Performance of HSBC Bank

1.0 Introduction

1. about the internship report1.1 Origin of the report

This is an Internship report prepared as a requirement for the completion of the BBA program. The primary goal of Internship work is to provide an opportunity for translation of theoretical conceptions in real life situation.

At the last semester of BBA program, I was assigned for an Internship from April 16, 2008 under the guidance of my faculty advisor Md. aaaaaaaaa, Senior Lecturer, vvvvvvv University and organizational supervision of, flkjflkj, Network Services Center, HSBC Bangladesh Ltd. As a requirement for the completion of the program I needed to submit this report, which could include an overview of performance of HSBC.

1.2 Objective of the Term Paper

The objective of the term paper is to learn the practical implementations of the theories. In additional to serve this purpose it tries to find out all the necessary information. Objective of this term paper also include knowing about the methods of different activities of the department where I worked as an intern in HSBC.

1.3 Methodology

In this term paper I have collected data and information from various sources such as Internet websites, newspapers, related books, journals, brochures etc. All the information incorporated in this report has been collected both form the primary sources and as well as from the secondary sources.

Primary source of Information:

Discussion of the official of the banks. Annual report and product files of the banks. Data from the companys document. Secondary source of Information:

Previous reports and journals relevant to the banking industry. Other published document of the banks, journal, newspaper etc.In my Internship report I will use interviewing technique and my focus group will be mainly executives of the HSBC. I will also use different statistical tool to make my work more reliable and accurate.1.4 Scope

Related discussions have been presented with a proper sequence here. Also facts and figures have been presented too. The information used in this report is the most updated one. So lacking of information is not a fact here. But some sensitive issues could not be added for lack of proper clarified and classified information.

1.5 Limitation

There were some limitations in my report that I need to disclose. As student of BBA department, I started to prepare this term paper during my ongoing course. So I faced serious time constrains. Moreover, the information available regarding any possibilities of utilizing an opportunity are always little at best. So I had to work at my best guess and analyze all the information from a hypothetical perspective.

Following are the limitations. Such as:

Time limitation. Technical constraints. Difficulties in data collection. Confidential information was not accurately obtained. Some analyses on the obtained data are based upon my sole interpretation.2.0 Organization Part

2.1 Introduction to hsbc holding plc2.1.1 Background

HSBC Holdings plc is a public limited company incorporated in England and Wales. It is headquartered in London. It is the world's largest company and the world's largest banking group, as calculated based on different metrics by the annual Forbes list of the world's largest firms published on April 2, 2008. In February 2008, HSBC was named the world's most valuable banking brand by The Banker magazine.HSBC Holdings was established in 1991 to become the parent company to The Hongkong and Shanghai Banking Corporation Limited. The former was established virtually simultaneously in Hong Kong and Shanghai in 1865 to finance the growing trade between China and Europe by Scotsman Thomas Sutherland, who wanted a bank operating on "sound Scottish banking principles". Its heritage in East Asia means it is a British institution with an extensive international pedigree. HSBC Holdings is listed on the London, Hong Kong, New York, Paris and Bermuda stock exchanges.HSBC is well-known in banking circles for its diversified and risk-averse approach in its business operations (to the extent that, for instance, Europe contributes around one-third of its 2007 earnings and commercial banking 30%). According to Forbes magazine, the world's largest bank (based on a composite score) is currently the fourth largest bank in the world in terms of assets ($2,348.98 billion), the second largest in terms of sales ($146.50 billion), the largest in terms of market value ($180.81 billion), and the most profitable bank in the world with $19.13 billion in net income last year (compared to Citigroup's $3.62 billion in the same period) as of April 2, 2008.It is also by far the largest bank in the United Kingdom and in Hongkong, prints most of Hongkong's local currency in its own name, is a lender of last resort in many parts of the world, and since the end of 2005 has been the largest banking group in the world by Tier 1 capital. By acquisitions and organic expansion HSBC is currently pursuing a strategy of rapid growth in booming China.2.1.2 Business Lines

HSBC splits its business into fours distinct groups:

Personal financial services: HSBC provides more than 100 million customers world-wide with a full range of personal financial services, including current and savings accounts, mortgage loans, car financing, insurance, credit cards, loans, pensions and investments.

Commercial banking: HSBC provides financial services to small, medium-sized and middle-market enterprises. The group has almost 2.5 million of such customers, including sole proprietors, partnerships, clubs and associations, incorporated businesses and publicly quoted companies.

Global banking and markets: This customer group provides tailored financial services to corporate and institutional clients. Business lines comprise Global Banking, Global Markets, Global Asset Management, Global Research and Principal Investments. This division was previously known as Corporate, Investment Banking and Markets.

Private banking: HSBC Private Bank is the marketing name for the private banking business conducted by the principal private banking subsidiaries of the HSBC Group worldwide. HSBC Private Bank, together with HSBC Guyerzeller and the private banking activities of HSBC Trinkaus & Burkhardt, known collectively as Group Private Banking, provides services to high net worth individuals and their families through 93 locations in some 42 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. As of December 2007, profits before tax were US$1,511 million and combined client assets under management were US$494 billion.2.1.3 Global PresenceThe HSBC Group has a significant presence in each of the world's major financial markets, with the Americas, Asia Pacific and Europe each representing around one third of the business. With 10,000 offices in 83 countries, 210,000 shareholders, 330,000 staff and 128 million customers worldwide, HSBC arguably has the most international presence among the world's multinational banking giants.The Hongkong and Shanghai Banking Corporation maintains a network of around 600 offices in 20 countries in Asia Pacific, as well as owning of a number of HSBC banks operating in various countries and holding the group's stakes in further lenders, particularly in mainland China.

2.2 Introduction to Hsbc Bangladesh

2.2.1 Background

HSBC obtained license from Bangladesh bank on 17 April 1996 to conduct banking business in the country and commenced formal banking operations on 3 December 1996 through opening a branch at Dhaka. In Bangladesh, the HSBC Group is represented by HongKong Bank, which has its head office in Hong Kong and a holding company, HSBC Holding Plc, which is incorporated in England. HSBC currently has a network of 8 branches (including 1 Amanah branch) and is one of the largest commercial banks in the country. HSBC Bangladesh (here forth referred to as HSBC) also has a network of 16 ATMs, 6 Customer Service Centers (which include ATM Machines, Easy Pay Machines, Phone Banking, and Access to the HSBC website with a dedicated officer at the premises). HSBC Bangladesh has acquired licensing to provide off-shore banking services to qualified Export Processing Zone clients. Off-shore banking clients, in applicable zones in Bangladesh, may conduct banking transactions and avail credit facilities in foreign currency subject to applicable rules and regulations. Being one of the largest offshore banking facility providers in the Export Processing zones, HSBC has the experience and capabilities to assist and fulfill the banking needs of the investors.

2.2.2 Business Lines

The range of services offered by HSBC in Bangladesh is as follows:

Trade Services

The trade services provided by HSBC can be classified into two broad categories in accordance to the nature of business.

Import: With over 130 years of experience supporting importers globally, HSBC is well positioned to fulfill the clients requirements of foreign trade. A full range of import services handled by experienced staff is available, ensuring that the clients import documents are processed without delay. The Import Services include: Documentary Credits

Import Collections

Import Finance

Shipping Guarantee

Internet Trade Services

Export: HSBC Bangladesh has a dedicated team of experienced trade professionals to facilitate the clients export requirements in a tailor made fashion, Leveraging on HSBCs international network, it aims to provide the client with faster turnaround time and innovative export solutions. The Export Service includes:

Pre-shipment Finance

Post- shipment Finance

Electronic Documentary Credit Advising

Corporate BankingHSBC has a full range of products and services for corporate clients, which include: Working Capital Financing, Term Loan, Trade Facilities, Guarantees & Bonds, Structured Financing & Syndications etc.

Payments & Cash ManagementHSBC's Global Payments and Cash Management services provide domestic and regional transaction solutions to companies throughout the world. Services include a comprehensive range of traditional account and transaction services, augmented by liquidity and financial management solutions and delivered via HSBCs global Internet banking platform, HSBCnet. The Payments & Cash Management Services include:

Account Opening for companies

Countrywide Receivables Management Solutions

Countrywide Payables Management Solutions

Cross Border Remittance Services

Internet Banking Solutions Personal Financial ServicesThe Bank has a range of products and services designed to cater individual requirements. The range of products & services for individual customers comprises of the following:

Online Banking

ATMs/Phone banking

Customer Service Centre (CSC)/Call Centre

Savings/Current/Time Deposit Accounts

My Future - Personal Savings Plans/My Loan - Personal Lending Products

Foreign currency banking services for Resident and Non-resident Bangladeshis

Along with these products, HSBC is committed to providing a superior level of personalized customer service, which is being constantly monitored. 2.3 Introduction to the Department

2.3.1 Background of Network Services Center

The Network Services Center (NSC) is the operational department of HSBC BD. It is the responsibility of NSC to provide the operational support to the departments that deal with the clients directly, for example Corporate Banking, Personal Financial Services etc. NSC was established in the year 2000 with the vision of HSBCs global policy of centralizing the operational jobs. Under the jurisdiction of COO is being managed by a Manger designated as Manager NSC.The department currently employs 67 personnel. The department is headed by a Manager, Mr. Fuad Y Khan and he has two assistant managers, Mr. Mustafa Moniruzzaman & Mr. Aseef Iqbal, reporting to him. Other than them there are ten Staff Officers, two Supervisors and fifty-two Assistant Officers. Each Assistant manager has five segments reporting to him.

2.3.2 Various Segments

NSC can be further divided into ten segments, each headed by a Staff Officer, according to the nature of their operations. They are as follows: Remittance Segment: The remittance segment deals with the inflow and outflow of funds from Bangladesh. This segment maintains a strict protocol of Bangladesh Bank regulations while facilitating the flow of funds.

Clearing Segment: The clearing segment deals with the cheques that are deposited at the bank the cheques that are forwarded to HSBC from other banks through the Bangladesh Bank Clearing House.

Global Payments & Cash Management Operations (PCM Ops): PCM Ops deals with the collections and payments of the corporate clients. It is also responsible for the maintenance of the HSBCnet operations. This segment is on the verge of launching some new products for the corporate clients. Support Segment: The Support segment deals with the liaison with Bangladesh Bank regarding 18A/18B permissions for the corporate clients. This segment also deals with the special remittance issues.

Institutional Banking Operations (IB Ops): IB Ops deals with the LCs opened in local banks that have no foreign presence. IB Ops helps facilitate these LCs through the global presence of HSBC.

Account Maintenance Segment: The Account Maintenance segment deals with the loading and maintenance of all the accounts of the clients of HSBC in the HUB System (HSBC Universal Banking System)

ATM, Bonds & Credit Cards segment: This segment deals with the issuance of the Credit Cards and ATM cards for the clients of HSBC. This segment also deals with the purchase of Government Bonds for the clients of HSBC.

Custody & Clearing Operations (C & C Ops): The C & C Ops segment deals with the foreign investors who wants to invest in Bangladesh. This segment acts as a middle man in the buying & selling of securities on behalf of the foreign clients.

Easy Pay Segment: This segment deals with all the bill payments on behalf of the clients through the Easy Pay Machines that are set up in the customer service centers across the country.

Customer Activity Monitoring Program (CAMP): The CAMP segment monitors the transactions of all the clients of HSBC in order to root out money-laundering.

2.4 Introduction to the segment

2.4.1 Background of PCM OpsPCM Ops, referred to as PCM Ops (DAK) represent the management structure for the delivery and development of payments and cash management products related backend services, at Group and local level.

The PCM Ops team supports relationship managers (RMs), officers (ROs) in both PFS (Personal Financial Services) and CMB (Corporate Banking) for the smooth support services of PCM products to their client base(s). It also delivers payments services appropriate for Personal Banking (to some extent), in accordance with propositions defined by the PFS Team.

2.4.2 Products & ServicesThe activities undertaken by each PCM function varies according to local requirements, however for PCM OPS, Bangladesh, these may include:

Payments Telegraphic Transfer (TT)

Cashier's Order (CO)

Demand Draft (DD)

Collection Upcountry

Overseas (FCY)

Inland Local Currency (LCY) - PFS & PCM Corporate customers

Inland Foreign Currency (FCY)

Travelers Cheque

Bangladesh Bank Cheque (for customers)

Other Payments Salary

BEPZA Bill Payment

Payments through Hexagon/HSBCnet HEXAGON/HSBCnet Hexagon Operation (Customer Account loading, Rate Sheet input, Branch Report download & Email printout & update)

Correspondence with Group Offices

Customer Advice Printing, Sorting & Filing

Hexagon Cheque Leaf Delivery & Maintenance

Documentation Checking & Filing

DEPZ Customer visit

Customer Visit (Installation, Training & Troubleshooting)

Customer Query (Over Telephone)

Customer Loading in Shex

HSBCnet user registration approval

Documentation Checking & Filing

Training at Customer end

Implementation management (Hexagon, HSBCnet, Up Country Collections, Payments, Collections, etc.)

Technical support (related to PCM)In this context, the section PCM OPS generally manages the Operational issues related to the aforesaid product range.

2.4.3 Organizational Chart

PCM (DAK) Ops in NSC, is currently under the following structure:

2.4.4 Functions

In order to provide for the internal/external customers PCM Ops need to perform the following functions:

Organizes itself to integrate seamlessly with the customer support segments

Maintains close liaison with customer segments, participating in their management processes, as appropriate,

Provides PCM related training and market intelligence to staff within the customer segments,

Delivers an excellent level of service to customers, at an acceptable unit cost in a timely manner,

Investigates and resolve service failures with customers,

Have the necessary capacity,

Are aware of issues raised by customers directly with the PCM function,

Appropriately manage operational and other risks arising from their PCM related activity,

Are able to support new product developments,

Have strategic and operating plans, with objectives that are aligned to those of the PCM function and therefore those of HSBC Group as a whole.

2.4.5 Compliance

PCM project management ensures that product developments comply with all applicable law, codes, rules, regulations and standards of good market practice. Group policy requires all Group Offices ensure that they have adequate procedures in place to control and manage legal risk effectively.

The principal areas of Legal Risk are: Contractual

Litigation

Legislative

Intellectual property

There may also be associated reputation risk.

2.4.6 Operational Risk

The Groups definition of operational risk is as follows:

Operational risk is the risk of loss arising through fraud, unauthorized activities, error, omission, inefficiency, systems failure or from external events. It is inherent to every business organization and covers a wide spectrum of issues.

Credit, market, liquidity, insurance, strategic and reputational risks are excluded from this definition. The reference to error, omission and inefficiency reflects process failures and the role of human error.

Operational risks have historically resulted in losses to the Group in the following major categories:

Fraudulent and other external criminal activities

Breakdowns in processes and procedures due to human error, misjudgment or malice

Terrorist attacks

System failure or non-availability

In certain parts of the world, vulnerability to natural disasters

The Group must remain alert to the possibility of rare but extreme events, whether or not mentioned above.

3.0 Project Part

3.1 Work flows of the services (pcm ops)3.1.1 Up-Country CollectionsUp-Country Collection procedure facilitates the clients towards an effective cash management. In this service, HSBC collect their funds from all over the country through correspondent banks, reducing risk, hassles and more importantly providing an efficient time value of money at clients part. The diagram below explains the work-flow of up-country collections:

Figure 1: Up-country Collections Workflow

Legend:

Steps of the Up-Country Collection:1. [Day 0] Corporate customers deposit funds (cheques, pay-orders, cash, etc.), to different branches of the correspondent banks; using deposit slips as the proof of their deposit,

2. [Day 0] The correspondent banks send a copy of the deposit slip by courier after 3pm, by the designated courier service,

3. [Day 1] The courier delivers the copy of the deposit slips to HSBC the next day morning by 10.30 am.

4. [Day 1] The correspondent banks transfer the available fund to HSBCs master account maintained with their local office by 12:00 noon,

5. [Day 1] The local office of the respective correspondent banks issues a Bangladesh Bank cheque amounting to the sum of all the funds that they received from their branches till 12 noon,

6. [Day 1] HSBC collects the Bangladesh Bank cheques from the correspondent banks by 12.30 pm and deposit the same to Bangladesh Bank,

7. [Day 1] Local office gives HSBC a copy of the statement along with the BB cheques indicating the branch wise break-up of the previous days collection.

8. [Day 1] PCM OPS cross match the deposit slips and the funds received from the correspondent banks. These datas are captured in an excel sheet and then transferred the fund to the corporate accounts upon reconciliation,

9. [Day 1] Captured datas are posted to HUB by MT-100 module not later than 3.00 pm.ReconciliationHSBC keeps a detailed statement of the Collection Correspondent Banks NOSTRO accounts indicating the breakdown of the fund received by the Bangladesh Bank Cheque. HSBC maintain a separate file for each of the Collection Correspondent Banks. HSBC also keeps the deposit slips in envelopes marked by the payment date.FCD checks whether the Total Credit entries on everyday on the NOSTRO account by Collection Correspondent Banks is matched by a Total Debit entry (narration indicating the Date) by PCM Ops on the mirror NOSTRO account.

Collection Correspondent Banks:

1. Uttara Bank Limited

2. National Bank Limited

3. Prime Bank Limited

4. Islami Bank Bangladesh Limited

3.1.2 Telegraphic Transfer (T.T.) ProcedureOne of the key goals of Global Payments and Cash Management is to provide fund transfer mechanism to remote areas of the country through correspondent banks. To facilitate the payments/transfer of funds and inward remittances to the remote places in smoother & efficient manner, HSBC maintains accounts with correspondent banks to facilitate the same.

Figure 2: Telegraphic Transfer Workflow

Legend:

Steps of the Payment (T.T):1. Customer gives an instruction (To branches or other business lines front offices), or PCM Ops receive inward remittances from abroad.

2. PCM Ops choose the path to remit the fund.

a. If the beneficiary bank is one of HSBCs correspondent banks remote branch then PCM Ops shall send an instruction through that correspondent banks local office,

b. If the beneficiary bank is not one of HSBCs correspondent banks remote branches, then PCM Ops shall send an instruction to any correspondent banks local office, whose branch can remit the fund to the beneficiary bank and branch. In other words, PCM Ops choose a correspondent bank who has a branch closer (probably within the same clearing zone) to the beneficiary bank branch;

3. Calculation:

a. PCM Ops calculate the appropriate charges that PCM Ops must deduct from the customer as per agreement with them, or as per standard tariff.

b. PCM Ops calculate the appropriate charges that the Payment Correspondent Bank will deduct from the NOSTRO account to execute the instruction;

4. Transactions:

a. PCM Ops Debit the appropriate TT amount plus total (HSBCs + Other Banks) charges from the customers account;

b. PCM Ops Credit the TT amount plus Payment Correspondent Bank charges to the correspondent banks mirror NOSTRO account;

5. After executing the transactions, PCM Ops send a remittance instruction (i.e. letter) addressing the Payment Correspondent Bank to Debit, the TT amount plus their charges, from HSBCs NOSTRO account in their book and remit the fund to their appropriate branch.

Reconciliation:

PCM Ops have files for TT instruction where the customer instruction, charges calculation and Other Bank forwarding letter is kept.

FCD checks whether the Credit entries made by PCM Ops (for TT amount plus charges) on the mirror NOSTRO account, is matched by a Debit entry on the NOSTRO account for the TT amount; and later on at the end of the moth, whether the Total Charges of the TT matches or not.Payment Correspondent Banks:

1. Uttara Bank Limited

2. National Bank Limited

3. Prime Bank Limited

4. Arab Bangladesh Bank Limited

5. Islami Bank Bangladesh Limited3.1.3 HSBC DD drawn on Sonali Bank

HSBC DD drawn on Sonali Bank service is another way to transfer funds of customers from their HSBC account to any area in Bangladesh. To facilitate this service, HSBC maintains an account with Sonali Banks Ramna Corporate Branch to channel funds to the remote locations of Sonali Bank.

Figure 3: DD Drawn on Sonali Bank work-flow

Steps of the HSBC DD drawn on Sonali Bank:1. The customer deposits an instruction in any HSBC branch, indicating that they need to transfer funds to a certain branch of Sonali Bank in a remote location.

2. PCM Ops then prepare the forwarding letter and give it to the customer along with the DD.

3. PCM Ops provides the cover to Sonali Bank Ramna Corporate Branch by Bangladesh bank cheque on the next day.

4. When the customer, deposits the DD to the branch of Sonali Bank, the fund is then transferred to the appropriate account mentioned in the DD.

Reconciliation

PCM Ops maintains a file named DD Sonali Bank, which contains the customer instruction and photocopy of both the forwarding letter and DD.

FCD checks whether the Credit entry to HSBCs Sonali Bank NOSTRO accounts is matched by a Debit entry by PCM Ops on the mirror NOSTRO account.3.1.4 Payments - HSBC Cashiers Order (CO)

HSBC CO service is another way to provide payment to the customers and non-customers through instructions received from customers.

Figure 4: Cashiers Order Work-flow

Steps of the HSBC CO:1. The customer deposits an instruction in any of HSBCs branches, indicating that they need to transfer funds to a certain beneficiary (ies).

2. PCM Ops then prepare the forwarding letter and give it to the customer/cHSBCsier along with the CO.

3. When beneficiary(ies) deposits the CO to their bank branches, the beneficiary(ies)s bank then claim/place the CO through Bangladesh Bank clearing house or collection (if not in clearing zone). PCM Ops then honors the CO.3.1.5 Foreign Cheque Purchase procedure

PCM Ops also provide cheque purchase facility to some of HSBCs CMB clients having such agreements. PCM Ops Credit the customers account immediately, and realize HSBCs fund later on.

Figure 5: Foreign Cheque Purchase Work-flow

Legend:

Steps of the Foreign Currency Cheque Purchase:1. HSBCs customer deposits their cheques in any of HSBCs branches;

2. Usually HSBCs branches purchase the cheques for the PFS clients and send to PCM Ops for collection. For Corporate clients they send the cheques to PCM Ops for purchase and collection.

3. PCM Ops then send the cheque to the appropriate bank for collecting the fund, after proper crossing and endorsement;

a. If it is a cheque drawn on a Local Bank in Bangladesh, then PCM Ops send the Cheque to that Bank requesting them to issue a Foreign Currency Demand Draft drawn on Bangladesh Bank Dhaka favoring HSBC quoting the reference number;

b. PCM Ops have cash letter agreement with HSBC USA, UK and Germany for USD, GBP, EURO respectively. For any cheque drawn on a bank in those countries. PCM Ops send those cheques for collection under cash letter service.

c. If the cheque is drawn on a bank of any other country except those mentioned above, then PCM Ops send the cheque to HSBCs Group offices in that country to collect the fund on behalf of PCM Ops and remit through HSBCs respective NOSTRO accounts.

4. Every week PCM Ops checks HSBCs NOSTRO account with HSBCs Foreign Currency Cheque Collection Correspondent Banks to verify whether they have collected the fund and Credited HSBCs NOSTRO account in their book or not,

5. If they have credited HSBCs NOSTRO account in their book, PCM Ops then perform R24 to Debit the Foreign Currency Cheque Collection Correspondent Banks mirror NOSTRO account in HSBCs book and Credit the suspense account (which was out-of-fund when the customers account was earlier Credited).Return

If any cheques returns unpaid, PCM Ops do perform adjustment entries to the clients account accordingly and send the returned cheques to the client.

3.1.6 Salary Payments procedure

Salary Payment function is the most widely used service of Global Payments and Cash Management. A huge number of organizations prefer to use HSBCs service instead of issuing cheques to each of their employees.

PCM Ops have the facility to Debit a single account and Credit multiple accounts. This approach is used in salary payments.

Figure 6: Salary Payments Work-flow

Transaction:

Steps of the Salary Payment:1. If both the employer and employees maintains account with HSBC:

a. Branches receive the instruction both in hard and soft copies from clients. They check the authenticity (Proper signature, availability of fund and matching soft and hard copies) and forward to NSC by LN to execute the instruction.

b. To execute the salary, the customer account is debited, and the NSC-Autopay account is credited.

2. If the employer maintains account with other bank, and employees maintains account with HSBC:

a. The Manager of the different bank gives PCM Ops the salary instruction along with a Pay Order, instructing PCM Ops to collect the fund and then credit the numerous accounts. The instruction is submitted both as a printed document as PCM Opsll as in an Excel file.

b. PCM Ops place the Pay Order in the clearing-house through HSBCs clearing department, who deposit the cheque in the Item in Course of Collection account to clear the fund.

c. Once the fund is cleared to execute the salary, the Item in Course of Collection account is debited, and the NSC-Auto pay account is credited.

3.1.7 Bangladesh Bank Cheque Deposit of Customers

Bangladesh Bank Cheque Deposit service is used to transfer funds of customers from another Bank to HSBC.

Figure 7: BB Cheque Deposit Process

Steps of the Bangladesh Bank Cheque Deposit procedure:1. The Other Bank Manager gives PCM Ops a Bangladesh Bank Cheque, along with a forwarding letter indicating the account (s) where the fund needs to be credited.

2. PCM Ops fill the Bangladesh Bank Cheque deposit slip and deposit the Cheque to Bangladesh Bank along with the deposit slip.

3. If Bangladesh Bank accepts the cheque, they Debit the fund from the Other Banks NOSTRO account to HSBCs NOSTRO account. Thus PCM Ops receive the fund.

4. PCM Ops then carry out the transaction of Debiting HSBCs Bangladesh Bank mirror NOSTRO account and crediting the appropriate account (s) mentioned in the forwarding letter of the Other Bank.3.1.8 Outward Cheque Collection procedure

HSBC also provide cheque collection services to nonPCM clients.

Figure: FCY Cheque Collection

Figure: LCY Cheque Collection

Steps of the LCY Cheque Collection procedure:1. Customer deposits the cheques at HSBC branches

2. NSC receives those cheques from HSBC branches through internal mail.

3. If the cheques drawn on bank is within Chittagong clearing, it is sent to HSBC Chittagong.

4. If the cheques drawn on bank is outside Chittagong clearing:

a. Pass R23 for the cheque.

b. Send the cheque to the drawn on Bank, asking for a Pay Order drawn on their Local Office.

c. After receiving the Pay Order, it is sent to the clearing department to be placed in the clearing-house of Bangladesh Bank Dhaka.

d. The clearing department places the fund (with a hold date) in the Item in Course of Collection account.

5. On the fund available date, R24 is passed which automatically Debits the Item in Course of Collection account and Credits the Customer account.

Steps of the FCY Domestic Cheque Collection procedure

1. Customer deposits the cheques at HSBC branches


3. Pass R23 for the cheque.

4. Send the cheque to the drawn on Bank, asking for a FCY Demand Draft drawn on Bangladesh Bank.

5. After receiving the FCY Demand Draft, it is sent to Bangladesh Bank Dhaka.

6. If the fund is available, R24 is passed which automatically Debits the HSBC Bangladesh Bank FCY NOSTRO mirror account and Credits the Customer account.

Steps of the FCY Foreign Cheque Collection procedure

1. Customer deposits the cheques at HSBC branches


3. Pass R23 for the cheque.

4. We then send the cheque to the appropriate bank for collecting the fund, after proper crossing and endorsement;

5. Appropriate bank of the previous Step:

a. We have cash letter agreement with HSBC USA, UK and Germany for USD, GBP, EURO respectively. For any cheque drawn on a bank in those countries. We send those cheques for collection under cash letter service.

b. If the cheque is drawn on a bank of any other country except those mentioned above, then we send the cheque to our Group offices in that country to collect the fund on behalf of us and remit through our respective NOSTRO accounts.

6. Every week we check our NOSTRO account with our Foreign Currency Cheque Collection Correspondent Banks to verify whether they have collected the fund and Credited our NOSTRO account in their book or not;

7. If they have Credited our NOSTRO account in their book; we then perform R24 to Debit the Foreign Currency Cheque Collection Correspondent Banks mirror NOSTRO account in our book and Credit the customers account.

a. For any cheques drawn on a bank in USA, indemnity requires if deposited by PFS clients.

b. We also practice cooling period. i.e. If the cheque is within New York / London, we wait for 7 working days; otherwise for 12 working days; to Credit the customers account.

Return: If any cheques returns unpaid, we do perform return entries via R23 and charges customers account accordingly and send the returned cheques to the customer.

Filing: After passing R23, all the documents of the cheque are kept in the LCY/FCY Unpaid File, which subsequently is moved to the LCY / FCY Paid file upon payment. In case of returns, all the documents of the cheque are filed in the LCY/FCY Return file.

Reconciliation: FCD checks whether the Credit entry on our NOSTRO account by Foreign Currency Cheque Collection Correspondent Banks is matched by a Debit entry (possibly with the same narration) by us on the mirror NOSTRO account.3.1.9 HSBCnet

The back-end maintenance of HSBCnet is done at PCM Ops, NSC. This includes creating new users, loading of customer accounts and creating /modifying customer profiles. All the maintenance of HSBCnet is done with software known as Staff Hexagon (Shex). The workflow of HSBCnet at PCM Ops is shown below:Figure 8: HSBCnet Operations Process

3.2 Bill payment procedure3.2.1 BEPZA Bill Collection procedure

HSBC provide bill collection services to BEPZA. BEPZA bill issuance date is by 7th of each month; it is sometimes around 5th or 6th of month. Receiving the bill, we do process the bills by debiting clients accounts in HSBC or collecting funds from non-HSBC clients by the due date, preferably 22nd of the month. We also report it through RCMS functions.

RCMS System Entries procedure:NSC to follow the below instruction for RCMS entry and execution:

1. Use the A/R Template in Appendix 1. Only difference between this template and the regular one, is "Invoice Amount" and "Bill Amount" Columns, The figures are results of multiplication of the USD Amounts, to be mentioned in "Invoice Reference 1" Column, and the rate mentioned in the first row. The rate must be TT clean Bank buy on the execution day plus BDT0.08. There is also a "ROUNDUP" Function in the result columns, because RMS must pull upto 2 digits after the decimal point. Directions on how to use the ROUNDUP function is mentioned below. If the original payment is in BDT, then the above columns need to be filled out directly.

Following is the existing Invoice Pattern, given # is an alphabetic character and $ is a numeric character:###-###-$$$$$-$$$$$$

Where,First three ### will be:

WAT for Water, ELE for Electricity, REN for Building Rent, LAN for Land Rent, GAS for Gas Rent.Second three ### will be:

DHK for Dhaka, CTG for Chittagong.

Third five $$$$$ should match the numbers mentioned in the payor ID for that invoice.

Last 6 $$$$$$ can be:

200508 for August 2005, 200509 for September 2005. This goes by billing month.Points to note for an effective reconciliation:If a new payors is needed, then the A/R file may include the payors with basic details. System will automatically add payor at A/R file upload. For BEPZA Project, we do not need detailed payor info through Payor File or RMS Screen. Just do everything through A/R File upload, whether the payors are existing or not.

Payor pattern now is ###-###-$$$$$ for EPZ-DHK (or CTG) - 5 digit customer number assigned by NSC Ops. Needs to match with the third $$$$$ of the invoice number for the payor.

2. Transactions: They follow the sequence as follows. The times are mentioned below for indicative purposes. "Cut off Time Maintenance" screens allow us to maintain cut - off times as per existing RCMS Manual/EDR.

As you can see, you can trigger the Invoice recon only after the returned cheque report generation cut-off time and before the EOD. After you triggered the invoice recon, you can then trigger the report generation for intraday invoice recon report. If you want the invoice recon report (EOD version) before the EOD is triggered, you may generate the EOD invoice recon report. Once you triggered the EOD, you will not be allowed to generation the intraday report.

Two BEPZA required MIS Format one is a consolidated one required after the execution and the other each customer wise separate report. The reconciled invoice report generated through RCMS need to be transformed into the two format.3.2.2 DEPZ Bill Payment Execution

1. Since DEPZ doesnt have single specific date for the payment (land/rent due 2/3days earlier than electricity bill payments) the first payment date will be used as the bill payment execution date for all the bills.

2. As per the AR sheet NSC to debit the clients account in OBU or FCY or BDT were necessary.

3. NSC to Credit BEPZA account separately for each bill. Caution must be taken while crediting the bill amount, which should match the rate applied.

4. To provide a special rate of BDT 0.08 above HSBC Board rate while crediting BEPZA account.

5. In case of unavailable fund we liaison with Client services of PCM for further action.3.2.3 Other Functions:

Up-country Collection New Branch activation

Send Deposit Slips to Correspondent bank branches or Clients

Sonali Bank New Branch activation

Morning Statements

Evening Daily Collections

MIS information

Collection Monthly Charges

Payment Monthly ChargesNote: HSBC maintain an account with each of our Correspondent Banks, containing a minimum balance required as per our agreement. This kind of account our account in their book is also sometimes referred to as NOSTRO account. In HSBC banking system, we maintain a mirror account with each of our Correspondent Banks NOSTRO account.

4.0 Analysis of the Organization4.1 SOWT AnalysisHere are the strengths, weaknesses, opportunities and threats of HSBC, "The World's Local Bank" Strengths

International Finance: Since HSBC is a multinational company itself, it is well qualified to advise other companies on aspects of international business. With offices around the world, for the cosmopolitan client, HSBC often cannot be beaten in this area. HSBC knows how to succeed in M&A and organic and effective growth it was mostly an Asian bank until it took over a UK bank in 1992 and now has become the world's second largest bank by profit.

Listed in London: HSBC is primarily listed on the London and Hong Kong stock exchanges, which saves the company much grief in complying with new American Sarbanes Oxley laws. Many companies have chosen to list on foreign exchanges other than America because of the expensive new regulations.

China: HSBC is the "Hong Kong Shanghai Banking Corporation" and it has 140 years of experience in China. Since China is the place to be nowadays for businesses and banks, HSBC benefits for being both an old Chinese company and trusted by the Chinese people. The best news for HSBC is that as other companies grow in China, it does, too, because it gains new clients and new global opportunities with each passing day. HSBC has the largest network of any foreign bank in China and deeply understands the Chinese market and customer. In a world that is increasingly going China's way, this is quite a boon to HSBC. Record profits: Last year, HSBC experienced the most profits ever for a UK high street bank, with profits of 11.5bn ($20.97bn) for the whole year.

Weaknesses Branding: While it is certainly a global company, HSBC came late to the game on deciding to perform an integrated marketing strategy and capitalize on its global brand. Because it had set up so many different banks in different countries at different times over a hundred year period, it set them up under different names Hong Kong Bank of Canada, British Bank of the Middle East, HSBC Banco Roberts. Not even all of these banks, prior to 1998, carried the HSBC logo. In 1998, they were all branded together, but the previous lack of branding and the name changes may have hurt HSBC in brand recognition. Customers may have thought that HSBC was taking over their local bank and not realized that HSBC had already been serving them for decades. In any case, the rebranding was an overdue move that should have occurred before 1998.

Record profits ending: As is usually the case, record profits can only last so long. HSBC announced in December 2006 that it was doing just as well as last year, but not as well in revenues. It announced that each year, its bad debt rises. Other banks' shares fell as well on the news.

Opportunities The Middle East: Other banks are running scared of this region. However, HSBC has run its regional business locally and been rewarded for its efforts with numerous awards and honors for the Middle East market. HSBC is a trusted name there, and the company has taken advantage of Iraq's new democracy by creating a presence in the country. HSBC is the largest international bank in the Middle East.

Emerging economies: In addition to the growing Chinese middle class, Brazilians and Indians are beginning to emerge as growing consumers, and therefore growing consumer spenders. Some denizens of these countries previously did not even own a bank account, but companies like HSBC are poised to move in and take advantage of the growing middle class in these areas. In places like Argentina and Turkey, HSBC experienced pretax profits of 50% last year. This is where it is growing the most. By investing in these countries, HSBC can offset problems it may have as spending in the US and UK declines.

Threats Employees striking: Last year, British employees held a strike involving 1,500 workers at HSBC branches in London. At its annual meeting, striking workers stood outside, handing out bags of nuts and saying that they are paid "peanuts" while HSBC experiences record profits. The scenario in Bangladesh is not any better, with employees are constantly complaining about their low wages compared to some Bangladeshi and ks and other multinational companies.

Email viruses: Last year, HSBC Group's CEO announced that HSBC received tens of thousands of email viruses a day and must spend great amounts of money to prevent these from causing system wide damage. As most banking is done on computers, even one virus could cripple HSBC. On their worst day in 2004, the bank received 100,000 attacks.At a glance,

Strengths: (S)Weakness: (W)

HSBC has the largest network banking around the world. Therefore, it can come up with its successful Cash Management products in Bangladesh.

Strong global brand image.

HSBC has the global electronic banking system Hexagon which woks globally. HSBC has limited number of cash management clients.

High cost of fund.

Higher tariff charges then local banks.

They dont have many types of Cash Management Products.

Less reputation and recognition among the corporate clients.

Opportunities: (O)Threats: (T)

HSBC came up with new Cash Management products like Web Bank, payments plus.

Scope of new PCM products in the market.

Engage in different social welfare activities.

Multinational banks may merge with local banks to provide good services.

The local banks may provide this Cash Management service with free of cost.

Fear of losing market share of existing PCM market.

Price war

Large network of the established local banks.

4.2 PEST Analysis Political Factors:The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. Unluckily, the political environment in Bangladesh currently is not positive. Lack of responsibility, intolerance and criminalization is the main problem of Bangladeshi politics. High inflation and interest rate makes the bankers job uncertain and unpredictable. Lack of clear government policy and weak monetary policy of Bangladesh bank are major hurdle for banks like HSBC.

Economic Factors:Although relatively high growth rate, economic activities are halted by political crisis, which in terns affect all kind of business. As the success of banking industry depends on economic health, HSBC is being affected adversely by the stagnant economic condition. Inflation and unemployment rate are also on the rise, creating a nationwide pessimism all around us.

Socio-cultural Factors:Peoples preference to good quality foreign banks is well proven in this country. HSBC has introduced Shariah/Islamic banking to attract a large number of customers who are cautious about Islamic principles about interest. However recent misconducts by some phony banks have tarnished the customers faith somewhat. Peoples attitude about loans such as car lone, home loan, future premium, etc are changing for the positive, more people are using ATM card and credit cards, so social environment is quite optimistic.

Technological Factors:HSBC has its main competitive advantage in technology. Its sophisticated fund transferring facilities, ATM network, hexagon service, phone banking, gives Bangladeshi customers a taste of true high tech bank. Therefore, as long as HSBC can hold onto its good quality service, it has a bright prospect in Bangladesh.Recommendations

&

Conclusions5.1 RecommendationUse of Marketing Research:The management of HSBC should regularly administer marketing research activities in order to keep a regular track of satisfaction levels. Regular research should also be conducted to find out customer expectations about various service aspects. As customer expectations and satisfaction are not static figures regular research at sufficient intervals should be conducted.Complaint Management:HSBC should actively manage the complaints of various customers and encourage customers to give feedback about the services. The management should collect, document complaints, use that information to identify dissatisfied customers, correct individual problems where possible and identify common service failure points. Research showed that this strategy will radically improve the overall customer satisfaction.

Market segmentation strategies:The bank should concentrate on the various demographic segments that are currently not very satisfied with the banks services. Products and services should be tailored for these segments. Appropriate research and surveys should be designed to find out the requirements of these dissatisfied segments. On the other hand, the bank should capitalize on the segments that are currently very satisfied with the services.

Focus on relationship strategies:The bank should focus more on existing customers in order to build strong and loyal relationship with them as satisfied customers more aptly or certainly recommends the bank to friends and relatives. Thus the power of relationship will foster positive Word of Mouth Communication and will attract new customers at a lower cost.Clarity of the statements:The bank should redesign the format of its account statement in to a clearer and easily understandable format. Customers have huge amount of dissatisfaction towards the current format of statements. In should be redesigned with inputs from customers and satisfying their requirements.

Employee Trainings:Employee trainings and workshops should be administered in order to give them knowledge and professionalism of customer interactions. With more professional base employees can better satisfy the customers. They should be taught about how to deal with problem customers and how to deal problematic situations.

Individual Attention & Care:Individual attention should be given to customers in order to better understand their needs and better satisfy them.New Branches should be introduced:Customers showed a huge dissatisfaction with current locations as HSBC provides services from only 5 branches throughout Bangladesh. New branches should be constructed in Dhaka city satisfying more geographic segments. As conveniency of branch location was a very important factor for the customers HSBC should consider building new branches and ATMs within Dhaka city as well as other metropolitan cities of Bangladesh.

New Investment products:New investment schemes should be introduced to meet customer demands. Other banks have high amount of investment schemes and services. New personal savings, future investment products, Sanchay patra schemes should be launched to stay ahead of competition and better satisfy customer requirements.Reconsider interest rates on Savings:The savings rates of HSBC should be redesign as most of the customers were currently dissatisfied with the savings rates. HSBC should restructure the interest schemes of its savings product to attract more valuable customers.

Customer defined Service standards:A formal service blueprint should be designed with appropriate service level standards to reduce the variability of service. These standards should customer defined and customer expectation should be considered while deciding on the service standards.Defensive Strategy of Service Quality:HSBC should pursue a defensive service quality strategy that is a go slow strategy rather than offensive service strategy. That is should focus on Costs of operation, increasing Volume of businesses with existing loyal customers, Segmentation of the premium customers, foster a positive word of mouth communication in its existing customers, etc. Though these strategies will take time to develop a huge customer base, they will in the long run bring more loyal customers to HSBC.Faster Delivery of ATM cards:HSBC should reduce the amount of time required to provide new ATM cards. Currently it takes 3 weeks while some competitors can provide the card within 2 working days. As the HSBC ATM card comes directly from Hong Kong delays are obvious. HSBC should make necessary arrangements to produce the new cards locally in order to reduce the customer difficulties faced in the absence of ATM card.Introduction of House Building Credit Facilities:House building credits & loans should be introduced to more completely satisfy customer needs. Moreover to compete head to head with other banks HSBC should launch this product without delay. At present HSBC is financing to purchase complete flats only.Locker Services:While interacting with the customers at customer service point a huge amount of customers demanded lockers services. With such demand of this service, HSBC should consider of proving locker services to its customers. This will also attract new customers from other banks who are currently offering these services.

Advertising & Promotion:HSBC should pursue an aggressive advertising campaign in order to build up a strong image and reputation among potential customers. In this context, the valuable strengths should be used for positioning the corporate image of the bank. TV ads should be aired to reach a wider array of customers. The ads should capitalize on building strong relationship, needs of customers and quality service of the bank rather than features of products. Thus and offensive marketing strategy emphasizing customer satisfaction and service quality can bring valuable business for the Bank.

Elimination of Contract Employees:Contract employees should be eliminated from the customer service departments as they lack the commitment and willingness to serve customers. One serious mistake can take away valuable customers and years of relationship.

Control over the mailing network:HSBC should strictly monitor the courier services that are engaged in delivering mails and documents. Huge amounts delivery failures are being piled up at branches. So HSBC should have some control over its couriers and ensure proper delivery of mails and documents.

Process Management:The actual procedures, mechanisms and flow of activities at customer service should be well managed and structured in order to form a good experience of the service in the minds of customers. As the services of the Bank are complex in nature, the employees should provide adequate guidance to customers in order to avoid service failures. Thus the whole process should follow a broad service philosophy, which is tailored to customer needs.5.2 Conclusion

Manager, NSC

Assistant Manager, NSC

Staff Officer

PCM OPS, NSC

Assistant Officer

Faruq Al Banna

Assistant Officer

Salamun Karim

Assistant Officer

Sakibul I Khan

Assistant Officer

M Sharif -Ul-Arafin

Supervisor

Correspondence

Bank Branch 1

HSBC

HSBC Customers deposit fund

HSBC Customer Account Credited




Correspondence

Bank Branch 3

Correspondence

Bank Branch 2

Correspondence

Bank Branch N

Correspondence Bank Local Office




Fund Transfer by internal mechanism

Fund Transfer by Bangladesh Bank Cheque, the next day

Deposit Slip sent by Courier, on the same day

Correspondence Bank Local Office

Beneficiary Account Credited

HSBC Customer Account Debited




TT instruction sent

Correspondence

Bank Branch 1

Correspondence

Bank Branch 3

Correspondence

Bank Branch 2

Correspondence

Bank Branch N

HSBC




TT instruction sent

Fund Transfer by internal mechanism

Customer instruction to issue DD

Sonali Bank Remote Branch

DD

Sonali Bank Ramna Corporate Branch

Cover through Bangladesh Bank Cheque

Ultimate Beneficiary

Payment

HSBC

Customer

DD accompanied with Forwarding Letter

Customer instruction to issue DD

Customer instruction to issue CO

Beneficiary Banks Branch(es)

CO

HSBC Clearing, NSC

Ultimate Beneficiary

Payment

HSBC

Customer/ Bank (PCM Ops)

CO accompanied with Forwarding Letter/Sent to Courier for delivery

Overseas Correspondent Bank (NOSTRO accounts)

Overseas Group Offices

Other Local Banks

Bangladesh Bank

FDD drawn on B. Bank

HSBC BD

FDD drawn on B. Bank

Customer Deposited FCY Cheque




Cheque sent

Fund transfer

Customer submits instruction (hard & soft) copy file to branch office

Excel file sent to NSC by LN for processing

Salary file executed by MT-100 & Hexagon at NSC, PCM

Necessary verification

Corporate/ Auto Pay Customer A/C

Employee A/C

Employee A/C

Employee

A/C

NSC Auto Pay A/C

Other Bank forwarding letter accompanied with B. Bank cheque

Bangladesh Bank

Cheque sent

Cheque sent

Fund Transfer

Customer A/C

HSBC

Fund transfer

EBD

HSBCnet User Maintenance

S Hex Maintenance

A/C Load Request

Reply of the request

Overseas Request

Will check the documentation & filing

Will send a complete HSBCnet Application Form to EBD

Internal Customer

HSBC DAK

CMB/PCM

External Customer

(potential/existing)

( Customer Loading

( A/C Loading/Deletion

( Service update as per customer request

( General maintenance

( Staff activity

( Link the user registration with appropriate customer

( Review the user status: add/delete & take necessary action as per customer/ RSC instruction

B.Bank Clearing House

Customer

Deposits LCY cheques

Fund received

PO

HSBC

Pay Order, drawn on their Local Offices

Banks outside Dhaka & CHG clearing zone

Overseas Correspondent Bank (NOSTRO accounts)

HSBC





Overseas Group Offices

Other Local Banks

BangladeshBank

FDD drawn on B.Bank

FDD drawn

on B.Bank

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Documents

Performance of HSBC Bank