UCBL Intern Report
UCBL Intern Report
UCBL Intern Report
GLANCE:
United Commercial Bank Limited (UCBL) started its operation in the mid 1983 with an
Authorized Capital of Tk. 1000 Million and Paid up Capital of Tk. 100 Million (raised to
Tk. 299 Million in 2009); sponsored by some dynamic and reputed entrepreneurs from
various fields of economic activities such as shipping, oil, finance, garments, textiles and
insurance etc and eminent industrialist from the country and also participated by the
Government. It is a full licensed scheduled Commercial Bank set up in the private sector
in pursuance of the policy of the Government to liberalize Banking & Financial services
it has been able to establish one of the largest networks of 107 branches as on 31.12.2010
among the first generation banks in the private sector.
The Chairman of the Board of Director Mr. Jahangir Alam is a renowned businessman
besides being an eminent personality of the country.
The Bank has in its Management a combination of highly skilled and eminent bankers of
the country of varied experience and expertise successfully led by M. Shahjahan
Bhuiyan, a dynamic banker, as its Managing Director and well educated energetic and
dedicated officers working with missionary zeal for the growth and progress of the
institution.
With its firm commitment to the economic development of the country, the Bank has
already made a distinct mark in the realm of Private Sector Banking through personalized
service, innovative practices, dynamic approach and efficient Management. The Bank,
aiming to play a leading role in the economic activities of the country, is firmly engaged
in the development of trade, commerce and industry thorough a creative credit policy.
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Utilize all available resources to develop various plans, policies and procedures in
each of the objective and goal areas.
Search for a total customized solution of I.T for the purpose of full automation
step.
Goals:
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Objectives:
United Commercial Bank Limited aims at excellence and is committed to explore a new
horizon of banking and provide a wide range of quality product ad service.
It is a bank for common people including businessmen and professionals. It intends to
serve with quality at a price competitive to anyone in the financial market. It would
constantly keep on exploring the needs of the clients.
So the United Commercial Bank Limited shall also develop a youthful; and exuberant
management team-technologically sound and rich in experience. They would work hand
with zeal and enthusiasm to achieve the objectives of the bank in the new millennium.
Its business objectives are:
Current Position:
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Capital:
During the year 2009 authorized capital of the bank remained unchanged at TK. 1000
millions and the paid up capital stood at around TK. 299 million. On the other hand the
reserve fund of the bank increased by 16.33 percent to TK. 2,197 million in the year 2009
as against TK. 1,889 million in the previous year.
Number of Branches:
Presently the number of branches stands 107 covering almost all the important places of
the country. The numbers of authorized dealer branches are 24.
Investment:
At the close of 2009, total investment of the bank stood at TK. 9,346 million as against
TK. 7,201 million at the year 2008. However, dividend amounting to TK. 8 million has
been received from different companies/ institutions against investment in shares during
the year 2009.
Division of UCBL:
All policy formulation and subsequent execution are done in the Head office. It
comprises of nine major divisions namely Credit division, International Division, Central
Account Division, Human Resource Division, Information Technology Division, Training
Division, Research and Development Division, Audit and Compliance Division.
Online Service
Credit Card
One Stop Service
Time Deposit Scheme
Monthly Savings Scheme
Deposit Insurance Scheme
Inward & Outward Remittances
Travelers Cheques
Import Finance
Export Finance
Working Capital Finance
Loan Syndication
Underwriting and Bridge Financing
Trade Finance
Industrial Finance
Foreign Currency Deposit A/C
NFCD ( Non Resident Foreign Currency Deposit Account )
RFCD ( Resident Foreign Currency Deposit Account )
Consumer Credit Scheme
Locker Service
Liquidity Ratios
1
Cash Position
Indicator
2004
2005
2006
2007
2008
2009
0.074
0.076
0.073
0.082
0.073
0.077
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Cash Position
Indicator
2
Liquid Security
Indicator
2004
2005
2006
2007
2008
2009
0.116
0.096
0.156
0.098
0.095
0.087
Liquid Security
Indicator
0.100
0.050
0.000
2004
2005
2006
2007
2008
2009
2004
0.583
2005
0.572
2006
0.550
2007
0.770
2008
0.686
2009
0.682
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Capacity Ratio
1.000
0.800
0.600
0.400
0.200
0.000
2004 2005 2006 2007 2008 2009
Capacity Ratio
4
Cost Deposit
Ratio
2004
2005
2006
2007
2008
2009
0.430
0.440
0.516
0.527
0.580
0.610
2004
2005
2006
2007
2008
2009
1.000
0.939
0.659
0.601
0.449
0.408
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Deposit
Composition Ratio
0.600
0.400
0.200
0.000
2004 2005 2006 2007 2008 2009
6
Hot Money Ratio
2004
1.963
2005
1.978
2006
2.295
2007
2.303
2008
2.763
2009
2.687
2005
2006
2007
2008
2009
Hot money
ratio suggests the coverage of volatile liabilities by short-term assets. In 2004 the
hot money ratio was 1.963 times. The higher this ratio is the lower risk and higher the
Liquidity position has. In 2005, its hot money ratio slightly increased to 1.978
times and continues its trends to reach to 2.763 times in 2008, but slightly
decreased to 2.687 times in 2009. Overall, the hot money ratio of UCBL increased over
the years.
7
2004
2005
2006
2007
2008
2009
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41.67
3
51.88
9
76.32
0
70.00
5
42.00
9
46.64
1
80.000
60.000
40.000
20.000
0.000
2004 2005 2006 2007 2008 2009
2004
1.033
2005
0.980
2006
0.947
2007
0.901
2008
0.872
2009
0.808
The ratio as
depicted in the above illustration has a declining trend. In the year 2004 the ratio reached
its peak mainly because a high proportion of deposits were loaned out and for
Preventive reasons the bank had to keep higher levels of liquidity. After year 2004, the
ratio went down because an amount loaned out in proportion to the deposits were went
down and needed less liquidity. Overall, from 2004 to 2009, this ratio is fall down.
2004
2005
2006
2007
2008
2009
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0.420
Loan commitment
ratio
0.395
0.396
0.482
0.279
0.244
Loan commitment
ratio
2005
2006
2007
2008
2009
Loan
commitment ratio is another types of liquidity indicator which measures the
volume of promises a lender has made to its customers to provide credit up to a
prescribed amount over a given period. Higher this ratio implies that greater future
liquidity needs. So, for UCBL this is declined till 2006 but it grow up in 2007 and again
fell down till 2009. Overall, this ratio decreased which is better for the bank.
Leverage Ratios
1
2004
0.950
2005
0.940
2006
0.940
2007
0.937
2008
0.932
2009
0.937
2005
2006
2007
2008
2009
The trend of
UCBL is slightly moving downward. In 2004 the debt to total assets ratio was 95 %
which means for BDT 100 of total asset the bank holding BDT 95 as debt.
2
Debt Equity
2004
19.16
2
2005
15.60
8
2006
15.60
0
2007
14.99
5
2008
13.77
9
2009
14.85
9
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Ratio
15.000
10.000
5.000
0.000
2004 2005 2006 2007 2008 2009
2004
1.882
Interest Coverage
Ratio
2005
1.964
2006
1.755
2007
1.740
2008
1.655
2009
1.719
Interest Coverage
Ratio
1.800
1.700
1.600
1.500
2004
2005
2006
2007
2008
2009
The trend
shows a gradual down ward fall of interest coverage ratio of UCBL. In 2004 the
ratio was 1.882 times, which means UCBL could cover their interest expenses by
1.882 times with their current level of EBIT.
2004
2005
2006
2007
2008
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2009
Operating Efficiency
Ratio
0.458
0.422
0.442
0.393
0.404
0.398
Operating Efficiency
Ratio
The trend
shows slight fluctuating in the beginning but steady trend in last 3 years. In 2004 the
ratio was 45.8% which for each BDT100 the bank incur BDT 45.8 as an expense.
Moreover in the following years Bank did slightly strong expanse management,
therefore in 2009 it had operating efficiency 39.8%.
Employee
Productivity
Ratio
2004
841558.
667
2005
1022380.
235
2006
1167262.
327
2007
1596769.
834
2008
1792950.
279
2009
2070197.
215
Employee Productivity
Ratio
Tax management
efficiency
2004
0.196
2005
0.362
2006
0.441
2007
0.422
2008
0.312
2009
0.299
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Tax management
efficiency
0.300
0.200
0.100
0.000
2004
2005
2006
2007
2008
2009
The graph
shows a gradual increase and decreasing trend. In 2004, UCBL pre tax income is 0.196
times higher than after tax income. Till 2006 the bank had good trend and fall gradually
in later years.
Expense management
efficiency
2004
0.029
2005
0.029
2006
0.027
2007
0.026
2008
0.026
2009
0.023
0.030
0.020
0.010
0.000
2004
2005
2006
2007
2008
2009
The trend
shows a downward line, which is very good for management showing as managing the
expenses smartly. Bank has managed its expenses very nicely over times. Initially
in 2004 it had 2.9% of operating expenses over total assets. However at the end of 2009
they smartly declined that ratio into 2.3%.
5
Asset management
efficiency
2004
0.063
2005
0.069
2006
0.061
2007
0.066
2008
0.063
2009
0.057
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Asset management
efficiency
In 2004 bank
managed 6.3% operating revenue over its total asset. Their performance had been almost
stable in following years. There for it had 5.7% asset management ratio in 2009.
Funds management
efficiency
2004
20.162
2005
16.608
2006
16.600
2007
15.995
2008
14.779
2009
15.859
Funds management
efficiency
15.000
10.000
5.000
0.000
2004 2005 2006 2007 2008 2009
In 2004 bank
had total asset 20.162 times higher than total equity. That means, at that time bank had
huge debt. However in following year it decreased and came into 15.859 times in
2009.
7
Rate Paid on
Funds
2004
0.053
2005
0.052
2006
0.054
2007
0.063
2008
0.072
2009
0.061
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0.040
0.020
0.000
2004 2005 2006 2007 2008 2009
This ratio
increases from 2004 to 2008 and then it decreased in 2009. Thus it can be said that
though total interest expense in relation to earning assets has increased till 2008
but it decreased in 2009, thus it can be concluded that in 2009 UCBL was more efficient
than in other years.
2004
0.450
Efficiency
Ratio
2005
0.372
2006
0.402
2007
0.358
2008
0.372
2009
0.360
Efficiency Ratio
0.500
0.400
0.300
0.200
0.100
0.000
2004
Efficiency Ratio
2005
2006
2007
2008
2009
It has been
found that this ratio has decreased from 45% in 2004 to 36% in 2009. Thus it can be
concluded that when this ratio was lower, change in the total noninterest expense has
been proportionately higher when in compared to the net interest and non interest income,
thus it can be said that with the passage of time this bank became inefficient and thus was
able to raise their non interest expense.
Profitability Ratios
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Return on Equity
(ROE)
2004
2005
2006
2007
2008
13.545
24.040
25.053
27.130
17.443
2009
16.35
1
Return on Equity
(ROE)
2005
2006
2007
2008
2009
In 2004 the
share holders of UCBL has earned BDT 13.54 per BDT 100 worth of their investments.
In 2007 shareholder earning was the highest among these six years of analysis
which is 27.13. This ratio increased till year 2007 but after year 2007 it declined
drastically.
2004
0.672
Return on Assets
(ROA)
2005
1.448
2006
1.509
2007
1.696
2008
1.180
2009
1.031
1.500
1.000
0.500
0.000
2004
2005
2006
2007
2008
2009
In 2004 UCBL
has made a net profit of BDT 0.672 by utilizing BDT 100 worth of Assets. In 2005 return
on asset was increased till year 2007 due to increases in net income after tax. After year
2007 return on asset was sharply decreased. But overall, this ratio increased.
2004
2005
2006
2007
2008
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2009
2.992
3.848
3.339
3.244
3.100
2.892
3.000
2.000
1.000
0.000
2004 2005 2006 2007 2008 2009
It can be said
that in 2004 the bank made a net interest income of BDT 2.992 by utilizing BDT 100
worth of Assets. This ratio has shown a steady decrease except in 2005 and became
2.892% in 2009. Thus it can be said that with the passage of time the bank has earned a
higher net interest income which is actually bad for the bank.
2004
0.374
2005
0.124
2006
0.071
2007
0.800
2008
0.681
2009
0.562
2005
2006
2007
2008
2009
Initially UCBL
had net interest margin of 0.374 times of its total asset. Afterward, this ratio decreased till
year 2006 and then increased which is highest in six years. But again it declined till year
2009.
5
Net Operating
Margin
2004
3.421
2005
4.000
2006
3.426
2007
4.021
2008
3.781
2009
3.454
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Net Operating
Margin
4.000
3.500
3.000
2004
2005
2006
2007
2008
2009
In 2004 UCBL
made a net operating profit of BDT 3.42 by utilizing BDT 100 worth of assets. Over the
year UCBL this ratio was fluctuating and it remained same to BDT 3.42 by
utilizing BDT 100 worth of assets in 2009.
2004
2005
2006
2007
2008
73.15
181.22
252.76
272.43
255.59
2009
311.7
9
In 2004 the
common stockholder earning per share was BDT 73.15. In 2005 the common
stockholder earning per share was BDT 181.22. In 2006, 2007 and 2008 EPS was BDT
252.76, BDT 272.43 and BDT 255.59 respectively. The EPS has increased because net
income after tax increased and also the number of common stock outstanding
increased significantly. In 2009 earnings per share rose sharply due to increase in net
income after tax and EPS was BDT 311.79.
7
2004
2005
2006
2007
2008
2009
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0.04
Earnings
Spread
0.04
0.02
0.01
0.01
0.02
Earnings Spread
0.05
0.04
0.03
0.02
0.01
0.00
2004
Earnings Spread
2005
2006
2007
2008
2009
It has been
found that with the passage of time this ratio has declined in trends where it was
found that this ratio has decreased till 2008 and it 2007 it became least and reached 1%
and then it increased and became 2% in 2009. So, it can be said that total interest
income in relation to total earning asset has decreased in a higher rate than total
interest expense in relation to total interest bearing liability, which is not a good
scenario for this bank.
2004
0.11
Net Profit
Margin
2005
0.21
2006
0.25
2007
0.26
2008
0.19
2009
0.18
2005
2006
2007
2008
2009
Overhead
Margin
2004
2005
2006
2007
2008
2009
0.03
0.03
0.03
0.03
0.03
0.02
Overhead Margin
0.04
0.03
Overhead Margin
0.02
0.01
0.00
2004 2005 2006 2007 2008 2009
2004
18.230
2005
6.291
2006
5.862
2007
17.314
2008
12.481
15.223
15.817
5.372
13.369
10.222
5.000
0.000
200420052006200720082009
decrease at a higher proportion compare to decrease in EPS and 2009 the ratio also
declined because the increase in EPS at a higher proportion compare to the increase in
price per share.
Market book
ratios
2004
2.469
2005
1.512
2006
1.469
2007
4.697
2008
2.177
2009
0.563
3.138
2.906
0.966
2.661
1.233
1.006
Market book
ratios
Dividend per
Share
2004
30.002
2005
50.003
2006
39.999
2007
47.885
2008
20.000
30.001
16.665
38.821
32.001
35.003
decreased mainly because the dividend paid increased compare to the total equity
share outstanding. In 2009 it was BDT 30 as dividend against each share they hold.
4
Dividend
Yield
2004
2.250
2005
4.386
2006
2.699
2007
1.015
2008
0.627
2009
2.796
4.528
2.975
12.103
5.582
11.007
10.510
Dividend Yield
5.000
4.000
3.000
2.000
1.000
0.000
2004
Dividend Yield
2005
2006
2007
2008
2009
The dividend
yield ratio shows the return that the share holder gets against each taka of investment. Its
a comparison of dividend and market share price. We find that UCBL dividend
yield was not consistent during these six years of analysis. In 2005 dividend yield of
UCBL was higher than rest of the five years. Overall this banks dividend yield decreased
from year 2004 to year 2009. It is very important ratio for the investor. So this decrease
discourage share holder to invest and cause the share price down.
SWOT Analysis
Strength
1. Effective manpower
2. Established Customer Base
3. Extensive Branch Network
4. Business Growth
5. Overseas Network
6. Healthy Liquidity
7. Strong Capital Base
8. Cooperative Sr. Mgt.
9. Strength & Support of the Board
10. Proactive Branches
11. Continued Stability
12. Loyal Client Relationship Developed by Br. Mgr.
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Opportunities
1. Enter into geographic market to increase market share.
2. Expanding the Banks product line to meet a broader range of customers
needs.
3. Developing existing personnel skills to provide faster service.
4. Developing technological know-how to provide faster service.
5. Using the Internet & E-commerce technologies to provide most modern
Banking service.
6. Expanding the Banking service in abroad.
7. Acquisition of rival financial institution with attractive technological
expert.
8. Extend the Banks Brand Image to new geographic area.
Threats
1. Unhealthy competition in banking sector
2. Negative tendency of the borrowers regarding repayment of loans &
advances
3. Existing amount of classified loans & advances
4. Slow recovery rate of classified loans & advances
5. Adverse shift in foreign exchange rates and trade policies of foreign
government
6. Political unrest & instability in the country
7. Sudden changes in government policies related to trade & commerce
8. Some existing loosing branches
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OBJECTIVES
remittance).
Go through the performance of Foreign Exchange business of UCBL, i.e. income,
export import trend etc.
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Find out what UCBL do for the measurement of Foreign Exchange risk
To observe and analyze the foreign exchange risk management from front office
dealing room to back office.
RESEARCH METHODOLOGY
This study will be mainly based on descriptive issues. For the description part Face to
face interviews with the key personnel of United Commercial Bank will serve the
primary data for the study. The secondary data for the analysis part will be collected from
the annual reports of United Commercial Bank Ltd. available at the Dhaka Stock
Exchange Library. Bangladesh Bank Library will also be used for collecting necessary
monthly and annual reviews, statistical bulletin, economic trends, journals, circulars,
guidelines on Foreign Exchange activities of banks.
The secondary data will also collected from
Publications of Bangladesh
Internet publications.
Financial statement only depicts the figures/numbers and their break down but
do not clarifies the rationale in most of the time. Interviewing the officials on
specific disclosure items sometimes was not fruitful because of generalized
answers.
Number of year taken as a sample is limited to come to any specific conclusion
out of this study.
Time constraint led to get narrower outcomes.
Foreign Exchange
Foreign Exchange means exchange foreign currency between two countries. Foreign
trade can be easily defined as a business activity, which transcends national boundaries.
This trade among various countries causes for close linkage between the parties dealing
in trade. The bank which provides such transactions is referred to as rendering
international banking operations. International trade demands a flow of goods from seller
to buyer and of payment from buyer to seller. And this flow of goods and payment are
done through letter of credit (L/C).Currency is the most important term in Foreign
Exchange business in todays modern world economy.
The term Foreign Exchange has three principal meanings. Firstly, it is term used
referring to the currencies if other countries in terms of any single one currency. To a
Bangladeshi, Dollar, Pound sterling etc. are foreign currencies and as such foreign
27 | P a g e
exchange. Secondly, the term also commonly refer to some instruments used in
international trade, such as bill of exchange, Drafts, Travel Cheque and other means of
international remittance. Thirdly, the terms Foreign Exchange is also quite often referred
to the balance in foreign currencies held by a country.
Foreign exchange business comprises three areas: export, import and remittance. H.E.
Evitt defined Foreign Exchange as the means and methods by which rights to wealth
expressed in terms of the currency of one country are converted into rights to wealth in
terms of the currency of another country. Foreign Exchange Department is international
department of the bank. It deals with globally and facilitates international trade through
its various modes of services. It bridges between importers and exporters. Bangladesh
Bank issues license to scheduled banks to deal with foreign exchange. These banks are
known as Authorized Dealers. If the branch is authorized dealer in foreign exchange
market, it can remit foreign exchange from local country to foreign country. This
department mainly deals with foreign currency. This is why this department is called
foreign exchange department.
Import :-
Pre-shipment advance,
Advance Bill
Export guarantees.
Advising/Confirming letters-letter of
credit.
Remittances:
in foreign Exchange:
Bill of exchange.
cheque.
Bill of Lading.
Commercial Invoice.
currency notes.
Non-resident accounts.
Inspection certificate.
Packing List.
Insurance Policy.
Pro-forma Invoice/Indent.
Master receipt.
GSP Certificate
foreign exchange
central banks US Dollar buying selling rate were withdrawn. There are 32 scheduled
banks operating as authorized dealers in the inter-bank foreign exchange market are not
permitted to run a position beyond certain limits. In the event of speculation on an
appreciation of the value, an authorized dealer may buy more foreign currencies than it
needs, but at the end of the day it must maintain its limit by selling excess currencies
either in the inter-bank market or to customers. Authorized dealers maintain clearing
accounts with the Bangladesh Bank in dollar, pound sterling, mark and yen to settle their
mutual claims. If there any excess foreign exchange holdings exist after these
transactions, it is obligatory for them to sell it to the Bangladesh Bank. In case of shortfall
of the limit, authorized dealers have to cover it either through purchase from the market
or from the Bangladesh Bank.
The average monthly transactions of foreign exchange in the inter-bank market accounted
for $23.46 million in 1991-92 and crossed the $1 billion mark in 1998-99. The average
monthly turnover for the six months between July and December 2000 was $1.5 billion.
The phenomenal growth of inter-bank transactions was due mainly to relaxation of
exchange control regulations and expansion of the activities of the Bangladesh Foreign
Exchange Dealers Association (BAFEDA) formed on 12 August 1993.
Export
Import
Remittanc e
U.S.A.
Canada
India
Japan
Brazil
Australia
United Kingdom
U.A.E.
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China
10 Malaysia
Some world recognized Bank also support UCBL for doing their daily operational
activities with some world reputed bank1
HSBC
Citi bank
Bank of India
The foreign correspondents of the bank play an important role for the maintaining the
currency collection of the bank & they also give a huge contribution on the remittance for
our country also.
He has to have experience of importing the same goods through the bank. If he
has no such experience, the goods that he wants to import have to be approved by
the Import policy.
If these requirements are fulfilled by the customer, the banker may proceed to prepare the
proposal for the customer. If the board approves the proposal, the authorized banker can
open L/C in favor of the customer by taking Pro-forma Invoice or Indent. In cases of
export, the customer has to fulfill the following requirements:
The exporter has to be a customer of the bank; that means, he has to have a CD
Account with the bank.
The exporter has to give an Export LC or Contact against which he can open L/C.
If the customer fulfills these criteria, the authorized banker can go for business with him.
Import Section
The Import Section helps business and other people to import goods. In international
environment, buyers and sellers are, in most of the cases, unknown to each other. So a
seller always seeks guarantee for the payment for his exported goods. It is the bank that
guarantees the seller the payment for the goods on behalf of the buyer. This guarantee is
called Letter of Credit. Thus the contract between the importer and the exporter is given a
legal shape by the banker by its Letter of Credit.
According to Import and Export Control Act, 1950, the office of the Chief Controller of
Imports and Exports (CCI & E) provides the registration (IRC) to the importer. Import of
goods in Bangladesh is regulated by the
Ministry of Commerce in terms of the Import and Export Control Act, 1950;
Import Policy Order and the Public Notice issued by the Office of the Chief
Controller of Imports and Exports (CCI&E)
Import Mechanism
Letter of Credits can be opened with any of the Branch authorized to deal in foreign
exchange. Bank issuing L/Cs has to perform the following functions that are to be done in
Applicants approach to the bank
Figure -1
YES
Import mechanism
Application for letter of credit limit
If primary requirements
fulfilled
Rejection
35 | P a g e
Lodgment
Nature of business
Goods to be imported
Security offered
Repayment schedule
A credit officer scrutinizes this application and accordingly prepares a credit limit
proposal (CLP) and forwards it to the Head Office Credit Committee (HOCC). The
committee, if satisfied, sanctions the limit and returns it to the branch. Thus the importer
36 | P a g e
is entitled to an approved credit limit. Once a party succeeds in opening an L/C through
United Commercial Bank Ltd, generally it requires no fresh credit limit on subsequent
occasions; however, further approval of the Head Office is required only if it proposes to
increase its credit limit.
iii. Taking necessary documents from the applicant
A bank takes the following documents with the application from the applicant while
opening a Letter of Credit:
Documents evidencing payment of fee for current year for Import Registration
Certificate (IRC)
Declaration by the importer that he has paid income tax and submitted returns to the
Note: For import of capital machinery and initial spares to set up a new industry, a Letter
of Credit can be opened without Import Registration Certificate (IRC). No waiver form
the Chief Controller of Imports and Exports is necessary for this purpose.
iv. Lodgment
After the scrutiny, the following steps are taken to process for lodgment of import
documents received form the negotiating bank. Lodgment means retirement of funds.
Usually payment is made within seven days after the documents have been received. If
the payment is deferred, the negotiating bank may claim interest for making delay.
37 | P a g e
However, after receiving the documents, the Motijheel Branch authority collects the
documents by contacting the importer.
Lodgment Constitutes the Followings:
Conversion of foreign currency amount of the bill and the charges of the foreign
bank
into Taka is done separately by applying Bills Collection (B.C.) selling rate
ruling on the date of lodgment. If the forward exchange was booked, the booked rate is
applied. Payment against Documents (PAD) is made by debiting PAD account and
crediting Head Office account. Full particulars of the documents are entered in the
prescribed PAD register allotting a consecutive serial number.
Documents are endorsed under seal and signature.
Inter-Brach credit advice (IBCA) is sent to the Head Office along with a prescribed
statement to provide them credit for the payment from their overseas account through
Prime Bank Limited General Account.
Head Office (International Division) in receipt of the IBCA and the statement will
respond the entry by debit to branch account (through United Commercial Bank
Limited General Account) and contra credit to NOSTRO Account of the negotiating
bank abroad. To arrange necessary fund for payment, a requisition is sent to the
International Department.
As the T.T & O.D rates are paid to the ID, the differences between these two rates
remain as exchange gain for the Branch.
As soon as the above formalities are completed the importers are served with PAD
bill intimations for retirement of concerned import document. A letter of intimation
(P.A.D. intimation) regarding receipt of the documents should be sent to the applicant
with a request to take delivery of the documents on settlement of all dues against it and
mentioning the maturity date of P.A.D.
The Import mechanism is completed with the lodgment because most of the import
operates by the United Commercial Bank Ltd. is cash letter of credit.
38 | P a g e
Export Section
Bangladesh exports a large quantity of goods and services to foreign households.
Creation of wealth in any country depends on the expansion of production in the export
sector in international trade. Most of the exporters who export through United
Commercial Bank are readymade garment exporters. They open export Letters of Credit
here to export their goods, which they open against the import Letters of Credit opened
by their foreign importers.
Export Policy
Export policies formulated by the Ministry of Commerce, GOB provide the overall
guideline and incentives for promotion of exports in Bangladesh. Export policies also set
out commodity-wise annual target. It has been decided to formulate these policies to
cover a five-year period to make them contemporaneous with the five-year plans and to
provide the policy regime. The export-oriented private sectors, through their
representative bodies and chambers, are consulted in the formulation of export policies
and are also represented in the various export promotion bodies set up by the
government. However, Exports forms Bangladesh are regulated by the following Acts,
Guidelines and authorities:
Ministry of Commerce by issuing Export Policy Order under the authority given
to it by Export Import Act, 1950; It outlines the Governments export
development strategies and lays down the package of incentives to promote
exports. It also provides the list of items, which are either banned for export or
whose export is subject to fulfillment of certain conditions.
39 | P a g e
Export Mechanism
Obtaining EXP
The mechanism of letter of credit under export has been shown in Figure in the next
page. The description of the
mechanism is stated after the figure.
Signing of the contract
Export Mechanism
MECHANI
SM
Figure -2
Procuring the materials
Shipment of goods
40 | P a g e
Examination of document
OK
Bank Certificate;
42 | P a g e
After getting contract for sale, exporter should ask the buyer for Letter of Credit clearly
stating terms and conditions of export and payment. The export is normally, executed
against letter of credit opened by buyers. Sometimes, exports are made on CAD, DP, and
DA on Consignment Sale basis without cover of letter of credit. On receipt of Letter of
Credit, it is checked thoroughly by advising bank.
The concerned branch of the bank communicates with the beneficiary and advices
him about the Letter of Credit received.
The Branch enters full particulars of the Letter of Credit in the Letter Credit
Advising Register (Performance Register) allotting separate serial number for
each Letter of Credit
Particulars of all amendments (if any) are also to be recorded in the same Register
before advising the same to the beneficiary.
If the L/C contains any request by the opening bank, it has to be complied with
under intimation to the beneficiary; the approval of Head Office required for this.
A suitable clause should be incorporated at the bottom of the L/C stating that the
L/C is subject to the provision of UCPDC- ICC Publication No. 5000.
43 | P a g e
Bill of Lading
Certificate of origin
Consular Invoice
Inspection Certificate
Invoice
Packing List
Shipping Advice
Remittance section
Our economy depends highly on foreign remittance. The people who are working abroad
send currency through the help of bank. United Commercial Bank Ltd. follows three
ways to collect foreign remittance. The mechanism is presented in Figure46 | P a g e
Foreign Remittance
UCBL receive cash by the clearing house and deposits it to receivers A/C
47 | P a g e
Western Union
48 | P a g e
This is the administration of foreign exchange business. In this process the foreign
exchange department accomplishes its responsibilities.
49 | P a g e
The need for foreign exchange is high in Bangladesh. Cause we had to import a lot more
than we export. Other than export, the remittance by non-resident Bangladeshis and
foreign aid is another source of foreign currency. In previous years we have seen frequent
bouts of devaluation of our currency i.e. taka. This is mainly done to keep our exporters
in business, although there are other reasons also.
Table-1: Annual Review of Import Payments:
(Taka in Crore)
2009-2010
Mode of financing
Cash
Loans/Credits
Grants
IDB loan (short-term)
Other unclassified imports
A. Sub-total
B. Imports of EPZ
Total Import: (A+B)
Changes
(1)-(3)
2008-2009
Amount
Percentage
of total
Amount
Percentage
of total
147762.8
90.0
139995.3
90.4
7767.5
(+5.5)
320.3
0.2
574.0
0.4
-253.7
56.1
0.0
4.0
0.0
52.1
5764.9
3.5
4782.2
3.1
982.7
564.4
0.3
509.7
0.3
54.7
154468.5
94.0
145865.2
94.2
8603.3
9774.9
6.0
8956.0
5.8
818.9
164243.4
100.0
154821.2
100.0
9422.2
(+6.1)
20
09
-
20
10
Total Import
(Taka in Crore )
50 | P a g e
2009-2010
Amount
1
87269.1
14879.1
102148.2
Mode of financing
Cash
Exports of EPZ
Total
(Changes in %)
2008-2009
Amount
2
84423.8
13074.3
97498.1
95000
90000
85000
80000
2009-2010
2008-2009
51 | P a g e
Export L/C
Import L/C
Remittance
Total Business
28,882
41,801
27,230
36,500
38,519
40,303
52,639
60,329
60,009
58,857
1,252
3,063
2,140
3,688
15,050
70,437
97,503
89,699
100,197
112,426
52 | P a g e
60,329
60,009
58,857
2007
2008
2009
50,000
1
40,000
30,000
20,000
52,639
40,303
10,000
0
2005
2006
Y = a + bt
Here,
a = Constant
b= Slope
Y= Dependent variable
t = Time
b = Yt / t2
a = Y/ n
Import (Y)(mill)
40,303
52,639
60,329
60,009
58,857
Y = 272,137
Time (t)
-2
-1
0
1
2
t = 0
Yt
-80,606
-52,639
0
60,009
117,714
Yt = 44,478
t2
4
1
0
1
4
t2 = 10
Y = 54,427.40 + 4,447.8 t
Here, Y = Import business of UCBL
This equation indicates that the import business of this bank will be increased by
Tk.4, 447.8 million per year and the trend is presented in the Figure:-
Import trend
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
2005
2006
2007
2008
2009
Year
Export is an influential tool for foreign exchange business. Any decrease in export can
cause a huge decrease in foreign exchange income as well as profit. The trend of export
business for last five years is presented here
40,000
30,000
25,000
41,801
20,000
15,000
35,000
28,882
36,500
38,519
2008
2009
27,230
10,000
5,000
0
2005
2006
2007
Year (n)
2005
2006
2007
2008
2009
n=5
Export (Y)(mill)
28,882
41,801
27,230
36,500
38,519
Y = 172,932
Time (t)
-2
-1
0
1
2
t = 0
Yt
-57764
-41801
0
36500
77038
Yt = 13,973
t2
4
1
0
1
4
t2 = 10
By using the model of time series method we can find the export trend of UCBL. So the
equation for Export Business is
Y = 34,586.4 +
1,397.30 t
This equation indicates the export business of UCBL will be increased by Tk.1, 397.30
million per year and the trend is presented in Figure below
55 | P a g e
14,000
12,000
10,000
8,000
15,050
6,000
4,000
2,000
0
1
1,252
2005
2
3,063
3
2,140
3,688
2006
2007
2008
2009
Here, this is a clear observation that there is a very fast movement in the remittance
collection of the UCBL in especially in FY2009.
56 | P a g e
Year (n)
2005
2006
2007
2008
2009
n=5
Remittance(Y)
1,252
3,063
2,140
3,688
15,050
Y = 25,193
Yt
-2,504
-3,063
0
3,688
30,100
Yt = 28,221
Time (t)
-2
-1
0
1
2
t = 0
t2
4
1
0
1
4
t2 = 10
Y = 5,038.60 +
Here, Y = Remittance business of UCBL
2,822 t
This equation indicates the remittance business of the bank will be increased by Tk.2, 822
million per year and the trend is shown in the Figure:-
Remittance Trend
16,000
14,000
12,000
10,000
Remittance
8,000
6,000
4,000
2,000
0
2005
2006
2007
2008
2009
Year
57 | P a g e
The reason behind the increasing trend of remittance is the satisfactory performance of
the bank is that UCBL has agreement with many money exchange situated in different
countries. So, it is convenient for the people to send currency in time. For this the bank is
enjoying a growth in remittance business.
Commission
Year L/C
Expor
Bill
Accepte
OBC
PO,DD
Exchang
Total
t Bill
Purchase
d Bill
, IBC
FX
TT, TC
Gain
Incom
d
2005 109.3
2.02
0.83
4.66
1.34
9.65
176.12
e
304.01
9
2006 132.2
4.49
0.96
9.35
2.09
9.35
272.92
431.43
7
2007 175.5
6.17
1.28
10.10
2.34
8.78
316.02
520.20
1
2008 201.6
7.43
1.82
19.20
3.26
10.61
404.84
648.85
9
2009 263.5
10.17
2.64
17.03
3.68
11.35
563.74
872.11
0
Source: Bank database
58 | P a g e
FX Income
Ex
b
ill
L/C
Bill Purchase
A cc. Bill
OBC, IBC
, DD, TT, TC
Ex gain
In the Table the different sources of income for foreign exchange business are revealed
and the income is showing a continuous increasing trend.
The most dominant variable in foreign exchange income is exchange gain. This is
achieved from both export and remittance business.
59 | P a g e
The foreign exchange income, operating income and profit after tax for five years is
presented in Table. The foreign exchange income has a contribution to operating income
as well as to banks profit.
Foreign exchange income, operating income, profit
( Tk. In million)
Year
2005
2006
2007
2008
2009
Total FX
Operating
Income
Income
Income
1196.20
1592.21
1970.37
2406.43
3235.24
Profit
25.41%
27.10%
26.40%
26.96%
26.96%
304.01
431.43
520.20
648.85
872.11
Profit
418
375
612
568
1052
Ratio of FX
to
Amount
3000
2000
Operating
Income
1000
0
2005 2006 2007 2008 2009
Year
In the above Table, it is shown that along with the increasing trend in foreign exchange
income the operating income is also increasing. So, foreign exchange income has a
positive effect on operating income as well as profit.
Tables above focus on the important information of foreign exchange business of United
Commercial Bank Ltd. Now, these data will be analyzed to measure the performance of
the bank. For performance analysis different tools of statistics and ratio have been used
here.
The income from the foreign exchange business includes two type of income. One is
commission and the other is exchange gain. Here is the Time series analysis of foreign
exchange income.
FX Income (Y)(mill)
304.01
431.43
520.20
648.85
872.11
Y = 2,777
Time (t)
-2
-1
0
1
2
t = 0
Yt
-608.02
-431.43
0
648.85
1,744.22
Yt = 1,353.62
t2
4
1
0
1
4
t2 = 10
Y = 555.32 +
135.362 t
Here, Y = Foreign exchange income of UCBL
This equation indicates the foreign exchange income of the bank increased by Tk.135.362
million per year. As the foreign exchange business is increasing year by year, foreign
exchange income is also enjoying a positive trend that is focused in Figure
Foreign exchange income trend
61 | P a g e
FX Income Trend
FX Income
1000
900
800
700
600
500
400
300
200
100
0
2005
2006
2007
2008
2009
Year
From the Time series analysis it is found that UCBL is enjoying a positive growth in
foreign exchange business. Definitely this is a positive sign for the bank and this growth
will help the bank in achieving its target.
departments prepare their reports independently to ensure better control of risk exposure.
Head of the department continuously review this manual to make it more effective.
Responsibilities of all the members of the treasury department, front as well as back
office is clearly defined.
For the measurement of foreign exchange risk and manage it effectively UCBL Does the
following analysis:
GAP analysis: For the sake of GAP analysis Inflow and Outflow from Foreign
Exchange is reviewed on a monthly basis. An example is attached in the
Annexure.
Net Position Analysis: Exchange rate risk arises from exchange rate movements,
which may affect the earning of the bank from its foreign exchange open position
taken from time to time. This risk is mainly managed by setting
o Determined limits on open foreign exchange position
o
63 | P a g e
Due to the relaxation of Red Quote and allowing floating rate all the banks risk
exposure have decreased substantially as Bangladesh Bank strongly monitors whether its
guidelines are followed or not.
The open position limit of different bank is decided by the Bangladesh Bank according to
the banks total capital. UCBL has a limit of 5 million USD, positive or negative. If the
bank is beyond that limit Bangladesh Bank will impose restrictions on that specific bank.
UCBL did not conduct any forward foreign exchange dealing during the year. Incase of
Spot dealing they always keep in mind their open position and there is no specified limit
exercised for that.
UCBL does not regularly do any VAR analysis on a paper basis or as a report, but the
Treasury department authority always keeps it in mind and takes decision accordingly.
On the Annual Report the bank shows a fund named Exchange Equalization Fund,
which was prepared in accordance with the guideline of Bangladesh Bank. This Fund was
required for dealing in FX prior to 2003. After the imposition of floating rate Banks does
not need to carry any Fund the balance of the fund created on 2003 is brought forward
and if there is any foreign exchange loss the bank can adjust that loss with this fund.
UCBL takes USD and TAKA as the base currency in determining the Risk exposure.
When asked to the officer with which currency they face more risk, the answer was YEN.
So they are more reluctant to deal with this currency. On the other hand USD has a strong
position as for the last couple of years it has been within a acceptable limit.
For the foreign exchange risk management the Bank follows the following points
cautiously:
All the transactions are carried out on behalf of the customers against L/C
commitments and other remittance requirements. No speculative dealing on
Bank's account was conducted during the year.
treasury keeps record and pass entries in books of account. The main risks in
treasury and foreign exchange business are exchange rates risk, fund management
and liquidity risk.
As per the Bangladesh Bank, Dealing room are placed in the treasury
department .Separate telephone and fax lines were installed at the dealing room to
meet Bangladesh Bank's guidelines.
The bank has formed a management committee (MANCOM) to review the proper
implementation and regular monitoring of the core areas.
Foreign currency transactions are converted into equivalent Taka currency at the
ruling exchange rates on the respective dates of such transactions.
Interest Risk and Liquidity Risk are also properly managed. Bank invests its
idle currency and keeps it in other bank account when the Interest rate is greater
than its cost of capital. In managing Liquidity Risk the bank has its own Nostro
account limit.
2007
338,771,44
2
2006
2005
2004
239341368
232,534,624
208190237
936,113
232,534,624
209,126,350
65 | P a g e
Exchange
Loss
(1,555,844)
Loss(dealing
room)
Exchange Income
338,771,44
239341368
232,534,624
207,270,506
(general)
Exchange
arise from the open positions will not substantially diminish total earnings and that the
capital cushion of the institution will not be undermined. Annexure-B provides a
numerical illustration of a financial institution's exposure to foreign currency risk arising
from its positions in a variety of currencies: the Indian rupee, the US dollar, the Japanese
yen, the Euro, the Canadian dollar, the Australian dollar, the Swiss franc and the British
pound. If reporting were done by the financial institution every day, the net short term
position for the day (shown in column 3) would cover foreign currency assets and
liabilities available in cash or maturing during the day. The net long term position (shown
in column 7) would reflect foreign currency assets and liabilities that mature in time
periods beyond one day. The illustration has translated all currencies into Taka. The exact
same analysis would apply if all currencies were converted to US dollars (at the close-ofday exchange rate) or any other convertible currency. In the example, the sum of the net
short term positions in the different currencies results in a negative net liability position
of Tk. 112,666,176, or 35% of total capital (shown in column 4). This SHORT-TERM
exposure exceeds the 12.5% limit and could create a loss for the institution if the Taka
were to devalue (i.e., more Taka needed per unit of foreign currency). Such a short term
exposure would be dangerous for the financial institution as adverse exchange rate
movement(s) could occur immediately and result in substantial losses. The net LONG
TERM positions sum to a positive net long term position (Tk. 173,553,849). The net
LONG TERM position offsets the negative net SHORT TERM position. The OVERALL
net positions for each currency are estimated in column 8 and sum to Tk. 60,887,673.
Their absolute values relative to total capital appear in column 9. The OVERALL
percentage comes to 18.72%, a relative amount above the 12.5% limit. Thus, estimations
that take account of all currencies, both very short-term and longer-term, indicate that the
institution is in imminent danger of loss in the short run, as well as the longer run. The
banking company should note that an extreme exposure occurs in the short term as there
is an excessively large (negative) net open position in US dollars (Annexure C).
UCBLs VAR analysis:
67 | P a g e
Correlation is calculated for the VAR analysis. Correlations range from +1 to -1. A +1
correlation indicates that two currencies move identically to each other against the US
dollar. A -1 correlation indicates that two currencies move in diametrically opposite
directions to each other against the US dollar. A zero correlation means there is no
relationship between the ways the currencies move. For example, studies reveal that there
is positive correlation between Euro and Swiss Franc, which indicates that a long Euro
position is hedged by the short CHF position. The Gross VAR calculated on each position
can therefore be reduced proportionately. Just as the loss is limited, so is the profit
potential in EUR/CHF position is limited.
The following table shows how positive and negative correlations between currencies
affect Net VAR calculation:
Correlation
Position A
Position B
(Any currency)
(Any currency)
Correlation
Short (+)
Long (-)
Short (+)
Long (-)
Short (+)
Short (+)
Long (-)
Long (-)
Short (+)
Short (+)
Negative (-)
Negative (-)
Positive (+)
Positive (+)
Positive (+)
term
sign
(Effect on Net VAR)
Negative (-)
Negative (-)
Positive (+)
Positive (+)
Positive (+)
The correlation term sign indicates whether the portfolio effect will be added or
subtracted in the net variation calculations. Even random movements between currency
rates may to some extent reduce risk.
68 | P a g e
Dealing Room operation in United Commercial Bank Ltd. and its support activities
follow the market principles and conventions for smooth operation. Apart from that
General guidelines for Dealing Room operations/ activities are stated hereinafter.
All financial activities involve a certain degree of risk; the scope of this guideline is to
put proper attention to every details of the Foreign Exchange transaction evolving around
Dealing Room. All transaction should in line with the Guidelines for Foreign Exchange
Transactions-1996 by Bangladesh Bank and relevant BRPD, FE, DBOD and other
regulatory authoritys Circular(s) instructions. Dealers must follow the code of conduct
prescribed by BAFEDA and other regulatory authority.
The purpose of this guideline is to minimize operational, market, and settlement risk
arising out of Foreign Exchange transaction.
Policy Statement for Dealing Room Operation (Ex)
Currency positions may only be held in USD/BDT currency pair to facilitate handling
of normal commercial and financial transactions, which includes minimum working
balances in Nostro Accounts in foreign currencies.
All foreign Exchange exposure limits and also currency-wise sub-limits are to be
expressed in terms of US$.
69 | P a g e
Dealing room is not authorized to enter into foreign exchange open position on their
own account.
Foreign Exchange operation should be so organized that there will be clear and
distinct separation of the Dealing Room and Back office.
Un-matched/ mis-matched forward exchange deals which would cause open position
are not permitted. The only forward exchange deals permitted are those for
customers.
Revaluation of Foreign Currency Assets and liabilities will be on daily basis. Forward
positions will be revalued only at the time of liquidation.
All forward deals and swaps must follow the guidelines and restrictions given by the
central bank.
Dealing Room will maintain counter party limit books which will include records of
all day to day customer transactions and inter-bank transactions.
There should be adequate number of officers with technical skills and knowledge.
Foreign Currency sale to retail customer for FTT, FDD and TC should be guided by
TT & OD rate of rate sheet. Point of sales may be allowed to take BC rate and the
difference between BC and TT OD rate may be refurnished from treasury a/c to
particular branchs account.
FOREIGN currency sale to retail customer for FTT, FDD and TC should be guided
by mid rate of the respective currency. In case of conversion of foreign currency to
another foreign currency the prevailing rate in international market is to be applied.
Import payment made out of FC margin a/c / retention quota a/c and special payment
facility (import payment out of export proceeds within 1 month) can be made in
respective currencys mid rate. In case of conversion of foreign currency to another
foreign the prevailing rate in international market is to be applied.
Foreign Currency purchase from retail customer for inward FTT should be guided by
TT Clean rate of rate sheet. Foreign Currency purchase from retail customer for FDD
should be guided by TT Doc rate of rate sheet. In case of corporate customers
customize rate can be applied.
Foreign Currency purchase from retail customer for FTT, FDD should be guided by
mid rate of the respective currency. In case of conversion of foreign currency to
another foreign currency the prevailing rate in international market is to be applied.
Foreign Currency purchase from exporters should be guided by TT clean rate of Rate
sheet for payment against clean bills for collection.
For crediting export proceeds into FC margin a/c/ retention Quota a/c ; respective
currencys mid rate is to be applied. In case of conversion of foreign currency to
another foreign currency the prevailing rate in international market is to be applied.
Forward Foreign Currency can be purchased from exporters. In that case the quoted
currency should be against BDT and the rates incorporated in the rate sheet for the
structured time frame (11Month, 3Month & 6Month) can be applied. Forward
transaction must follow the guidelines issued by the Central Bank.
Forward foreign Currency can be purchased from any exporter for conversion out of
their FC margin and Retention Quota a/c for the desired Currency pair other than
BDT.
Any encashment of Foreign Currency into BDT can be done from customers FC A/c
by applying TT Clean/TT doc rate by examining the nature of transaction.
Dealing in inter bank Sport market for USD/BDT currency pair is allowed subject to
Overbought/ Oversold limit of Exchange Position approved by Bangladesh Bank. The
applicable rate for inter bank transaction should be on market. Off market rate
transaction is not allowed. In this connection arbitrage function for other currency
pair is allowed. In case of any position taking/ speculation in any currency pair is no
allowed. For any Forward and Swap transaction rates should within the market
dynamics (Interest rate/ exchange rate/ annualization of tenor). Inter bank Sport,
Forward and Swap transaction must follow the Central Banks guidelines issued from
time to time.
Every day UCBL Dealing Room has to produce rate sheet with the following features:
a. Rate for Import bill payment.
b. Rate for export bill negotiation for sight /usance.
c. Rate for inward and outward remittance.
d. Rate for TC and Cash note.
e. Indicative rate for internal transaction
This rate sheet is produced in those currencies for which UCBL maintains Nostro a/c. i.e.
USD, EURO. GBP, JPY, USD/BDT rate is to calculate on the basis of prevailing free
floating rate in the inter- bank. On the other hand cross rate of other 4(four) currencies is
to obtained from Reuters Money 2000 and published in the rate sheet after maintaining
73 | P a g e
sufficient margin. Through this rate sheet treasury maintains daily profitability with our
branches and subsequent customers there on. For Corporate Customers treasury may
customize this rate but keeping in view the profitability of the bank. Apart from exchange
rates the following foreign currency interest rate is to be incorporated.
For liquidity of the foreign currency, our Exchange Position has permitted up to
USD1.5 million in both short/long position. In this connection the following method
is applied for liquidity measurement .
Plus
Inward Remittance
Plus
Encashment of FC
Total Supply of FC
Outward remittance
Total Demand of FC
74 | P a g e
Source
Frequency of Update
Spot FX
Reuters /
National
Newspapers
Forward
FX/ Swaps
Reuters
Once Daily
Pages: AFX=, FXXZ,
BD(F9), LIBOR01,
GBPF=,
EURF=,
JPYF=,
CHFF= etc.
Note
In absence of an
inter-bank
USD/BDT forward
market, banks
should use
spreadsheets to
determine tenorwise
forward
premiums that
should be used for
the verification of
75 | P a g e
Findings
Banks have a key role to develop the foreign exchange business in our country.
Commercial banks provide foreign exchange services to their customers. Though
foreign exchange business is challenging, it offers an excellent opportunity to
accelerate the growth of the banks own business United Commercial bank ltd. is one
of the major player in the foreign exchange business. It has been enjoying an
escalating growth in foreign exchange business. Income from the foreign exchange
business has a large contribution to UCBLs overall profit. The key Findings are
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UCBL does not have any branch abroad which is creating problem in
remittance transfer.
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Recommendations:
Through conducting this study I have acquired some practical knowledge about export
import business in Bangladesh and other relevant matters. Here I am trying to give some
recommendation which I think might be helpful to promote the export import business of
United Commercial Bank Ltd. As per earnest observation the suggestions are given
below:
For attracting more clients it should take some new marketing strategy which will
increase its total volume of export import transaction.
Attractive incentive package for the exporter will help to increase the export and
accordingly it will diminish the balance of payment gap of UCBL.
For the foreign exchange officials long term training is very essential and may help to
gain more efficiency at work.
UCBL should get out of its old, traditional track banking system and introduce its clients
with new services, technology which will attract more customers.
Bank can provide foreign market reports which will enable the exporter to evaluate the
demand for their products in foreign countries
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Conclusion:
After the relaxation of economic barrier at 90s, the area of business has expanded
globally for firms. At this situation firms interest of doing foreign exchange business was
rationalized with the support of different theoretical backgrounds. In Bangladesh the most
popular way of doing foreign exchange business is international trade that means direct
export and import. By involving in foreign exchange business, many firms of Bangladesh
are enjoying a large profit and size than previous. Firms are now improving themselves in
this lubricant area of business. This improvement is reflected in the current positive
growth of Bangladesh in the foreign exchange business. In recent years United
Commercial Bank has shown a better performance comparing with other first generation
commercial banks.
We expect this bank to review its problems toward foreign exchange business and
contribute a vital role in socio-economic perspective. Foreign exchange is always a
prominent site of business for all commercial banks. Countrys economic growth largely
depends on this sector. Bangladesh is also economically dependent on foreign exchange
business. There are some rules and regulation and other factors (political, economical,
demographic) that influences this sector. Government should identify the lacking and take
preventive steps to smooth this lucrative path of business
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1. The account opening confirmation was sent in the wrong residential address and
was accepted by an unknown person. When the employee realized his mistake, he
tried to get the letter back but couldnt find the person. The matter got worse when
the account holder stated receiving threat calls from the stranger and ultimately for
the security of account holder the bank manager decided to close that account.
2. In UCB, after submitting the cheque requisition slip, after three working days the
cheque book is given to the customer by just asking the name and account
number. That day a person came and claimed a cheque book and was given away.
A day later another person came and asked for the same cheque book. At that
moment the employee found out that the cheque book was given to the wrong
person. Therefore all the transaction from that cheque book was immediately
stopped.
3. It was the second week of my internship when a theft occurred. Things were going
fine and smooth, about an hour before the closing a man came running to the branch
head and said that Tk. 2 lac got stolen from this bag when he came to deposit
money. When CC camera was played we all were shocked to see that, when the
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victim was writing his deposit slip, three man came and surrounded his bag where
he kept money and one of them took out a blade and made a hole in the bag and
took the money and got away.
4. About a month ago UCB recruited few cashier. Every thing was going fine and
smooth. That day a customer came to deposit some Tk. 50,000, finding the cashier
new he asked him to put the received seal before handing over the cash and so the
employee did and the customer took the money and the slip and got away, as he was
a very old customer, he knew all the employees face so he took the advantage. At
the end of the banking hours when the slips were tallied it was figured out that the
customer didnt deposited the money and because of the employees carelessness
bank made a loss of Tk. 50,000
5. In UCB, the new account openers have to make some initial deposit, most of the
customers ask the bank employees to fill the deposit slip and the account opening
form. In trying to make the work faster the account opening officer by mistakenly
added an extra zero to the initial deposit which made the figure in lac, and also
entered the wrong figure in the computer too. The aware customer immediately
took out the extra money and never returned.
6. UCB had a very old client, who had a very good relation ship with the credit
department as he use to pay all his installments on time. This client use to bring his
accountant with him as a result almost all the bank employee use to know him. One
afternoon the client asked his accountant to get cheque from our bank. The
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accountant took the cheque and deposited the cheque in another bank where he, in
the past opened a fraud account with same name as his companys where he worked
and through online he withdrew all the money from different branches and left the
country.
7. That day a client came and opened an LC to import shoes, as all this papers, past
performance and export company(i.e. from the company the product is being
imported) was up to the mark, the bank didnt hesitate to open the LC. When his
product came to the dock he refused to take the product as there was only one shoe
instead of a pair in each box, thus the customer didnt pay the money for the LC and
the shoe was later on auctioned. Therefore the bank made a huge loss.
8. As UCB provides home loan, a client came and asked for home loan, he was asked
to submit the house mortgage. The client submitted all the legal papers and the loan
was given away. After a month the time came to repay the loan the client never
showed up. When the last date of the repayment got over the bank decided to file a
case and it was found that the mortgage was stolen and didnt belong to the loan
defaulter.
9. Few days ago a client asked for a big amount of foreign currency for which he paid
a day before but he asked the bank to deliver the money to his office by one of the
banks employee and asked to come from a route which is more secured. When the
banks employees were going through that route, few men came in bike and robbed
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them. When the bank informed the client about this incident, the client did not only
asked for a refund but also filed a case on the employees who were carrying the
money. As a result the employees lost their jobs.
10. When I was in Foreign Exchange department I witnessed an incident. A man came
to open an LC, he wanted to import medicine, for some reasons he was in a great
hurry. As he was a very reputed person, the employee at once agreed to open the LC
for him, as he was dealing with the proceedings, he felt something wrong and made
an excuse to the client to come after a day or two. At first the client murmured but
later agreed. After he left, the employee decided to make a search on the import
policy of that medicine and he was shocked to find out that, the medicine was
illegal to import. As a result the LC proceeding was immediately stopped.
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Bibliography
1. Annual report of United Commercial Bank Ltd. (2005-2009)
2. Bangladesh Bank guidelines for foreign exchange business.
3. Core Risk Management Manual, www.bangladeshbank.org.bd
4. Draft Guidance on Foreign Exchange Risk Management Policies for Banks,
www.gov.im/lib/docs/fsc/consultative/banksing/s4foreignexchange.pdf
5. Foreign Exchange Mechanism-Import
-By Md. Golam Ali
6. Foreign Exchange Mechanism Export
-By Md. Masud Hossain
7. Foreign Exchange Mechanism Remittance
-By Md. Shofiqul Islam
8. A Text Book on Foreign Exchange
-By Chowdhury L.R.
9. Jeff Madura, International Financial Management, 8th Edition.
10. Manual of Foreign manage Exchange Risk Management of United Commercial
Bank Ltd
11. Monthly Review published by Bangladesh Bank (2005-2009)
12. Schedule Bank Statistics published by Bangladesh Bank (2005-2009)
13. How to measure and manage Liquidity risk, interest rate risk and foreign
exchange
risk
using
Gap
analysis,
www.bangladeshbank.org/pub/pubarchive.html
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Annexure-A
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Annexure-B
Measuring Banking Company Exposure to Foreign Exchange Risk
Day/
Year
Liquid Foreign Currency Holding
1
2
3=1-2
Asset in Liability
Net Short
4
Net
8
Overall
9
Overal
foreign
in foreign
term
Short
foreign
in foreign
term
Net
Currency
currency
position
term
Currency
currency
position
Position
Positio
Curren
positi
cy
on
Net
n/ Core
/
capital
Core
Capita
l
666,426,2
Total
96
779,092,4
112,666,1
72
76
34.64
1,080,503,8
88
906,950,0
39
173,553,8
60,887,6
18.72
49
73
Annexure-C
Questionnaire
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