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The Hongkong and Shanghai Banking Corporation’- HSBC, in Bangladesh

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The Hongkong and Shanghai Banking Corporation’- HSBC, in Bangladesh A Report on Asset and liability management of HSBC 1.1.0Introduction This report is prepared on ‘The HongKong and Shanghai Banking Corporation’- HSBC, in Bangladesh. With its symbol of a Hexagon and the illustrative theme ‘The world’s local bank’ – HSBC is known to a lot of countries and territories of the world as a leading financial service institution. Although the history of its operation in our country is relatively new, yet HSBC already commands a great deal of respect and reputation in our banking community. We consider our self privileged as an MBA student from ASA University Bangladesh, to work with HSBC. While working with different sections of Personal financial Services Department, We got the opportunity to observe various principles and procedures followed in this department. On completion of our visiting duration, we decided to start compilation of a report on our works, side by side with our routine job assignments. 1.2.0 Background Every Financial Institute irrespective of its size is generally exposed to market liquidity and interest rate risks in connection with the process of Asset Liability Management. Failure to identify the risks associated with business and failure to take timely measures in giving a sense of direction threatens the very existence of the institution. It is, therefore, important that the strategic decision makers of an organization assume special care with regard to the Balance Sheet Risk management and should ensure that the structure of the institute’s business and the level of Balance Sheet risk it assumes are effectively managed, appropriate policies and procedures are established to control the direction of the organization. The whole exercise is with the objective of limiting these risks against the resources that are available for evaluating and controlling liquidity and interest rate risk. 1.3.0 Objectives HSBC is a well known fact that the function of Asset and Liability is very crucial for any bank. In Bangladesh, banking is relatively underdeveloped, and the practice of a prominent foreign bank like HSBC in its asset and liability management can be greatly enlightening. Here high light some facts of this sector in the hope that it may serve as useful references for the local banks to observe. The process they employ to manage and analyze facts of their asset and liability gives them a clear picture of their strengths and weaknesses in operation. That enables HSBC to make better decisions and obtain greater strength. The objectives of this paper are: To assess and identify the possible sources of risk in connection with the funding and lending activities. Ratio Analysis of the Financial statements To assess the impact of risk on the business and financial performance. To be familiarized with the qualitative and quantitative techniques needed to avert and or minimize risk. 1.4.0 Methodology The method to do the analysis on HSBC is by observation. We also took the help of the officials of the Personal financial Services Department to clarify our queries and used secondary data to come up with a report on the topic. We had to discuss one to one on the topic with the people responsible for managing this section in HSBC 1 | P a g e A Report on Asset and liability management of HSBC The general methodology of the work includes analyzing already followed practices of the Financial Institutions of South East Asia and local Financial Institutions to manage Balance Sheet Risk. Practices followed by Banks to the extent it matches with the activities of Financial Institutions have also been analyzed. Different reports, Bangladesh Bank Guidelines, web site information of different financial institutions were used as primary input for this paper. 1.5.0 Scope & Limitation The initiative to write a detail procedure of how HSBC works in managing the asset and liability, in the time of internee there across a lot of limitations which slowed me down and in some cases changed my course to write it up. The department is an important department in HSBC Bangladesh, so deriving data from PFS in any form is a severe breach of rule in the HSBC code of conduct. As a result, the project could not be compiled on actual data of operation. Therefore, it is restricted to general principles and process of HSBC BD in respect of its asset and liability management. 2.0.0 Overview of Bank Bank is a financial institution and intermediary, which collect deposits through its different deposit mechanism and provide loans and advances among the loan makers / investors with the view to earn profit. Thus a bank is a financial intermediary, a dealer in loans and debts. In financial concept, banking means safe custody of money and at the same time an institution for money transaction. To regulate the banking business there followed some financial laws of the government the old one is British stamp Laws in 1981 and English Exchange Bill in 1982. Other laws are the English Financial act of 1915; ht e India Company’s Act of 1936 and Indian Banking Regulation Act of 1949 are worth mentioning. The concept of banking is an old as civilization itself. Banking activities in its earliest crude form of lending and exchange prevailed during the ancient period. The legend of huge treasure of the Great King Solomon, the man of great wisdom, son of David (Alaihee-aas-Salam) and the activities of taxation and banking during his reign in 1005 B.C. The Indus Valley Civilization, the Roman Civilization, the Greek Civilization, the Egyptian Civilization, the Mesopotamian, the Babylonian Civilization, the Vedic Indian Civilization, the Muslim Civilization played important roles in giving birth to and flourishing of bank. 2.1.0 Origin of Bank The trace of banking has been discovered in Saudi Arabia in ancient period eight thousand years ago. In middle age in Italian Republics some. Jews dealt in money exchanging activities sitting on ‘Bonca’ (Italian word), ‘Banque’ (France word), meaning a long bench, which now converted to English as Bank meaning a financial institution. The earliest known bank started in China in 600 B.C., which was followed in Greece. With the advancement of urbanization people found it difficult to exchange goods against goods (Barter). The medium of exchange was thus a necessity and to control the exchange market the idea of a financial institution i.e. bank came into being. 3.0.0 HSBC Group at a glance 2 | P a g e A Report on Asset and liability management of HSBC HSBC Group Corporate directors Safra Catz • Vincent Cheng • Marvin Cheung • John Coombe • José Durán • Rona Fairhead • Douglas Flint • Sandy Flockhart • William Fung • Michael Geoghegan (CEO) • Stephen Green (Chairman) • Stuart Gulliver • James Hughes-Hallett • William Laidlaw • Rachel Lomax • Sir Mark Moody-Stuart • Gwyn Morgan • Narayana Murthy • Simon Robertson • John Thornton • Sir Brian Williamson Brands Bank of Bermuda • first direct • Hang Seng Bank • HSBC • HSBC Bank International • HSBC Direct • HSBC Halbis Partners • HSBC Insurance • HSBC Insurance Brokers • HSBC Investments • HSBC Premier • HSBC Private Bank • HSBC Rail • HSBC Trinkaus • M&S Money • Proa • SABB Principal local banks Argentina • Australia • Bermuda • Brazil • Canada • China • Egypt • El Salvador • France • Germany • Hong Kong • Malaysia • Middle East • Malta • Mexico • Panama • Poland • Turkey • United Kingdom • United States Minority stakes and joint ventures Bank of Communications (19%) • HSBC Saudi Arabia (60%) • British Arab Commercial Bank (47%) • SABB (40%) • Wells Fargo HSBC Trade Bank (20%) • Ping An (19.9%) • Techcombank (15%) • Bank of Shanghai (8%) • Axis Bank (4.99%) Annual group revenue: $88.6 billion USD (1% FY 2008) Employees: 335,000 Stock symbols: LSE: HSBA, HKEX: 005, NYSE: HBC, Euronext: HSBC, BSX: 1077223879 Group website: www.hsbc.com Group Headquarters: 8 Canada Square, London, E14 5HQ, United Kingdom 3.1.0 Foundation & Growth of HSBC The HSBC Group has a remarkable history in banking and financial services. That history has left its mark and helped to make one of the leading organizations in the modern financial world. HSBC’s pride in its history is not a matter of nostalgia. The experiences have shaped the Group’s character and business approach. Headquartered in London, HSBC Holdings plc is one of the largest banking and financial services organizations in the world. HSBC’s international network comprises over 9,500 offices in 79 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. Through an international network linked by advanced technology, including a rapidly growing e-commerce capability, HSBC provides a comprehensive range of financial services: personal financial services; consumer finance; commercial banking; corporate, investment banking and markets; and private banking. At 30 June 2003, the Group’s total assets amounted to US$983 billion (£595 billion, HK$7,663 billion). It has 218,000 employees and nearly 200,000 shareholders around the world. Although the Group’s holding company, HSBC Holdings plc, was formed as recently as 1991, many of its principal constituent companies opened for business over a century ago and have long experience in their home and international markets. The story of the growth and development of these companies is rich in variety and achievement, with an international pedigree that is unique in banking history. This brief history describes the origins and evolution of the companies that make up the HSBC Group. The history concludes with a 3 | P a g e A Report on Asset and liability management of HSBC summary of the far-reaching changes in recent years that have given HSBC its special place in today’s major financial markets. 3.2.0 The HSBC Group in the Asia-Pacific region Beginnings, 1865 The HSBC Group’s name is derived from The Hongkong and Shanghai Banking Corporation Limited, the founding member of the modern Group.
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