Acknowledgements

ACKNOWLEDGEMENTS

I am grateful to the faculty members of “Department of Administrative Sciences” who spent their valuable time with me and provided me with the required literature. Special thanks are owed to our Coordinator “Mr. Mubeen Khalid.”, the faculty member of IAS department in “University of Punjab” who allocated this task to me. His helpful annotations on this project allowed me to accomplish this task appropriately. In the end, I am also thankful to the people that are working in PRIME COMMERCIAL BANK LIMITED (PCBL), who helped me in completing my report through giving interviews, and by guiding me in order to make this report an in depth and comprehensive study of the practical implementation of the knowledge and information I gained during my internship.

PREFACE

This is the age of globalization and information technology and the world is changing with the fast pace. Now prefer those persons who have extraordinary interpersonal skills and who have the ability to exploit the external resources. The managers are required to have very up to date information and best communication skills so that they can deal well with the fast changing requirement of the world. The interpersonal skills can be improved by gaining a practical knowledge about the working of different organization. It not only helps in gaining knowledge but also give an exposure to the practical fields. Therefore, this six weeks internship program has been proved extremely helpful as it gives the students a chance to prove their ability and worth in the market so that they can get secure position in the market.

SECTION 1: CONCEPTUAL REVIEW OF PRIME COMMERCIAL BANK LIMITED CHAPTER: INTRODUCTION TO PRIME COMMERCIAL BANK LIMITED 1.1Prime Commercial Bank Limited: An Overview Prime Bank is a prominent Pakistani bank, providing exceptional value to its customers, shareholders and employees. Prime bank competes in selected market niches on the basis of superior service, innovation, specialized products and professionalism. Prime Bank’s activities focus on dedicated banking services for the middle market and middle market and middle to large corporations for there banking requirements. Prime Bank is a socially responsible institution firmly believing in the protection of the environment, peaceful coexistence, and respect for human rights.

1.1.1 Brief History and Present Status: Commercial Banking activities were initiated at the time of inception. During 1993, two more business divisions i.e. Corporate Banking and Financial Services were added. By 1996, Prime Bank’s countrywide network of seventeen Branches was in place. Under the Bank’s on going branch expansion program thirty-two new branches have been added during the years 2001, 2002, 2003 and 2004 while thirteen more branches were opened during 2005. This raised the total number of branches to sixty-two focusing primarily on the middle market commercial banking segment, consumer banking initiatives as well as agricultural, housing, financing of small and medium sized enterprise and Islamic banking. Total Assets of Prime Bank during the period from December 1992 to December 2005 has grown at an annual compound rate of about 23 percent to Rs. 53.8 billion. Within this period, Shareholders’ Equity grew from Rs.371 million to Rs. 3.4 billion, Deposits to Rs. 38.9 billion and Advances (net) to Rs. 25.5 billion. Profit before tax grew from Rs. 40.6 million to Rs. 765 million for the year ended 31st December 2005. After fourteen years of well controlled, yet sure and successful operations, the Bank is now poised to move forward rapidly to be at the cutting edge of financial services combining highly efficient delivery systems with continuous product innovation. Therefore, development of superior Human Skills and the latest Information Technology

platform are the cornerstones of Prime Bank’s overall strategy to be in the exclusive club of winning banks of the future. During the year ended December 31, 2005 the total assets of the bank grew by 33% to reach the level of Rs. 53.8 billion (2004; Rs. 40.3 billion). This growth in the balance Sheet footing was mainly constructed by a healthy and steady in deposits and advances during the year under review. Our focus on building up a strong Deposit base by mobilizing care deposits from the target markets ensures a steady and sustainable growth for the Bank. Introduction of tailor made deposits products to meet the need of our valued customer son markets competitive terms and conditions resulted in healthy growth of 29%over the last year. Total Deposits stood at Rs. 38.9 billion (2004;R. 30.1 billion). The non-performing advances of the bank as at December 31, 2005, stand at Rs. 789 million as against Rs. 776 million as on December 31, 2004, while the cumulative provision there-against amounted to Rs. 425 million compared to Rs. 406 million last year. Despite a good expansion in the loan portfolio this year, the non-performing loans (NPLs) to net advances ratio was reduced from 3.6% last year to 3% this year while keeping a check on the absolute amount of NPLs at last year’s level, which is another evidence or your Bank’s prudent strategy to lend to the right kind of customers. The increase in provision against non-performing advances is mainly due to new prudential regulations issued by the State Bank Of Pakistan in an effort to strengthen the growth base of Banking industry by creating sustainability against the risk of nonperforming assets. This year’s provision also includes Rs. 45 million set aside as general provision against Consumer portfolio in accordance with the Prudential Regulations issued by the State Bank of Pakistan. Despite the healthy position in the balance sheet we successfully managed to maintain a sustainable level of Advances to Deposits Ratio 66%. This was done to ensure availability of adequate liquidity so as to successfully manage any and all market eventualities in the face of swiftly changing interest rate scenarios. By maintaining an adequate level of liquidity your Bank remained well positioned to adjust to the changing rate scenario and reposition itself in line with the increase in interests rates. As a result thereof our investments and inter-bank leading increased by 59% over last year to close at 21.08 billion. With the capitalization of the Bonus Issue the paid up capital of the bank reached to Rs. 2.3 billion surpassing the minimum required capital of Rs. 2 billion as set by the State Bank of Pakistan by the end of December 2005. Your bank is well poised to comply with the new requirements to enhance the capital base by Rs. 1 billion every year, to the level of Rs. 6 billion by the year-end 2009.

Further to the successful Pre-IPO subscription of the First Term Finance Certificates (TFCs) of your bank amounting to RS. 640 million last year, the initial publics offer of Rs.160 million during the first quarter of 2005 was also heavily over subscripted. This long-term bond issue provides further strength to the already sound Capital Adequacy Ratio of the Bank.

Operating Performance: Important financial indicators of PCBL reflect a good and steady progress by the bank whereby the Pre-tax profit increased by 46% to Rs.525 million for the year2004. The profit after tax increased to Rs.495 million, as compared to Rs.345 million in 2004, registering an increase of 43% over last year due to increase in interest margins, which grew by 68% reflecting expansion in core banking activities coupled with well-managed treasury operations of your bank. On the other hand the operating expenses were well balanced and increased by only 24% over last year to reach Rs.1.17 billion as opposed to last year’s Rs.0.94 billion, due to the absorption of extra overhead cost of branches opened during the latter part of year 2004Furthermore to optimize its operational efficiencies the bank also undertook a major re-organization of its internal operating structure, devoting into the Business Process Reengineering (BPR) program embarked upon by the bank. 760

800 700 600

500

500

400

400 300 200

150

220

Rs.in Million

280

100 0 2000

2001

2002

2003

2004

2005

BRANCH NETWORK Inline with the bank’s strategy to strengthen and expend its market share through enhanced reach to the target customers your bank opened 12 additional branches during the year under review increasing the overall network to 65 branches covering 25 major cities of PAKISTAN.

1.1.2 The Vision: To be the Preferred Bank 1.1.3

The Mission: To provide exceptional value to all our stakeholders through superior service, innovative products and operational excellence.

1.1.4

Objectives:

Now it has acquired a comparatively larger market share and customer confidence, therefore the next objective is to maintain this confidence through strong and improved external as well as internal operations. The main objectives of the management are now: • • • •

To make the bank customer focused To plug the leakage of revenues and expenses To correct the structural flaws in the balance sheet To ensure internationally accepted accounting standards are followed in the bank.

The bank would continue to maintain its primary focus on the middle-market segment essentially targeting the commercial banking business of the segment. With a view to getting into the consumer banking in a significant manner, the bank has recently commissioned an independent consulting study for this purpose. Bank’s operating procedures, credit processing and internal controls are being reviewed and these studies have been instituted in order to further improve the quality of our operations.

1.1.5 Business Strategy: At its meeting held in December 2005, your board of directors deliberated at length the bank’s five year business plan/strategy submitted by the management. The strategy envisages doubling the bank’s market share by the year 2010 and more then tripling the size of the balance sheet. Although the bank would continue with its major focus on the small and medium enterprises, however the consumer financing segment would grow at a much faster pace thereby increases its contribution substantially to the bank’s income by 2010. Moreover as part of it overall strategy in order to expand its outreach to the target market. The bank has plan for opening of 37 more new branches (inclusive of Islamic bank branches) in phased manner over the next few years. Further strengthening of capital base through Tier-I and Tier-II capital, enhancing the deposit base of your bank reaching out to the customers through overall plan branch

network, major investment in HR and technologies to enhance the productivity and efficiency are some of the key elements of the said Five year Business Plan/Strategy;. 1.1.6

Core Value: • • • • •

Professionalism Customer Focus Teamwork Integrity Corporate Ethics

1.1.7 Corporate Philosophy: Prime Bank is committed to be a sophisticated, prominent and professional institution, providing one window service to its customers. The Bank visualizes itself as a full service institution dedicated to the specialized needs of its niche markets

1.1.8 Products and Services: •

Prime Bank Smart Financing Salient features: Financing from Rs 10,000/- to Rs 500,000/No down payment No processing charges No hidden cost No insurance cost Free doorstep delivery Quick approval Monthly installment as per your convenience (12, 18, 24 & 36 months)  5% BONUS on timely payment. (For LG Products only)*        

•

Prime Cash ATM Salient features:  Cash withdrawal  Account Balance Inquiry  Mini Statement

 Account Statement Request  PIN Change Request •

Prime Car Salient Features: No hidden cost No conditions apply Quick Processing Flexibility of early settlement and balloon payment during loan tenure  Financing Limit from Rs. 150,000 up to Rs. 10 Million  Application Processing charges only Rs. 2,000    

•

Prime Home Financing Salient Features:    

•

Financing from 300,000/- up to 40,000,000/Markup as low as 13.00% Balance Transfer Facility (BTF) available as low as 12.50 % Tenure from 3 years to 20 years

Prime Mahana Product category: Fixed Term Deposit with profit payable on monthly basis Proposed tenor: 6 months, 1 year, 2 years, 3 years and 5 years Fixed Term Deposit with profit payable on monthly basis in a checking account Target market: Pensioners, widowers, retired personnel, businessmen and others.

•

Prime N’cash

1.2 Training and Development Centre: The Training and Development Centre at Prime Commercial Bank is one of the most important departments. Its main function is to give training to the employees of the bank. Because of the dynamic banking environment it is very important for the company to train its employees so the company can compete in the growing banking sector of Pakistan. The Training Department at PCBL is striving for excellence in the banking sector. It got the best Trainers from the whole country who is working all days for the continuous improvement of the employees. Next it is important to know that how this department operates. First of all the team of the Training Department analyzes the weaker area of the working employees. This is done by Training Need Analysis (TNA). The Training Department circulates the Revised Training Need Assessment Form in all branches of the bank throughout the country. This form contains the list of Training Courses Offered with three different levels, basic level, intermediary level, and advance level (A copy of Revised TNA Form is attached at the end of the report). Then the Branch Managers are asked to evaluate the weaker areas of the employees. And then on his instruction the employee have to attend the training session which is one day long or some time it is for two days long at the training center. Basically the courses offered in training center are related to day to day operations of the bank. It include courses related to Operations, Trade Finance, Treasury, Accounting, Credits, Islamic Banking, Risk Management, Management and some other areas according to the needs of the bank. When TNA forms are filled they are again sent to the Training Center and the record is kept in their database. This is done on semiannually basis. Now by looking at the database, Training Courses are designed by the Training Department Team and then they conduct different courses at regular basis. If we see on the average 5 -6 courses are offered during a period of a month. If one course is on Operations the other could be on Trade Finance so this is how this department operates for the bank.

1.2.1 Structure of the Department (Training and Development Center): The structure of training department in very simple. It consists of a team of six people which includes four trainers, among the four trainers the most senior is the training manager. One training coordinator and a training administrator. The structure of the training center can be viewed as:

Branch Manager & Senior Trainer Trainer 1

Trainer 2

Trainer 3 & senior administrator

Training Coordinator

Training Administrator

1.2.2 Culture of the Training Department at PCBL: Team spirit, initiative, performance drive, and customer orientation are key characteristics of the Prime Bank’s employee and the Prime Bank’s culture.

CHAPTER: MANAGERIAL VIEW OF THE PRIME COMMERCIAL BANK LTD Managerial Policies: Managerial policies include all those policies which are adopted by the bank in performing all it internal activities as well as external operations. Different policies are required in order to introduce innovation and ensure maximum operational efficiency at minimum cost. The policies of Prime Commercial Bank are as follows: 1. Financial Policies: Prime Commercial Bank believes in capturing the market share through market development. More and more branches are being opened to increase the deposit portfolio of the bank. Providing in time and better service to the customers is also a successful strategy to attract more deposits. Prime bank mainly focuses on individual accounts as compared to company accounts and also they prefer current accounts as compared to saving or term deposits. This policy is adopted because current deposits do not cost the bank; on the other hand that bank has to pay cost against term deposits.

2. Deposits Policies: The policy of Prime Bank is to raise those deposits in which its costs are least. The best option is that of current accounts because the bank has to pay zero return on these deposits. Saving and term deposits are also good but since the bank has to pay some return on them therefore only current deposits are preferred.

3. Liquidity Policies: Prime Bank management has a policy of keeping an adequate reservoir of liquidity instruments.

4. Lending Policies: Lending polices of Prime Bank are in accordance with the prudential regulations issued by State Bank of Pakistan. Prime Bank adopts a very conservative approach while advancing loans. The policy is to grant loan to referred people or organizations only. This is to reduce the element of risk. Adequate security must be acquired before advancing any sort of loan. The nature of the security should be such that it is readily marketable and easily transferable. The size of the loan portfolio is to be based on rational issues. The parameters related to the borrower for granting any financial assistance are as follows: • • • • •

Character Capacity Capital Collateral Condition

The preference of Prime Bank is to issue short term secured loans. Long-term loans are only given to trustworthy selected clients. Usually non-fund based facilities are preferred.

5. Recruitment Policies: The major criterion to get a job in the banking sector includes business contacts, deposits and qualification. From the banking point of view, as we all know that they need business, they need such contacts, which can enhance their business portfolio, or they need deposits. Both these can happen through contacts or marketing or through people who work for it. That’s why PCBL is also looking for the people who are eligible as well as can bring business also. In PCBL the recruitment is done through direct appointment & management trainee seat.

MANAGEMENT STYLES: "By making things quantifiable and rational, executives can have more confidence in their decisions, even when they create uncomfortable outcomes, But when it comes to working for these executives, that way of thinking might turn their employees off."_ Nathan Washburn, a management researcher currently finishing up his Ph.D. at the W. P. Carey School of Business.

To know what are management styles and what type of management styles Prime Bank fellows, I interviewed my Manager Mr. Arif Ahmad he told me that “I think flexibility is key -- that you employ different styles as different situations present themselves. Also, each individual requires a different type of leadership. Just as a trainer must accommodate different learning styles to help people learn, so must managers as a manager change their styles based on the situation, individual needs and team needs. In other words, there is no single correct management style to follow. The first piece of advice I would give is; remember that different jobs, teams, or goals require different management styles. That’s the reason there are so many different styles. As for the employees that worked with you before, I think you’ll find they may very well welcome a change from autocratic to democratic. This doesn’t mean you give away decision making authority or overall responsibility, it does mean that you involve them in the decision making process. Since the employees work in teams and there are multiple teams, and since you cannot be everywhere doing everything with them at once unless you clone yourself. He said about the styles because there are multiple teams you must be able to rely on their ability to make sound judgments about there work such as when they need to involve you for assistance and when they are capable of handling things themselves. One of the primary goals of a good manager is to develop those below themselves as professionals. This holds true whether you are working in a gas station or a corporate boardroom, and the only way to do that is to allow them to make decisions and provide the overall grand view (see the forest not the trees) and counseling they need when they need help. It is also the most productive way for a team to accomplish a goal. When complicated decisions have to be made -- whether about salaries, layoffs or growth strategy -- executives often rely on their underlying values to help them sort through possible options. Profit maximization and rationality form the basis of one such set of values, one frequently used by executives when making these decisions. The leadership style in most of the departments is AUTOCRATIC means the managers are very directive and allow no participation from the lower side and tend to give individual attention when praising and criticizing but try to be friendly or impersonal rather openly hostile, also try to be objective in giving praise or criticizing.

ACCOUNTING POLICIES/ PROCEDURES 1. Status and Nature of Business: Prime Commercial Bank limited (the Bank) having its registered office at 77Y, D.H.A, Lahore (PAKISTAN) was incorporated in Pakistan on September 30,1991 as a Public Limited Company under the Companies Ordinance, 1984 and is listed on al Stock Exchanges of Pakistan.

The bank is fully accredited scheduled commercial bank and is principally engaged in the business of banking. The Bank had22 branches operational at the year-end while one more branch will be operational by end of February 2002.

2. Basis of Presentation: Accounting convention 2.1 These accounts have been prepared under this historical cost convention except as stated in note 4 and are in conformity with the International Accounting Standards (IASs), as applicable in Pakistan the banking companies Ordinance, 1984 in all material respects. 2.2 In accordance with the Islamic Banking System, trade related modes of financing include purchase of goods by the Bank from its customers and immediate resale to them at appropriate mark up in price of deferred payment basis. The purchased and sale arising under these agreements are not reflected in these accounts as such, but are restricted to the amount of facility actually utilized and the appropriate portion of mark up thereon.

3. Statement of Compliance: The accounts have been prepared in accordance with directives issued by the State Bank of Pakistan, the requirements of the Banking Companies Ordinance, 1984 and IASC, as adopted in Pakistan.

4. Basis of Measurements: Monetary values of elements of financial statements have been measured on historical cost invention except for those items, which are required, by status or the IASs to be reported on any other basis.

5. Summary of Significant Accounting Policies: 5.1 Financial Instruments The Bank account for regular way purchased and sales of financial assets using “Settlement Date Accounting” by recognizing at the time the instruments are actually transferred to the enterprise. Gains and losses on reorganization of financial assets and liabilities are included in the profit and loss for the period in which it arises. 5.2 Investments Held for trading securities These are investment securities that are held for short periods of time principally for generating profit form short-term price fluctuations.

Available for sale securities Investment securities intended to be held for an indefinite period of time, which may be sold in response to need for liquidity or change in equity prices are classified as available for sale. Listed Securities These are marketable securities measured at market value prevailing at the balance sheet date.

Unlisted securities Where active market does not exist, these are stated at cost less provision for permanent diminution in value, if any. Held to Maturity Securities Investment securities with fixed maturity where management has both the intention and the ability to hold to maturity are classified as held to maturity. 5.3 Lending/Borrowings against Securities Bank enters into transactions of repurchase and resale of Government Securities at contracted rates for specific periods of time with other financial institutions. 5.4 Advances Advances are stated net of provisions against non-performing advances, if any, which is taken to the profit and loss account. Advances are written off when there is no realistic prospect of recovery. 5.5 Fixed Assets and depreciation Tangible (a) Owned These are stated at cost less accumulated depreciation. Depreciation is computed at varying rate by taking inconsideration the estimated useful life of the related assets, using straight-straight-line method. (b) Leased

Assets subject to finance lease are stated at cost less accumulated depreciation. Depreciation on leased assets is provided from the date of the lease agreement using straight-line method at the rates stated in note 12. Intangible These are stated at cost less accumulated amortization, which is, computed@20% by taking into consideration the estimated useful life of the related assets, using straight-line method. Gains and losses, if an, on disposal of fixed assets are taken to the profit and loss account.

5.6 Taxation Current The charge of current tax is based on the result for the year as adjusted for the items which are non assessable or disallowed. Deferred The bank accounts for defend taxation using the liability method on all significant timing differences arising form differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable income. 5.7 Foreign Currencies Foreign currency transactions are accented for at exchange rated prevailing on the date of the transactions. 5.8 Employees Benefits Defined Contribution Plan The bank operates an approved contributory provident fund scheme through a trust for all its permanent employees. Equal contributions are made to the fund on a monthly basis by the bank and the employees are at the rate of8.33% per month of the basic salaries. 5.9 Revenue Recognition Profit on advances and investments are recognized on an accrual basis, except income, if any, which warrants suspension in compliance with the Prudential Regulations of the State Bank of Pakistan. Commissions earned in letters of creditor and a guarantee is also

recognized in an accrual basis. Dividend income is recognized when right to receive payment is established. 5.10 Cash and Cash Equivalents Cash Equivalents are held for meeting short-term cash commitments and comprised cash and balances with State Bank of Pakistan and other banks. 5.11 Derivative Financial Instruments Derivative financial instruments including forward foreign exchange contracts and other financial instruments are recognized at cost (including transaction costs) and subsequently measured at fair value.

5.12 Acceptances Acceptances comprise undertakings by the bank to pay bills of exchange drawn of customers. The bank expects to settle these acceptances simultaneously with the reimbursement form the customers. Acceptances are accounted for as off balance sheet transitions and are disclosed as contingent liabilities and commitment.

CHAPTER: STRUCTURE AND DESIGN ISSUES AT PCBL

There are different departments and division in PCBL so I am highlighting them in the form of an organogram.

Organizational Hierarchy Board of Directors

Executive Committee

President/Chief Executive

Human Resource

Finance

Regions/ Areas

Group Head Corp.Banking

Group Head Operations & Credit

Group Head…. Retail Banking

Corporate Merchant International Treasury

o

Credit

Investment

Electronic Te System & Operations

Assets Credits

Legal Affairs

GEOGRAPHIC DISTRIBUTION OF THE PRIME COMMERCIAL BANK LIMITED The network of Prime Bank is being divided into different regions according to the location. These regions are: Lahore region Central region Northern region Karachi region Southern region

STRUCTURAL DIMENSIONS OF PCBL Professionalism: Professionalism is both an individual characteristic and an ideological position. The primary definition is that of individual professionalism: the idea that membership of a profession carries with it a set of internalized values that will be reflected in the way in which work is carried out and the ethical standards that are adhered to. As an example, a concept of 'medical professionalism' would require that doctors prescribe the most appropriate treatment for their patients, rather than one which would yield them higher fees or would meet an externally imposed objective of cost control. Professionalism is more of an inherent trait but it is influenced by the work environment. Like in organizations where there is a greater stress on professional integrity places a

special emphasis on it. They look for this trait in their potential employees and also develop it after their initial hiring. Special training sessions are held to groom the employees and build their professional attitude. In PCBL, like all other organizations, special stress in placed on the professional attitude of employees. After the hiring of employees, a company policy book is handed over to each employee to guide them in their day to day activities. It is expected from the employees that they will work with their utmost honesty and integrity. Formalization & Objective Setting: Degree of formalization is the extent that roles are independent of specific personal attributes of individuals occupying the roles. Formalization tries to standardize and regulate behavior. It also is an attempt to make structure of relationships more visible and explicit. Diagrams and work flows, org charts are examples. In the rational perspective, organizational structure is an instrument that can be modified to improve performance. PPBS (planning, programming, budgeting systems) PERT (program evaluation review techniques) are examples of rational decision making support systems. Prior formalization can also reduce the stress of trying to build relationships between participants, and make roles and relationships more objective and external to participants. Formalization is an alternative to the information sociometric structure. It can in some instances separate personal feelings between participants from the work activities (in fact, some companies actively try to separate the two. Formalization allows succession to be put into a routine and make personal abilities like charisma less critical to performance in a certain role.

Personnel Ratio: Designation and number: The total number of employees working in the Prime Bank’s network is about 2000 at present. Prime Bank, Main Boulevard Branch has near 30 employees working with it. These employees are working in the following departments. Apartments

No. Of Employees

Operations Cash Department Account Opening Department Accounts Administration/Lockers Foreign Trade

6 3 2 1 1

Credit Manager & Deputy Manager

2

Business Development Branch Manager 1 Business Development Executive 1 Business Development Officers 8 Consumer Banking Regional Manager(each for Auto ,Business 3 & Home Financing) Verification Officer 1 Collection Officer 2

CHAPTETR: REVIEW OF THE PAST PERFORMANCE

RETURN ON EQUITY: 31-Jun-2005 15.40%

31-Jun-2004 18.57%

31-Jun-2003 13.99%

31-Jun-2004 1.08%

31- Jun-2003 0.95%

31-Jun-2005 12.6%

31-Jun-2004 13.9%

31-Jun-2003 10.6%

31-Jun-2005 69.30%

31-Jun-2004 65.42%

31-Jun-2003 63.50%

RETURN ON ASSETS: 31-Jun-2005 0.9%

CAPITAL ADEQUACY RATIO:

LIQUIDITY: Finances/ deposits

EARNING PER SHARE:

31-Jun-2005 Rs. 2.13

31-Jun-2004 Rs. 2.28

31-Jun-2003 Rs. 2.36

SECTION 2 CHAPTER: CORE INTRNSHIP EXPERIENCE AND KEY LEARNING June 28th was my first day at the Training Centre of Prime Commercial Bank Ltd. I reported to Training Manager at 9:00 am. He introduced me with the team of the Training Centre. He then assigns me the job of assisting the Training Administrator Mr. Tahir Ameen. Basically the job of Mr. Tahir is to administer and monitor all the activities at the Training Centre. Being the student of Finance, this doesn’t make any sense to do internship in such a department whose direct link is with company’s HR department. The main reason is this that when I got a chance of doing internship in Prime Bank there was no vacant place for an intern in any branch of Lahore. The branches were already overloaded. My Manager tried to engage me in a branch but unfortunately he could not able to do so. So that’s why I joined the Training Centre of Prime Commercial Bank Ltd. On the very first day Mr. Tahir told me about the affairs of the Training Centre. He told me in detail his task and also highlighted the area in which he requires my assistance. Basically his job was to make different types of arrangements regarding the Training of the employees. For example, if a course is offered on Banking Operations and it is specially offered for the employees of different branches from different cities like you can say it is offered for the employees of Northern region, the arrangements related to their accommodation, lunch or dinner, traveling etc. Making all such arrangements is part of his duty. This is not finished yet because there were some of the external duties performed by him, his duty also include handling of the internal affairs also like keeping the record of the budget granted by the Head Office, record of expense which was incurred during different training sessions. Another duty performed by him is to handle the supporting staff of the Training Centre. So these were some of the duties in which I was asked to assist him in the beginning. My first week was passed by observing these things over there. What happened in the next week, Mr.Tahir got injured in a traffic accident. He got some severe injuries on

his back and on his leg and he was advised by the doctor to take a rest of minimum 4 weeks. So his whole responsibility came onto my shoulders. That was a very tough job for me but I am very great full to my Manager Mr. Arif Ahmad that he guided me at every step. He told me how to handle things effectively. Then I started performing the duties as a Training Administrator. Now what happened next new courses are coming according to their schedule, as a Training Administrator my job was to make arrangement and to take care of everything happening in the Training Department. So my second week passed in this way. At the end of second week, I came to know about a course coming in the start of the next week on Soft Skills. The name of that course was Telephonic Techniques & Manners. This course was designed in such a way that it will help all of the employees working in Prime Commercial Bank Ltd. It is for higher officials as well as for low level employees. When I came to know about this thing that this course is designed for everyone in the company, my heart says that I should also attend this course this would enhance my soft skills and will also make me familiar with the corporate culture that how u should be talking on the telephone, but being an Intern over there this was against the policies of the Bank. I went to my Manager and told him about my intensions. I said sir I came here (PCBL) with the intensions to do internship in a branch but as there was no vacant place for any intern I have to adjust myself in Training Department. So please it’s a request, allow me to attend few course on core banking activities. He looked at me with a smile and said ok I allow u to attend three course of your own choice. But remember one course a week because you have also other things to do here as a Training Administrator. So I agreed on this and selected three courses for three weeks. Now it’s the first working day of third week of my internship. The first course which I was allowed to attend was a full day course on Telephonic Techniques & Manners. It tells you about how you should be speaking on telephone with you esteem clients, your colleagues and your higher officials. This was the main idea of the course and now I will explain the things which I learned from this course. The first main thing is that you have to project our whole personality on telephone through your voice. So we should be very care full in projecting our personalities on telephone. Next are the key concepts related to Telephonic techniques and Manners. These are explained as follows: First we see that what the reasons for which we speak on telephone are

1. To Inform or to Instruct: Here the goal is to clarify, secure understanding and explain the process you want.

2. To Persue: It is the willingness/ acceptance of an idea.

3. To Entertain: This type of speaking may include humorous statements you will make

In this regard we usually consider few more things which are very important for telephonic manners:

Pitch: It’s the highness and lowness of the sound of our voice. It should be varied in speaking.

Monotone: When speaker has little or no variation in pitch, he is monotone. Traditional problem in pitch is monotone.

Rate: It’s the number of words you use per minute when you speak 80 to 160 words per minute is the standard in public speaking. Over telephone it should be 60 to 90 words per minute.

Volume: It’s the loudness or softness of you voice. It should be clear enough to listen and understand the things told on the telephone.

Voice: It’s the ability to speak. The vibration made by the throbbing of vocal folds modified by the resonance of the vocal tract.

Sound: Sound is the vibration, as perceived by the sense of hearing. And it should be louder enough.

Contrast in Emphasis: You should be using a louder or softer volume on certain words, on certain ideas and certain part of your talk.

Controlled Breathing:

You should breathe deeply. Fill your lungs with air in order to produce higher pressure vocal notes.

Pronunciation the Case of Jargon Words: Within your organization you learn jargon pronunciation and accents. A danger lies in using the in-group pronunciation outside your group. So you should avoid things like this.

Extemporaneous: Usually what happen that speaker uses note or an outline. Like small chits or telephone message slips.

Memorization: It is that you can memorize whole message on the phone but you can’t always depend on your memory because sometime you forgot the most important point. So these were few things which are really important in telephonic manners. There are also some exercises which tell you that at what level your telephonic manners are standing. Next is the concept of Active Listening it means that you should be active enough while listening to a telephone call. It consists of a principle called LADDER. The LADDER Principle is L - Look at the person speaking to you. A - Ask Questions D - Don’t Interrupt D - Don’t change the subject E - Empathize R - Respond verbally and non - verbally. Next is about the voice how we use our voice to communicate with the person sitting on the other end.

Voice: How you use your voice is more critical over phone because the person on the other end is not “connected with you visually”. Your voice reflects your personality. Practicing your voice techniques is like practicing a sport. If you stay at it, you will reap its benefits. It is one of your personal signatures; varying pitch, rate and volume gives it

more interest and appeal. Hence you would have to project your whole personality on telephone through your voice.

How Assertive are you on the Telephone? Assertiveness: It is giving equal weight to your own opinion and others; being aware that both parties have rights. It is about respect other people rights. But you should also take steps to ensure that your own rights are also protected. It is about behaving in a confident, calm and reassuring way that helps you to control the situation. It is important that the callers feel that they can trust you. If you communicate on a calm, adult level, anxiety is reduced, and both parties feel good, each is aware of the other’s feelings and is able to see both side of the story. So assertiveness does not mean harassing other people and forcing your opinion onto them. Sometimes what happens that many people automatically discount their own feeling or become emotional and defensive when they feel that they have lost control of a situation. By being assertive on the telephone you will save time and feel more in control which should help you to feel positive towards your caller even in difficult circumstances. So this was summary of that course which I attended as my first training session. It ends up with Golden Telephone Rules. These are: 1. Be prompt, answer within three or four rings because callers do not like to be kept waiting for long. 2. If you are going to be away from your phone for any length of time, activate divert calls button. 3. Answer with a smile – it comes across in you voice, making you sound friendly and positive. 4. On answering give a verbal handshake, announcing the Bank’s name branch/ department as well as your own name. 5. When making a call, make sure that it is convenient time for the other person to handle it. 6. Show empathy, build an instant relationship with you caller by using a warm, friendly tone of voice. 7. Establish the need of your caller immediately by asking “ how may I help u” 8. Use open question to find out facts and information and also closed questions to clarify and check understanding. 9. If you can answer the caller’s question promptly and efficiently. If you can’t help, tell them what you can do for them. 10. Use continuity noises to show the caller that you are listening. 11. Repeat names, telephone and fax numbers and dates back to the caller to make sure that you have got them right. 12. Make notes because a short pencil is far better then a long memory. 13. Double check all vital information by reading back in summary what have you discussed.

14. Give the call you full attention. Nobody can hold two conversations and retain the 100% information from both sides. 15. Agree any actions that either party will take. 16. Finish off your call on a positive note. 17. Sign off properly. Confirming what will be happen as a result of this call and thanking the other person for their time. So this end up my first Training Session it was a great learning for me. Apparently its seems to be a very low level training session but in reality it was other way round. After this course I try to implement what I learned from this session in my internship period and I found how well it was designed for everyone. So after the first training session my third week spend in the routine work for the training department.

The fourth week…in this week I chose a very basic course related to daily operations of a bank i.e. Prevention of Money Laundering – KYC & Account Opening, and Types of Accounts in Line with Prudential Regulations.

What Is Money Laundering? •

• • •

Money Laundering refers to the methods criminals, use to hide and disguise money they make from committing crime. The term “laundering” is used when criminals turn their “dirty” criminal money into “clean funds” without arising suspicion. The conversion of profits derived from illegal activities into financial assets which consequently appear to have legitimate origin. Money Laundering is a magic trick for wealth creation - are haven for drug traffickers, arm dealers, tax evaders. Money Laundering, at best, may be defined as the processing through the banking system of the proceeds of crime in order to disguise their illegal origin.

How Money Laundering is Legalized? • • • •

Investing into Assets or Properties (e.g. Land, Building, Gold etc.) Washing dirty money through legalized channels like banks. Conversion of black money into Government Securities Movement of black money through financial institution and changing and hiding its  Origin  Ownership

 Character

How Black Money is Channelized? • •

The movement of ill-gotten money can be between the countries or within the same countries. When Banks don’t care about the source of cash flows, it increases the volume of bank money, which is later on injected into the main stream of economy.

Policies Encouraging Money Laundering: • • • •

Liberalization of Foreign Currency Accounts Issues of Bearer Bonds, Traveler Cheques, etc Free hand to Kerb Market Kerb market has been an easily approachable source to white and black money.

Source of Illicit Wealth: • • • • • • • • • • •

Frauds and misappropriations of public funds Tax evasions Qabza groups and Mafias Over and under Invoicing Bogus trade transactions Stolen antiques Illegal arm sale Drug money Smuggling of goods and humans Facilitating illegal immigration Embezzlement

Money Laundering in Pakistan: • • • • • •

Sustain economic inequalities Trade barrier that prevent legal business and movement of goods Regional disparities and conflicts Instability caused by support for criminal Rat race and greed Black economy is estimated twice the size of white economy.

How Money is Laundered: •

Tax evasion on legal business transaction

• • •

Illegal money lender getting payments from the borrowers on high interest rates Ill-gotten money’s source is being concealed by customer or his customer e.g. “A customer can deposit endorsed open cheques and other instruments especially of big amounts or some Benami deposits” are created. There are generally three steps to wash dirty money  Placement  Layering  Integration

Placement: Dirty money’s origin is attempted to be hidden by depositing in bank and is mixed with legitimate business. • • • • •

Large amounts are split into small amounts and; Deposit into bank accounts Used to by instruments like drafts, traveler’s cheque and other bank instrument in the name of front men and Collected through accounts at other location Using non- traditional financial institution: Currency smuggling, precious metal/ stones and art dealers, under ground banking Hundi, chit etc, other cash business that is hotels travel companies etc.

Layering: • • • • • •

Conversion/ transfer of funds to distant – from – source places. Purchase of assets including real estate in the names of front men or Benami; Series of quick purchases and sales of investment paper in the name of front men or Benami; A series of telegraphic transfer through accounts at various bank across the globe; Funds are transfer abroad to shell companies and are circulated in more than one companies until it appears clean Use of scattered accounts n low control areas is common.

Integration: • • • • •

Integration or Re-entry of laundered funds into white economy. Having laundered the funds, these are moved back into white economy as legitimates ownership by investing them in: real estate luxury assets business and bonds

Two methods are used for integration •

Loan back method Funds are transfer to off shore companies owned by launderers and loan is back to the launderers

•

Invoicing method i. Under invoicing by exporter for goods and services ii. Over invoicing by importer for goods and services.

Anti Money Laundering Measures in Pakistan: • • • •

The Government of Pakistan is seriously working an anti money laundering legislation and legal framework SBP has designed new structure for money changers SBP has issued instruction for the establishment of exchange companies Through Prudential Regulations SBP has devised certain rules for banks to follow, in order to prevent use of banking channel by money launderers.

SBP Prudential Regulations for KYC and Money Laundering Regulation M – 1 Know Your Customer (KYC) All reasonable efforts shall be made to determine true identity of every prospective customer, the importance of KYC/ customer diligence has increased. The minimum set of documents must be obtained from various types of customer/ account holders. • • • • • •

Introduction: Existing Account holder Account holder of another branch Account holder of another bank Employee of own bank/ branch Employee of another bank

Due Diligence: • • •

KYC – Know Your Customer RST – Report on suspicious Transaction Compliance Unit Monitoring The bankers used to look at this issue from the angle of banking laws, laws relating to protection to the collecting and paying bankers. Bankers must protect themselves by establishing the following key points related to the customers and their business that are likely to pose a higher than average risk to the bank, and it should be as per SBP Prudential Regulation.

• • • • • • •

Establish bonafides Determine eligibility Receive & examine necessary documents Obtain introduction/ references Make circumstantial enquires Know normal procedures and implication of deviation Effectively record and control: mandate, similar accounts.

Customer Due Diligence: Branches are advised that KYC/ customer due diligence is not a one time process exercise to be conducted at the time of entering into a formal relationship with customer/ account holder. Its an ongoing process for prudent banking practices, therefore branches are encouraged to: •

•

KYC: i.

Update customer information and records at reasonable intervals

ii.

Put in place a system to monitor the accounts and transaction on a regular basis. Install an effective MIS to monitor the activity of the customer’s account. iv. Maintain proper records of customer identification Monitor and check unusually large cash transactions.

RST: iii. iv.

vi. vii.

General: Set up compliance unit with a full time head Chalk out plan of imparting suitable training to the staff of bank/ branch periodically

Regulation M – 2 (Measuring) Anti Money Laundering Measure: i.

Banks DFIs shall ensure that their business is conducted in conformity with high ethical standards All banking laws and regulations are adhered Monitoring of accounts on a regular basis Transaction which are out of character/ inconsistent with the history should be viewed with suspicion Implementing of Bank’s policies & procedures and proper training there to

ii. iii. iv. v.

Regulation M – 3 (Record Retention) i. ii. iii.

Banks to maintain important record related financial transaction Records to be maintained in systematic manner Banks shall maintain al local & foreign transactions record for a minimum period of five years Record relating to the Suspicious Transaction reported by the bank will be retained even after the lapse of the period prescribed above

iv.

Regulation M – 4 (Corresponding Banking) The bank shall gather sufficient information about their correspondent banks to understand fully the nature of their business. Factors to be consider include: a) b) c) d) e) f)

Information about the correspondent bank’s management and ownership Major business activities Their locations Money Laundering prevention and detection measures The purpose of the account The identity of any third party that will use the correspondent banking services

Regulation M – 5 (Suspicious Transaction) The bank should pay special attention to all types of:

a. Complex Transactions b. Unusual large transaction c. Unusual patterns of transaction, which have no apparent economic or visible lawful purpose d. Branch should repot promptly within three days, after conducting appropriate investigation, through Compliance Officer of the Bank e. Report on suspicious Transaction should contain at a minimum the following information: i. Title, type and number of account ii. Amounts involved iii. Detail of transaction iv. Reason for suspicion v. Nature of underlying criminal activity, bank/ DFI suspects, has generated the proceeds under suspicion.

ACCOUNT OPEINING AND TYPES OF ACCOUNTS What is Account Opening? It’s the first step to establish Customer – Banker relationship. Account opening is necessary for assets based & liability based products.

Types of Accounts: i.

Assets Based Accounts: Commercial Advances and Consumer Advances

ii.

Liability Based Accounts Deposit accounts i.e. Current Account, PLS Accounts, etc

What is the difference between Current & Saving Accounts? a. Kind of Current accounts:

i.

liability based current accounts: Deposit account (non profit bearing)

ii.

Asset based current accounts Loan facility accounts

b. Kind of Saving accounts (Local Currency): i.

Profit and Loss Sharing PLS Account: Profit is paid half yearly Special Saving Account: Primax Classic: Profit is paid monthly on daily product Primax Anchor: Profit is paid on min. balance

ii.

Notice Deposit: Short Term Deposits 7 to 29 days (Profit is paid on maturity) 30 days

iii.

(profit is paid on maturity)

Term Deposit: (Fixed) 1 Month

1 Year

5 Year

Primax Exclusive: (Special Term Deposit Scheme) 3 Months

6 Months

Profit is paid on maturity, can be rolled – over for some period iii.

Primax term Deposits 1 Year - 5 Year

Profit is paid: 1 Year 2-5 Years

(at maturity) (6 monthly)

SPECAIL ACCOUNTS: i. ii. iii. iv.

Administrator, Executors Trusts Liquidator Local authorities, municipal corporation, etc

Non – Resident Accounts (Local/ Foreign Currency) i. ii.

Pakistani permanently residing abroad Foreign nationals living abroad

Foreign Currency Account: i.

Individual Accounts:

ii.

Saving Current Account Company Accounts

Documents Required for Account Opening: The following forms/ documents are always required before opening of accounts: i. ii. iii. iv.

Account Opening Form Identity Documents Specimen Signature Card Cheque Book Requisition

Account Opening Documents- Introduction Branches/Units shall obtain “Introduction” on the new account to assess the prospective customer’s /account holders integrity, respectability and the nature of the business etc. Any laxity in this regard may result in serious consequences for the banker. The following guidelines are to be followed in this regard: i.

Existing Account Holder:

Where the introducer is an existing account holder of the same branch, his introduction should be accepted, after due verification of signature by the official of the branch. ii

Account Holder of the another branch: In case the introducer is an account holder of another branch of Prime Bank, The account should only be opened after proper verification of the signature from the concerned branch.

iii

Account holder for another bank: Where the introducer happens to be an account holder of another bank, the Introduction should be accepted after complete verification of the signature and other particulars of the introducer from the bank.

iv

Employee of the Bank/Branch: The introduction by the employees of the bank may also be acceptable. However, may be he or she will have to establish that sufficient information Has been collected on the new account holder for making the introduction and that they believe that “Introduction” from the a person other than the Bank’s employee is not necessary

v

Employee of other Bank The introduction of a person other than by the bank/branch employee is being stress to ensure maximum authenticity on the status of the would-be accountholder/customer, beside minimizing he chances of undesirable accounts which may be opened on the introduction of the bank employees in their pursuit to achieve targets of opening maximum number of accounts and treating the “Introduction” a mere formality of the process.

Statement of Accounts Statements of accounts are generated on the fixed frequencies, i.e. Monthly: i ii iii Half Yearly:

Current Accounts Primax Classic Primax Anchor

Saving PLS

Mailing and Delivery of Statements: i. Send statement through mail in the bank’s envelop ii. Constantly update customer correspondence address in Auto Banker iii. Mail registered to be updated iv. If statement returned Un delivered

Hold Mail: 1. Flag marking as “hold mail” in auto banker in hold mail cases 2. Written request of the customer is required in case they want to pick the statement by hand 3. Deliver the statement on request after verification of the customer

Undelivered Statements: i. Return mail at any time must be taken seriously, take vigilant steps to identify the reasons of return ii. Keep record of undelivered mail iii. Contact customer and/or the introducer for rectifying the address iv. Check own record for address verification

Blocked accounts i

Dormant Account Dormancy period: Saving 12 months & current 6 months

ii

Unclaimed Balances & Articles Of Value Unclaimed period 10 years

iii

Deceased Accounts Immediately block and circulate the notice to other departments and

Branches iv

Attachments Notice and order served by: Court, Tax Department or some government agency.

Basic Banking Account (BBA)  

Open the new BBA A/C and complete the formalities for opening the account as usual , issue a new ATM card if desired and deduct it charges The following specification will be made known to all account holders maintaining BBAs:

1) 2) 3) 4)

BBA is a non-remunerative (non- profit bearing) account Could be opened with minimum deposit of Rs1000/-only No- minimum balance requirement If NIL balance remains for a continuous period of 6months, the account will be closed by giving notice 5) Two deposit &two cheque withdrawals are allowed free of a charge in a month. If in excess Rs 300/-per month service charge will be recovered and the average balance remain below 50,000/in case of non- availability funds, the system wile mark lien and later on recover charges.

Deduction of Zakat: • • • • • •

Zakat is collected at the ratio of 2.5% as per Zakat & Usher Ordiances1980 It is deducted on all profit bearing accounts on 1st Ramazan, FC accounts are exempted. Minimum deposit amount is announced by the Government on the annual basis Zakat collected is paid to the Govt. On its prescribed format within 24 hours of its deduction. Zakat deducted on 1st of Ramzan, must be reported same day by all branches to designated Branch of the bank. The main branch will consolidate the figure and submit the consolidated amount along with the statement to SBP and the copy of the challan form and Zakat statement is submitted to the Ministry of Zakat & Usher in Islamabad for the record.

Collection Of 5% Excise Duty on Service

Federal excise Duty levy able on the services rendered or provided by the Bank shall be recovered from the customers in addition to the prevailing commission/charges and deposited by the head office. These services provided by the Bank Companies, Financial institutions and non –banking finance companies shall be as follows: 1. 2. 3. 4. 5. 6.

L/c commission (Local & Foreign L/c) Guarantee Commissions (Local & Foreign L/Gs) Brokerage commission Issuance of P.O, DD, FDD Bill of exchange charges Transfer of money (local and foreign) including TT, MT and electronic transfer (Online Transactions). 7. Providing Bank Guarantees 8. Bill Discounting Commission 9. Save deposit lockers free 10. Credit and Debit Card issuance, processing operation charges. So this end up with my second one day training session. From this session I have learnt many things related to the general banking operation. As I was doing internship in Training Department, I was unaware of these operations. I get very important information related to the concept of money laundering and about the different types of bank accounts in line with Prudential Regulation. Onward this session my whole week was spent in doing the routine work for the Training Department. Fifth week of my internship…. In this I have a great opportunity coming my way. The next course which I was offered to attend was very much relevant to my major subject which is Finance. The name of the course was Treasury Management in Commercial Banks. This is very important course which is related to the Foreign Trade Department. The nominees for this course are the senior mangers of the Trade Department and many other employees related to the Trade department. Even my Manager Mr. Arif Ahmad has attended this course. To get the permission for this course was not an easy task. I have to convince my Manager that I have the ability and level of knowledge to understand this course. For this he said ok I ask u some basic questions related to this topic if you answer me right I will allow you to attend this course. Basically course is truly related to the subject of International Finance. So then I gave a small interview and after that I have convinced him that I am able to attend the course of such level.

Treasury Management in Commercial Banks Introduction to the Treasury Management in Commercial Banks Money Market Players:

• • • •

Commercial Banks Central Banks Large Corporations Other Financial Institutions including Discount Houses, Acceptance Houses and NBFIs

Financial Sector – Pakistan • • • • • • •

SBP SECP Commercial Banks NBFIs Investment Companies Mutual Funds Stock Exchanges

Instruments of Money Market: • • • •

Markets where funds are borrowed or placed for maturities les than one year is called money markets. Treasury Bills for one, three, and six months Short Term Financial Certificates ie. CDs Short term inter – bank borrowings

Instruments of Capital Market: • • • •

A market dealing with instruments of long maturities normally more than one year is called Capital Market. Shares of Public Limited Companies TFCs secured COIs unsecured for long term issue by NBFIs.

Service of Financial Market:

• • • • •

Pooling of savings Clearing and settling payments Pooling of risk Transfers across time and space Reduce information cost

Objectives of Commercial Banks: • • •

To maintain the liquidity and solvency To us excess funds so that they produce the highest possible returns To borrow necessary funds at the lowest possible cost

Role of Central Bank: • • • •

Buying and selling money market instrument under open market operations Voluntarily purchasing and selling of Foreign Exchange against local currency Changing the interest rate at which commercial banks can get money from central bank, (the discount rate) Changing in reserve requirement for schedule banks

Reserve Requirements for Scheduled Banks: • •

Every schedule bank must maintain cash reserve requirements and amount not less than 5 % of its Time and Date Liabilities with SBP Statutory Liquidity Requirement and amount not less than 15 % of its Time and Date liabilities in Government approved securities

Treasury Bills: • • • • • • •

Most common approved securities for maintaining statutory reserves by banks Easily salable in secondary markets for short term fund raising Periodical auctions by SBP through press Banks and Financial Institutions bid directly to SBP Individuals and NBFIs bid through their bankers Payments by bidders to SBP on settlement dates Issued at discount price

• •

Can be discounted at secondary market of commercial banks or used for REPOS transaction through SBP Changing the amount of reserves that commercial banks are required to keep against time and demand liabilities

Treasury Department: • • • • •

Plays the role of funds manager/ dealer To maximize profits (to achieve budgets) through inter – bank money market and foreign exchange deals To manage risks within acceptable parameters (internal and external) To maximum yields on treasury investments To provide competitive rates to branches/ customers

Organizational Structure of Treasury: • • • • •

Money Market Desk Foreign Exchange – FX Desk Risk Management Corporate Desk Asset Liability Committee (ALCO)

Functions of Money Market Desk: • • • • • •

Managing Balance Sheet Funding Commercial Assets (loan) Maintaining adequate liquidity Manage maturities of liabilities, market share, manage different sources, manage different investments and manage liquidity mix Funding and managing treasury assets Managing reserves and ratios

Functions of FX Desk: • • • •

Position taking Jobbing Market making Filling up commercial orders

•

Intervene for Central Bank

Functions of Risk Management: • • • •

To identify the key risks in treasury operation To identify/ develop critical variables and ratios to monitor these risks To identify warning and stress levels for these variables To develop and implement contingency plan

What is Risk? To chance that events or actions will not have previously planned outcomes.

General Risk in Treasury: • • • • • • •

Treasury operational Risk Credit Risk Liquidity Risk Currency Risk Interest Rate Risk Capital Risk Personal Risk

Operational Risk: • • • •

Risk of loss due to error Risk of loss due to ignorance Can be avoided by strict application of procedures Avoided by introducing clearly defined procedures

Credit Risk: • • • • •

Arises from failure of counter party to pay or repay Customer fails to repay loan Investment failure Failure of counter party in forward deal before maturity Can be controlled by strict application of dealing limits or using cash/ securities as collateral

Liquidity Risk: • • • •

Arises through inability to meet maturing liabilities due to insufficient liquid assets Arises through poor sash management, wrong choice of illiquid investment Insufficient working capital Can be controlled by cash flow analysis

Currency Risk: • • • • •

Change in value of an assets and liabilities due to change in exchange rates Must be managed not avoided Next enhance corporate performance in profit making Manage and controlled and hedging Strict observance of controls

Interest Rate Risk: • • •

Change in revenue from expenditure to a source due to a change in interest rates Managed & controlled by hedging Supervised by proper position reporting

Personal Risk: • • • • •

Risk of loss due to theft or fraud Risk of loss due to concealing errors or dealing losses Staff influence each other Over- dependence on certain members Controlled but never totally avoided

Functions of Corporate Desk: • • • •

Consultancy services to corporate customers Execute customers FX Orders Provide treasury products & services Identify risk exposure of clients

Two Prime Functions of Treasury: • •

Managing & Trading Interest Rates Managing & Trading Exchange Rates

Treasury Operations: • • •

Front Office – dealing room plays an important role in overall structure of the bank It manage liquidity and market based exposure in local and foreign currencies with the parameters set by the bank It is primarily responsible to compile exposure taken by the corporate and retail sector and ensure that these exposures are managed profitably for the bank

Treasury Front Office: • • • •

Treasurer Chief Dealer Senior Dealers Junior dealers/ position pad writers

Functions of Front Office: • • • • • • •

Record data from branches Compile and analyze data Gather market information Form a view of the market Execute deals Record deals on the system Monitor and comply with all limits

Treasury Back Office: It consist of the following personnel: • • •

Treasury Operation Manager Head of Foreign Currency Settlement Head of Local Currency settlement

Functions of the Back Office: • • •

Verification and confirmation of the deals Payments and settlement of amounts Post deals in ledgers

•

Update MIS reports

Treasury Middle Office: It consist of the following personnel: • • •

Treasury Mid Office Manager Head of internal reporting Head of external reporting

Functions of Middle Office: • • • • • •

Gather information on price and yield volatility Review MIS reports for branches Review Deal Tickets for complaints Mark –To-Market revaluation deals Interact with SBP for reporting and compliance Report compliance to senior management

Forward Exchange Rates & Contracts • • • • • • • •

Rates which are agreed today but applicable for future transactions These are required by the exporters and importers to avoid the negative impact of exchange rates fluctuations If foreign currency shows appreciation against local currency-importers concern If foreign currency shows depreciation against local currency-exporters concern All forward rates are based on spot rates A forward can be at premium over spot A forward can be at discount over spot A forward can be at PAR with spot

SBP Guidelines: • • • •

No forward cover to be issued for maturity less than 1 year 1 month forward cover should be for fixed maturities In case payments are made/ received within 1 month the spot selling/ buying rate will be applied and the contract will be closed out at maturity Forward purchased contract against exports are allowed up to six and a half month from the last date of shipment as per contract of sail or L/c

• • • • • • • • • •

Contract of forward purchase can be made at any time after the shipment has taken place for export under consignment basis but the last date of delivery should not fall after six and a half month from the date of shipment The forward contract can be booked at any time after opening f L/C or registration of import contract Forward cover facility is not available for import of crude oil Forward sale is allowed to non residents for portfolio investment in rupee denominated shares and securities on repatriation basis out of fund from abroad The date of forward sale can be the date of conversion of FC into rupees Forward cover will not be provided dividend, interest and coupon income Forward sale cover will not be allowed for FDI. Forward contract can be extended on roll over basis for less than 1 month if required by importer or exporter. Forward contract is to be extended by closing out the original contract and booking for a fresh contract at the new rate. Forward contracts partially unutilized or totally not taken up may be closed out on maturity and the difference between the booked rate and spot rate will be recovered from or payable to customer as the case may be.

Reports On Daily Basis to SBP: • • • • • •

Deals Take - ups Cancelled deals Adjusting Entries Closing Balance All sales to customers must be in cover of genuine transactions approved by SBP.

Exchange Rate Mechanism: • • • • • •

Presently exchange rate system in Pakistan is based on free – float system, i.e. demand and supply forces in inter – bank market Rates are quoted in direct or in indirect forms Ready rates Spot rates Cross rates Forward rates

• •

Choice of selling and buying rates in case of direct and indirect quotation Application of chain rule of equations for calculating cross rates. So with the exchange rate mechanism this course has ended. It was a really good course because its nature was very much practical. It enhances my knowledge regarding the treasury operations f the commercial bank in Pakistan. Another important thing of the course is that it also contains some numerical exercises related to calculation of the cross rates, conversion of spot rates into forward rates and related to exchange position. In my opinion this course was the best and toughest course of all the three courses I attended in Prime Commercial Bank Ltd. I am very great full to my manager that he allowed me to attend such courses. After this course I have one week left for my internship. In this week Mr. Tahir who is Training Administrator came back from his leave and takes his charge of the Training Administrator. So in the last week I didn’t have much work to do. Like before I just assisted Mr. Tahir in his routine work and in this way I ended my internship in the Training Department of Prime Commercial Bank Ltd. It was a very good working experience for me and I am quite sure that this experience will help me in my professional career specially in banking sectors.

CHAPTER: REVIEW, CONCLUSION AND RECOMMENDATIONS

SWOT ANALYSIS OF PRIME COMMERCIAL BANK LTD STRENGTHS:

• • • • • • • • • • • •

Cooperation among personnel is the key to success and Prime Bank personnel are very cooperative and kind to each other. A good system of communication flow is there. A good attitude of personnel bankers and relationship managers is a plus point . The credit administration department enjoys a stuff of very good business executive who attract and analyze people in a very good manner. The bank has a good team of customer relation managers and customer relation officers to help the people. The keeping of a good and modest environment during business hours The working of employs even after the end of the business or official hours. A good dressing of employees and their attitude towards the people. The commitment of employs towards secrecy. A good system of training new comers in the bank. Service to customer even at the cost of bank increase the business Automation and online business

WEAKNESSES • • • • • •

Employees turnover is higher A sense of pride in personnel Higher charges of some services as compared to some other banks There is lake of proper advertising like sponsoring of any festival or any event like ports etc. No frequent designing of new schemes for the depositors. Sometimes more time consumption in payment of cheque as these have to be get approved form credits department.

OPPORTUNITIES • • • • • • •

The role of personal bankers and relationship managers may increase its market share The joining of Mr. Saeed A. Chaudry is opening new ways of development A good sales team and marketing people committed employees due to payment of higher salaries payment of bonus to employees performing well a good job recruitment policy of hiring business graduates Highly motivated and committed staff towards the bank and towards the management policies.

THREATS

• • • • • • • • •

Pakistan is a developing country and our debt burdened economy is a major threat for the banking business The adoption of online system and developing of we sites of the other banks can create a threat to the bank The employee turnover can create a serious problem for the bank Delaying in launching a credit card Lake of promotion and advertisement Fewer deposits and advances schemes Start of evening banking by some banks Higher limit for account opening and profit earning Smaller branches network in the country

SUGGESTION

• • • • • • • • • • • • •

Increase promotion and marketing efforts by using electronic, print media and energetic and creative sales force in order to attract and capture the market share Employees must be given the opportunities for participation in decision making Increase salary package in order to motivate employees Control employee turnover Improve management Recruitment process must be amended and vacancies should be advertised in newspapers in order to hire more qualified ,young, energetic and capable people Favoritism must be controlled Update the website and provide more information because other banks have mare elaborated and fascinated websites Improve pricing policy because Prime Bank’s rates are higher as compared to other banks Reduce minimum requirement for account opening and profit calculation because other banks in the industry have low limits Start online foreign operations as early as possible Improve the layout of Training Centre. Increase number of departments in the branches