknesses External environment: The external environment includes all the factors outside the organization which provide opportunities or pose threats to the organization. They are:

Potential External OPPORTUNITIES

Potential External THREATS

Ability to expand the product and service line through automation. Ability to provide micro-credit facility for the individuals and businesses. Opportunity to diversify portfolio. Ability to serve additional customer groups through establishing branches. Ability to grow due to increases in market demand for banking services.

Costly regulatory Bangladesh Bank operations.

requirements from regarding banking

Negative attitude and perception regarding Bangladeshi clients. Vulnerability to recession and business cycles. Presence of lower-cost foreign and local competitors.

Table: Opportunities and Threats

Findings Annual average rate of inflation increased to 5 . 4 2 % i n D e c e m b e r , 2 0 0 9 f r o m 5 . 2 2 % o f November, 2009. Performance of the Bank: During the year under review, the performance of the Bank was satisfactory which reflected in its key indicators such as operational profit, increase in Deposits and Loans & Advances, reduction in quantum of NPL and cost of fund. The total Deposits, Loans & Advances and Profit of the Bank at the end of the year, 2009 stood at Tk.53,900.15 million, Tk.50,387.68 million and Tk.3,137.70 million respectively. Authorized Capital, Paid-up Capital, Reserve Fund & other Reserves: The Authorized Capital of the Bank stood at Tk.5,000 million as on date while Paidup Capital raised to Tk.2,284.90 million from Tk.1,757.62 million in 2008. The Reserve Fund increase to Tk.3,749.55 million recording 63.19% increase over last year's Tk.2,297.68 million. Deposit: Deposits of the Bank as on 31.12.2009 stood at Tk.53,900.15 million reflecting 14.91% growth over the previous year's figure of Tk.46,904.66 million. Deposit mix is appended in the chart below. Credit: The Bank has its own credit policy formulated in the light of directives and guidelines issued by Bangladesh Bank from time to time. The main focus of this policy is to maximize profit th r o u gh f ea s i b l e i n v es t m en t en s u r i n g sustainable growth. The Bank always tries to extend credit facility to unconventional sectors alon g wi th conven ti onal on es . Vari ous Agri-Projects, IPFF membership, etc. helped largely to achieve fruitful results. During 2009, the Bank disbursed Tk.50,387.68 million. Advance Deposits ratio was 0.93:01 in 2009. Credit Administration: Bank's Credit Administration Division is playing its role in bringing discipline in credit handling, taking vigorous steps to guard against portfolios becoming slow/bad. Immediate steps taken by the Division made it possible to streamline the credit portfolios of the Bank. Investment: At th e end of December, 2009, Bank's total investment stood at Tk.9,671.53 million, which is 48.18% higher than that of previous year's Tk,6,526.82 million. Bank's one of the main investment sectors is Government Treasury B o n d , w h i c h h e l p s m a i n t a i n i n g l i q u i d i t y requirements as well as yielding good profit.

Foreign Exchange Business: Like previous years, Foreign Exchange business played important role to profitability of the Bank in 2009. Through careful handling of Banking n eed s o f b o t h E xp o r t er s an d I mp o r t er s by assigning Relationship Officers, the Bank could achieve good result during the year under report. During 2009, the Bank handled export and import business to the tune of Tk.11,903.72 million and Tk.33,078.44 million respectively. Bank's Number of AD License Branches were 20 in 2009, efforts are being taken to increase this in 2010. Remittance Business: During the year 2009, the Bank consolidated its remittance business by taking timely and customer-friendly steps both at home and abroad. In 2009, total remittance received by the Bank was more than BDT 13,391.51 million registering 10.69% increases over last year's figure of BDT 12,098.18 million. Treasury: Through Dealing Room operations, the Bank earned Tk.822.14 million during 2009 against Tk.311.07 million in 2008. Capital Market Operation: Bank's Capital Market operations gained extra p a c e d u r i n g t h e y e a r u n d e r r e p o r t , w h i c h contributed remarkably to its profitability. Its separate Brokerage House is now on expansion p r o c e s s . S e v e r a l B r a n c h e s o f t h e B a n k ' s Brokerage House have been opened during last couple of years and mo re Branch es wi ll be opened soon to augment the services to stock traders. Operational Result: As on 30.12.2009, the operational profit of the B a n k w a s T k . 3 , 1 3 7 . 7 0 m i l l i o n a g a i n s t Tk.2, 363.49 mi llion of 2008, rate of growth being 32.76%, Return on Assets (ROA) was 2.61 %. Human Resources Development: The Management of the Bank recognizes the n e e d f o r a s e l f m o t i v a t e d , p r o a c t i v e a n d committed workforce for achieving both short and long term goals. In order to ensure this, r e g u l a r t r a i n i n g P r o g r a m m e s a n d o t h e r motivational measures are always in active consideration of the Management. Du r i n g 2009, Ban k' s Train in g In s ti tute has a r r a n g e d a t o t a l n u m b e r o f 4 2 t r a i n i n g programmes, workshops, etc. on diversified topics related to banking. A total number of 1562 Executives/Officers participated in these programmes/workshops. Further 13 Courses on IT, BESEL-II & Core Risk Management for Senior Executives were arranged at Chittagong. Total N u m b e r o f E x ec u t i v es a n d O f f i c er s a s o n 31.12.2009 was 1,214 against 1, 118 of 2008. Network of Branches:

B a n k ' s B r a n c h n e t w o r k h a s b e e n f u r t h e r expended in 2009 increasing th e number of Branches to 65, which was 57 in 2008. It has plan to open more Branches in 2010 and also to convert some of its SME Centers to SME/Agri. Bran ch es in sui table places to reach even remote corners of the country. Dividend: Considering proposed appropriation of profit for the year under report, the Board of Directors of the Bank has been pleased to recommend 47% Stock Dividend (i.e. Bonus Share) for the valued Shareholders of the Bank for the year 2009, subject to approval of the Shareholders in the forthcoming 25th Annual General Meeting of the Bank. Managing Core Risks in Bank: Managing various core risks, as identified by the Central Bank vide its guidelines on Risk factors i n v a r i o u s B a n k i n g a s p e c t s , i s o f g r e a t importance. The Bank recognizes this and tries to comply with the requirements as enumerated in th e guidelines of the Regulatory bodies. D i f f e r e n t C o m m i t t e e s / D e p a r t m e n t s a r e assigned with the job of addressing core risks discharging their responsibility sincerely. Audit and Inspection: Audit and Inspection Department at Head Office working under Internal Control and Compliance Division of the Bank conducts inspection of the branches on regular basis to identify and check th e i r regu la r i t i es by s ugges ti n g c o r r ec ti v e acti on s . In cas es wh ere exi s ts deli berat ed irregularities, the Audit Department primarily iden ti fi es th e of f en ders an d rep orts to th e authority for necessary action. Besides, the Managing Director's Vigilance Team also helps i n e n s u r i n g d i s c i p l i n e i n o p e r a t i o n o f t h e branches. Information Technology: Wi t h t h e a c t i v e s u p p o r t o f i t s I n f o r m a t i o n Technology Division, the Bank could run its Real T i m e O n l i n e B a n k i n g S y s t e m u n h i n d e r e d th rough out th e y ear . Th e Ban k h as plan to further automation of the activities of the Bank to save time to meet the expanding demand of the customers. Corporate Governance: C o r p o r a t e G o v e r n a n c e r e f l e c t s f a i r n e s s , accountability, responsibility in discharging activities by any organization, especially the fi nancial i n s ti tuti on s in order to s af eguard i n t er e s t o f th e S t a k eh o l d er s . E s t a b l i s h i n g c o r p o r a t e g o v e r n a n c e h a s b e e n m a d e imperative for the Banks/Financial Institutions by the Central Bank of the country. The Bank a l w a y s g i v e s p r i o r i t y i n c o m p l y i n g w i t h directives of the regulatory bodies and also c o m p l i e s i n d e a l i n g w i t h t h e v a l u e d Shareholders in a fair way. Accordingly, various o r g a n s o f t h e B a n k s u c h a s t h e B o a r d o f Di r ec to r s , Ex ec u ti v e Comm i t t ee an d Aud i t Committee of the Board

perform their duties taking full responsibility and accountability. The Management acts as per all regulatory norms. The Bank has taken befitting steps in this regard and follows the following principles: The Chairman of the Board of Directors a n d th e Ch i ef E x ec u t i v e Of f i c er a r e separate persons. The Board of Directors has an Executive Committee and an Audit Committee to support/supplement the Board in taking decision on various policy and business r e l a t e d i s s u e s h e a d e d b y d i f f e r e n t p e r s o n s a s t h e C h a i r m a n o f t h e Committee(s). The Board reviews and approves short a n d l o n g t e r m s t r a t e g i c c o r p o r a t e business plans for compliance by the M a n a g e m e n t . T h e B o a r d / E x e c u t i v e C o mmi tt ee of th e B oa rd ac ts as p er policy/guidelines issued by the Central Ban k regardi n g op erati on i n vari ous sectors. The Board/Executive Committee o f t h e B o a r d a p p r o v e s t h e c r e d i t proposals as per Banks set policy and Bangladesh Bank guidelines/regulations. The Board also reviews the action plan implemented by the Management. T h e A u d i t C o m m i t t e e o f t h e B o a r d reviews audit report of the Branches and o th er f u n c t i on s i n i t s r egu l a r l y h el d meeting and advises the Management for development/correction. The said C o m m i t t e e a l s o f o l l o w s u p i m p l e m e n t a t i o n o f i t s s u g g e s t i o n s / decisions on regular basis according to Bangladesh Bank circulars/guidelines. The Management operates as per polices, rules and regulations as ap p ro ved by th e Board of Di r ec tors , c o m p l y i n g w i t h o t h e r s t a t u t o r y requirements. T h e M a n a g i n g D i r e c t o r & C h i e f Executive Officer of the Bank and his Management Team carries out decisions f u l f i l l i n g a l l n o r m s a n d r u l e s a n d regulations related to various sectors of investment. The Bank gives utmost priority in s u b m i t t i n g p e r i o d i c a l a n d o t h e r statements to Bangladesh Bank regularly and other regulatory bodies in time to enable the Shareholders to make correct a s s e s s m e n t o f c o m p a n y ' s a f f a i r s / profitability. T h e B o a r d e n s u r e s c o m p l i a n c e o f requirements of regulatory bodies such a s C e n t r a l B a n k , S e c u r i t i e s a n d Exchange Commission (SEC), the Stock Ex ch an ges , Regi s trar of Joi n t Stock Companies and Firms, NBR, CDBL. etc. The Bank has a Chief Financial Officer (CFO) as per SEC's requirement. The employees of the Bank are being paid competitive salary and allowances as approved by the Board of Directors from time to time.

Necessary provision against Gratuity has been made as per Bank's Service Rules and as required by Regulatory Bodies. Mentionable that the SEC has approved building-up of Staff Gratuity Fund in phases within 2010 as per schedule fixed by them. Corporate Social Responsibility (CSR): The Bank gives top most priority in discharging its responsibility to th e society. It has long h i s t o r y o f d i s c h a r g i n g c o r p o r a t e s o c i a l responsibility and to give it an organized shape, the Board of Directors has set up "NCC Bank Foundation" through which various steps have been taken to fulfill CSR. Recognition: Th e B an k don at ed Ta ka 3 .00 la c t o install a 'Plaque' engraving names of Freedom Fighters of Uttara Club. Th e Bank donated Taka 4.00 lac for construction of a monument in honour of Language Veteran Mr. Abdul Matin at Road No. 08, Dhanmondi R/A, Dhaka. Distribution of Relief: The Bank donated Tk.25.00 lac to the Prime Minster's Relief Fund to help the victims of BDR carnage. Besides, the Bank has been paying Tk.4.80 lac per y ear to th e f ami ly of lat e Col. Lutf or Rahman Khan, a victim of BDR carnage. This will continue for 10 (ten) years. Don ated Tk.1.50 lac to Ai la Cyclon e victims and for refinement of five ponds affected with saline water due to tidal bore. D o n a t e d T k . 2 . 0 0 l a c t o E c o n o m i c Reporters Forum, Dhaka. Donated Tk.5.30 lac to various Individuals &Institutes on a/c. Rehabilitation. Distributed 2,500 blankets worth Taka 5, 62 ,500/ - i n Patgr am, Ch i lmar i an d Fu lb ar i a a rea t o h elp th e co ld w av e affected people.

Recommendation (s):

Delegation of authority is centralized which makes the employee to realize less responsibility. The employee morale is deteriorated. So they should increase their employee morale.

The credit proposal evaluation process is lengthy. Therefore, sometimes valuable clients are lost and the bank becomes unable to meet targets. So they have to take short time for credit proposal evaluation process.

No substantive use of Annual Confidential Report (performance evaluation form of the employee) to reward or to punish the employee. Hence the employee becomes ineffective. So they always need to care about employee motivation.

The bank lacks aggressive advertising and promotional activities to get a broad geographical coverage. They need to overcome their lacks and provide promotional activities.

The bank has only a few ATM booths and not in proper places. So, the scope of using ATM card is limited. They need to establish a few ATM booths in proper places.

Computer facility for all the officers is not available. Moreover, all the officers have no computer knowledge. They should provide available computer in their offices.

The bank has no any research and development division. So they need to open research and development division. The common attitude of Bangladeshi clients is default. So the employee has to knowledge about their clients. Multinational as well as the fast growing local banks with modern products and services are capturing huge market within a short period and resulting to switch over the existing customers of the bank. So they need to apply new technology and always ready to take their position in the market.

Conclusion:

National Credit and Commerce Bank Limited a second-generation private bank emerged in 1985 on 25th November along with liberalization of global economies. The bank has 53 branches across the country. NCCBL has done various processes shorter by using international software called SWIFT, which is used by very few private commercial banks. Our government gives most emphasis on foreign remittance to keep macro economic balance.

Remittance of NCC Bank contains an important part in overall operation of the Bank. Our industrial sector that are operating their business in different countries getting a good benefit from this department. Although there have some limitation in total operation process including online disturbance, management process, code fore, d authorization, technical problem etc. Bank now trying their best to improve such problem and to enhance their operation and customer services. For more facilities NCC bank have a good step to serve in rural areas. They made a deal with an ego, which facilitates them for more service in this sector. Moreover they have taken steps to open new 5 branches in different area for wide operation. Due to clear and transparent operation bank have introduces Corporate Governance where board reviews and approves various policies for compliance by the management. The Board/ Executive committee reviews the guidelines issued by the Central Bank regarding operation of the Industry. The Board / executive committee of the board approves the credit proposal as per approved policy and Bangladesh Bank guidelines/regulations. Due to maintaining different level of transparency bank are now receiving more profit in every year. And here remittance plays a good role to booster this profit. From the learning and experience point of view I can say that I really enjoyed my internship at NCCBL from the very first day. I am confident that this three (3) months internship program at this bank will definitely help me to realize my further carrier in the job.

Bibliography

1. Jaffe, and Westerfield, Ross (2005): Corporate Finance, publisher name, editin, p.10 Newspaper: (i) Financial Express, 15.12.2005, P.10. (ii) Bangladesh Bank Publications 03.01.2006 P.12.

Annual Reports: Annual Report (2007), National Credit and Commerce Bank Limited. Manual: Manual Foreign Exchange operations and policy, NCCBL. Internet Resources: http: // www. Bangladeshbank . org, retrieved on 10.09.2008. http: // www. NCC Bank- bd. Com . org, retrieved on 22.09.2008.