Internship Report

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Introduction
s natural resources are unevenly distributed in different countries, a
country cannot produce everything it needs. Some countries are good at producing dairy products; some are specialized in iron and steel industries. As a result, a country will buy what it needs from countries that are good at producing them and in return will sell its products to countries that require them. The products will be moved from one country to another by means of aircraft, railways, trucks, ships or a combination of two or more modes of transport. This buying and selling of goods is international trade and is participated in by different parties.
Why International Trade is so important?

As competition is raising the global standards for quality, increasing the demand for advanced technology & innovation and increasing the value of customer satisfaction, the global market is swiftly changing from a sellers market to a buyers market. This is a profound period of social, economic and political change and to remain competitive globally, organizations must be aware of all aspects of the emerging global economic order. Additionally, the evolution of global communications and its known and unknown impact on how international business is conducted cant be minimized. Again, we know that trade causes peace and prosperity by promoting creativity, mutual understanding, and interdependence. Market is burgeoning in emerging economies in Eastern Europe, the Commonwealth of Independent States, China, Indonesia, Korea, India, U.S.A- in short, globally. These emerging economies hold the promise of huge Prepared by: Md. Kamrul Bari, Matric No: B013002
2 markets in the future. In the more mature markets of the industrialized world, opportunity and challenge also abound as consumers tastes become more sophisticated and complex. Banking institutions play a vital role in international trade. International trade is an exchange of goods between a buyer (importer) and a seller (exporter) for a predetermined price. Trade services means facilitating trade transactions that is export and import. And all export and import in international business are executed through banks.
Why I have chosen Trade Services Department for my Internship?

As global economic growth occurs, understanding trade is increasingly important. And, my purpose in conducting my Internship in a multinational bank such as HSBC Bank (Trade Services Department) stems from my interest in international trade- not just the operational aspects of the Bank, but what are necessary to become successful in real or practical work life. To bolster our imagination, we need to keep up on the changing situations i.e. we need an interest in foreign affairs. And, my Internship in the Trade Services Department of HSBC Bank has given me the opportunity in viewing what is happening in actual trade businesses. In HSBC Bank, the international trade is handled by Trade Services Department or briefly called as a pet name HTV (HSBC Trade Services) throughout the bank all over the world.
1.1 ORIGIN OF THE REPORT
Prepared by: Md. Kamrul Bari, Matric No: B013002
3 This report is an outcome of sixteen weeks Internship Program prepared as the partial requirement of BBA program of the Department of Business Administration, International Islamic University Chittagong. The work on this report was carried out as an Internship program at The Hongkong and Shanghai Banking Corporation Limited, Osman Court 70, Agrabad Commercial Area, Chittagong in the Trade Services Department under the Large Local Corporate Team. The report assigned by the academic supervisor Mr. Serajul Islam, Lecturer, Department of Business Administration, International Islamic University Chittagong. And approved by the organization supervisor Mr. Kazi Moinuudin Khaled, Manager, Trade Services Department of HSBC Bank, Chittagong. The organization attachment started on August 10, 2005. The report is entitled as Overall Performance of Trade Services of HSBC Bank. Actually this is a feedback which department desires from the students who join in an organization after the completion of theoretical part of the BBA program.
1.2 Objectives
The primary objective of the report is to meet the compulsory requirement of submitting a report that is an essential part of the internship program and to have a practical knowledge of the professional life by relating one-year theoretical learning to business. Specific Objectives: To present an overview of HSBC Group To provide information on HSBC Bangladesh To appraise various trade services operations of HSBC Bank.
4 To identify its strengths and weaknesses as well as threats and opportunities from customers viewpoint. To analyze its performance based on the available data. To analyze consumer banking industry of Bangladesh
1.3 Scope
The report will mainly focus on how HSBC Bangladesh is providing documentary credit facilities to target customers and how its trade services are making transaction methods more acceptable worldwide. And identifying its major strengths and weaknesses based on some performance analysis is also the focusing point.
1.4 Methodology
The report is based on primary and secondary data. For data collection following methods are followed: On the job observation. In-depth interviewing of corporate customers. By reading books of different foreign Exchange Guidelines. Browsing the Web site of the HSBC Bangladesh Limited. Finally, through conversation with the different level executives of HSBC.
Primary Sources
Formal questionnaire for data collection is not used. I have collected primary information through informal discussions with employees, respective Unit Heads and officers were interviewed regarding many issues of the system of HSBC.
Secondary Sources
For the organization part, information has been collected through office memo, operating manuals, articles, journal, publications and brochures used by the HSBC in this regard.
Sample Information
Sample is collected from the corporate clients and employees of HSBC Bank. 1.6 Limitations An Internee has to complete the internship and prepare an internship report within short time. In brief, I faced following limitations during the time of preparing this report: Due to time shortage, details of many aspects of the Trade Services of HSBC (Bangladesh) Limited have been skipped in this report. One of the main barriers in writing this report was the confidentiality of data. Though I saw their internal procedure that is being used in processing and evaluating any documentary credit, but I was told strictly not to disclose that even in my internship report. Large-scale research was not possible due to constraints and restrictions posed by the organization. Deficient comprehension of the respondents was another major problem. In many cases, up to date information is not published. To protect the organizational loss in regard of maintaining confidentiality, some parts of the report are not in depth. Getting relevant papers and documents were strictly prohibited. Many procedural matters were conducted directly in the operations by the top management level, which may also gave some sort of restrictions. The information regarding the competitors was difficult to get.
Organizational Overview
2.1 History of the Organization
Headquartered in London, HSBC Holdings plc is one of the largest banking and financial services organizations in the world. It began operations in Hong Kong more than130 years ago. The HSBC Group's international network comprises some 7,000 offices in 80 countries and territories in Europe, the Asia -Pacific region, the Americas, the Middle East and Africa. With listings on the London, Hong Kong, New York and Paris stock exchanges, around 190,000 shareholders in some 100 countries and territories hold shares in HSBC Holdings plc. The shares are traded on the New York Stock Exchange in the form of American Depositary Receipts. Through a global network linked by advanced technology, including a rapidly growing ecommerce capability, HSBC provides a comprehensive range of financial services personal, commercial, corporate, investment and private banking; trade services; cash management; treasury and capital markets services; insurance; consumer and business finance; pension and investment fund management; trustee services; and securities and custody services.
2.2 HSBC Group at a glance
Assets Profit (pre -tax) Staff
US $ 746,335 million at 30 June 2002. US $ 5067 million in 2002 Some 170,000 employees in 81 countries and territories.
Share listings
HSBC Holdings is listed on the London, Hong Kong, New York, and Paris stock exchanges. Trading of the company's shares on the stock exchanges is conducted in London, Hong Kong and Paris in the US$ 0.50 ordinary shares, and in New York in the form of American Depository Shares, each of which represents five ordinary shares.
Technology
HSBC maintains one of the world's largest private data communication networks and is reconfiguring its business for the e-age. Its rapidly growing e-commerce capability includes the use of the Internet, PC banking over a private network, interactive TV, and fixed and mobile telephones.
Product range
Personal, commercial, corporate, investment and private banking; trade services; cash management; treasury and capital market services; insurance; consumer and business finance; pension and investment fund management; trustee services; and securities and custody services.
Key events
The HSBC Group evolved from the Hong Kong and Shanghai Banking Corporation Limited, which was founded in 1865 in Hong Kong with offices in Shanghai and London and an agency in San Francisco. The Group expanded primarily through offices established in the bank's name until the mid-1950s when it began to create or acquire subsidiaries. This strategy culminated in 1992 with one of the largest bank acquisitions in history when HSBC Holdings acquired Midland Bank plc (now called HSBC Bank plc), which was founded in UK in 1836.
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2.3 Foundation and Growth of HSBC
The HSBC Group is named after its founding member, The Hong Khong and Shanghai Banking Corporation Limited (HSBC), which was established in 1865 in Hong Kong and Shanghai to finance the growing trade between China and Europe. The inspiration behind the founding of the bank was Thomas Sutherland, a Scot who was then working as the Hong Kong Superintendent of the Peninsular and Oriental Steam Navigation Company. He realized that there was considerable demand for local banking facilities both in Hong Kong and along the China coast and he helped to establish the bank in March 1865. Then, as now, the bank's headquarters were at 1 Queen's Road Central in Hong Kong and a branch was opened one month later in Shanghai. Throughout the late nineteenth and the early twentieth centuries, the bank established a network of agencies and branches based mainly in China and South East Asia but also with representation in the Indian sub-continent, Japan, Europe and North America. In many of its branches the bank was the pioneer of modern banking practices. From the outset, trade finance was a strong feature of the bank's business with bullion, exchange and merchant banking also playing an important part. Additionally, the bank issued notes in many countries throughout the Far East. During the second world War the bank was forced to close many branches and its head office was temporarily moved to London. However, after the war the bank played a key role in the reconstruction of the Hong Kong economy and began to further diversify the geographical spread of the bank. The group expanded primarily through offices established in the banks name until the mid 1950s when it began to create or acquire subsidiaries. This strategy culminated in 1992 with one of the largest bank acquisitions in history when HSBC holdings acquired Midland Bank plc, which was founded in UK in 1836. The following are some key developments in the group since 1955. 1955 The Hong Kong and Shanghai Banking Cor poration of California was founded.
9 1959 The Hong Kong and Shanghai Banking Corporation acquires The British Bank of the Middle East (formerly the Imperial Bank of Persia, now called HSBC Bank Middle East) and The Mercantile Bank (originally the Chartered Mercantile Bank of India, London & China). 1960 Wayfoong Finance Limited, a Hong Kong hire-purchase and personal finance subsidiary, is established. 1965 The Hong Kong and Shanghai Banking Corporation acquires a majority shareholding in Hang Seng Bank Limited, now the second largest bank incorporated in Hong Kong. 1967 Midland Bank purchases a one -third share in the parent of London Merchant bank Samuel Montagu & Co. Limited (soon to be renamed HSBC Republic Bank (UK) Limited). 1971 The Cyprus Popular Bank Limited (now Laiki Bank) becomes an associated company of the Group. 1972 The Hong Kong and Shanghai Banking Corporation forms merchant banking subsidiary, Wardley Limited (now called HSBC Investment Bank Asia Limited). Midland Bank acquires a shareholding in UBAF Bank Limited (now known as British Arab Commercial Bank Limited). 1974 1978 Samuel Montagu becomes a wholly owned subsidiary of Midland. The Saudi British Bank is established under local control to take overThe British Bank of the Middle Ea st's branches in Saudi Arabia.
10 1980 The Hongkong and Shanghai Banking Corporation acquires 51% of New York State's Marine Midland Bank, N.A. (now called HSBC Bank USA), with a controlling interest in Concord Leasing. UKbased merchant bank Antony Gibbs becomes a wholly owned subsidiary. Midland acquires a controlling interest in leading German private bank Trinkaus & Burkhardt KgaA (now HSBC Trinkaus & Burkhardt KgaA). 1981 Hongkong Bank of Canada (Now HSBC Bank Canada) is established in Vancouver. The Group acquires a controlling interest in Equator Holdings Limited. 1982 Egyptian British Bank S.A.E. is formed, with the Group holding a 40% interest. 1983 Marine Midland Bank acquires Carroll McEntee & McGinley (now HSBC Securities (USA) Inc.), a New York based primary dealer in US government securities. 1985 1986 New Head office building opened at Hong Kong. The Hong Kong and Shanghai Banking Corporation establishes Hong Kong Bank of Australia Limited (now HSBC Bank Australia Limited) and acquires James Capel & Co. Limited, a leading London-based international securities company. 1987 The Hong Kong and Shanghai Banking Corporation acquires the remaining shares of Marine Midland and a 14.9% equity interest in Midland Bank. 1989 A strategic alliance is entered into between The Hong Kong and
11 Shanghai Banking Corporation and California-based Wells Fargo Bank. Midland Bank Launches First Direct, the UK's first 24-hour telephone banking service. 1991 HSBC Holdings is established; its shares are traded on the London and Hong Kong stock exchanges. 1992 HSBC Holdings purchases the remaining equity in Midland Bank. HSBC Investment Bank plc is formed. 1993 The HSBC Group's Head Office moves to London. Forward Trust Group Limited (now HSBC Asset Finance (UK) Limited), a Midland subsidiary, acquires Swan National Leasing, establishing the UK's third largest vehicle contract hire company. 1994 The Hong Kong and Shanghai Banking Corporation is the first foreignbank to incorporate locally in Malaysia, forming Hong Kong Bank Malaysia Berhad (now HSBC Bank Malaysia Berhad). 1995 Wells Fargo & Co. and HSBC Holdings establish Wells Fargo HSBC Trade Bank, N.A. in California to provide customers of both companies with trade finance and international banking services. 1997 HSBC Holdings and Wachovia Corporation of the United States form a non-equity alliance to market corporate financial services worldwide. Forward Trust acquires Eversholt (now HSBC Rail (UK) Limited), a rail rolling-stock leasing company and the largest owner of electric trains operating on the UK mainline network. Marine Midland Bank acquires First Federal Savings and Loan Association of Rochester in New York. In Latin America, the
12 Group establishes a new subsidiary in Brazil, Banco HSBC Bamerindus S.A. and completes the acquisition of Roberts 01S.A. de Inversiones in Argentina (now HSBC Argentina Holdings S.A.). 1999 Shares in HSBC Holdings begin trading on a third stock exchange, New York. HSBC Holdings acquires Republic New York Corporation (now integrated with HSBC USA Inc.) and its sister company Safra Republic Holdings S.A. (now HSBC Republic Holdings (Luxembourg) S.A.). Midland Bank acquires a 70.03% interest in Mid-Med Bank plc. (Now called HSBC Bank Malta p.l.c.), Malta's largest commercial bank. . 2000 HSBC and Merrill Lynch form a joint venture to launch the first international online banking and investment services company. HSBC reaches an agreement in principle to acquire 75% of the issued shares of Bangkok Metropolitan Bank, the eighth largest bank in Thailand. HSBC acquires Credit Commercial de France (CCF), a major French banking group. Shares in HSBC Holdings are listed on a fourth stock exchange, in Paris. 2001 Agreement is reached for HSBC to acquire Barclays Banks branches and fund Management Company in Greece. New 44-floor Headquarter building at Londons Canary Wharf is due to be ready for occupation.
13 HSBC International Network The HSBC Group's international network comprises of some 7,000 offices in 80 countries. A brief list is presented below
Country Classifications
14 To ensure that key resources (management time, capital, Human resources and information technology) are correctly allocated and that the exchange of best practice is accelerated between entities, the group has classified the countries where it operates into 3 categories the large, the major and the international. These classifications are a function of sustainable, attributable earnings, the number of retail clients, balance sheet and size of operation. A brief presentation of this classification is shown below:
Large United Kingdom, USA and Hong Kong SAR/ Mainland China. Definition - More than one million personal clients. - Sustainable earning greater than US$ 200 million Business Focus Concentrated one million personal clients Be a top 10 player in any market/ region served Developed cross selling, loyalty programs and value added products
Major Argentina, Canada, India, Malaysia, Kingdom of Saudia Arabia, Singapore and United Arab Emirates.
15 Definition Sustainable earning between US$ 100 -200 million.
Business Focus/Rationale
- Universal banks (personal, corporate and investment banking with domestic business) - Platforms for international Group business - Next generation of large companies - Stable self-funding entities - Onshore HQ International The rest of the world
Definition
Earnings below US$ 100 million Business Focus/ Rationale - Platforms for international Group business - Limited domestic presence - Nursery for developing management - Tomorrows major Business - Supported by offshore HQ
HSBC Principal Business Entities
16 The group is represent by different business entities in over 80 countries and territories around the world. It would be difficult to list them all individually so the name of the major entities are shown on the following page along with their region and volume of operation. HSBC Group Vision To - become the worlds leading financing services company
- balance Group earnings between the OECD and the Emerging Markets
HSBC Group Values

- Long term, ethical client service
- High productivity through teamwork - Confident and ambitious sense of excellence - International character, conservative orientation - Capable of creativity and strong marketing. HSBC Governing Objective We will the mean Total Shareholder Return performance of a peer group of financial institutions over a three year rolling average; and target to double shareholder returns in five years. HSBCs Business Principal and Values The HSBC Group is committed to five Business Principles: Outstanding customer service; Effective and efficient operations; Strong capital liquidity; Conservative lending policy; Prepared by: Md. Kamrul Bari, Matric No: B013002
17 Strict expense discipline; HSBC also operates according to certain Key Business Values: The highest personal standards of integrity at all levels; Commitment to truth and fair dealing; Hand-on management at all levels; Openly esteemed commitment to quality and competence; A minimum of bureaucracy; Fast decisions and implementation; Putting the Group's interests ahead of the individual's; The appropriate delegation of authority with accountability; Fair and objective employer; A merit approach to recruitment/selection/promotion; A commitment to complying with the spirit and letter of all laws and regulations; The promotion of good environmental practice and sustainable development and commitment to the welfare and development of each local community.
HSBC Brand & Corporate Identity The Hexagon logo of HSBC derives from HSBCs traditionally flag, a white rectangle divided diagonally. Like many other Hong Kong company flags in the last century, the design of the flag was based on the cross of ST.Andrew, The Patron Saint of Scotland. HSBC brand & corporate identity represents what HSBC wants its brand to mean to its customer. It is derived from the groups Corporate Character Prepared by: Md. Kamrul Bari, Matric No: B013002
18 HSBC is a prudent, cost conscious, ethically grounded, conservative, trustworthy international builder of long-term customer relationships. Basic Drives Higher productivity, Team Orientation, Creative Organization & Customer Orientation. Vision To be the worlds leading financial company. The essence of HSBC brand is integrity, trust and excellent customer service. It gives confidence to customers, value to investors & comfort to colleagues.
2.4 HSBC in Bangladesh
The HSBC Asia Pacific group represents HSBC in Bangladesh. HSBC opened its first branch in Dhaka on 17th December, 1996 to provide personal banking services, trade and corporate services, and custody services. The Bank was awarded ISO9002 accreditation for its personal and business banking services, which cover trade services, securities and safe custody, corporate banking, Hexagon and all personal banking. This ISO9002 designation is the first of its kind for a bank in Bangladesh. The Hong Kong and Shanghai Banking Corporation Bangladesh Ltd. primarily limited its operations to help garments industry and to commercial banking. Latter, it is extended to pharmaceuticals , jute and consumer products. Other services include cash management, treasury, securities, and custodial service. Realizing the huge potential and growth in person banking industry in Bangladesh, HSBC extended its operation to the personal banking sector in Bangladesh and within a very short span of time it was able to build up a huge client base. Extending its operation further, HSBC opened a branch at Chittagong, two branch offices at Dhaka (Gulshan and Mothijheel) and a n offshore banking unit on November1998. Another branch has been opened at Dhanmondi on 1st of March, 2003. At 28th February 2003, the number of
19 employees of this bank in Bangladesh was 175. HSBC Bangladesh is under the strict of supervision of HSBC Asia Pacific Group, Hong Kong. The Chief Executive O fficer of HSBC Bangladesh manages the whole banking operation of HSBC in Bangladesh. Under the CEO there are heads of departments who manage specific banking functions e.g. Personal banking, corporate banking, etc . Currently HSBC Bangladesh is providing a wide range of services both two individual and corporate level customers. In 2000 the bank launched a wide array of personal banking products designed for all kinds of (middle and higher middle income) individual customers. Some such products were Personal loans, car loans, etc. Recently the bank launched three of its personal banking products Tax loan, Personal secured loan & Automated Tele Banking (ATB) service. These products are designed to meet the diverse customer needs more completely. HSBC in Bangladesh also specializes in self-service banking through providing 24-hour ATM services. Recently it opened two new ATMs at Shantinagar & Banani to better satisfy those geographic segments. In total the branch currently has 9 ATMs (5 on-site & 4 offsite) located at various geographical areas of Dhaka & Chittagong.
2.5 HSBC Bangladesh Overview
Name of the Organization Year of Establishment Head Office Nature of the organization
The Hong kong & Shanghai Banking Corporation Bangladesh Ltd. 1996 Anchor Tower, 1/1-B Sonargaon Road, Dhaka 1205, Bangladesh Multinational company with subsidiary group in Bangladesh.
20 Capital Asset TK 4380 million Deposit Tk 3985 million Advance Tk 2755 million Shareholders Products HSBC group shareholders Savings & deposit services. Loan products. Corporate and Institutional services. Trade services Hexagon Management Mr. Steve Banner Chief Executive Officer Mr. Mamoon Mahmood Shah Head of Personal Financial Services Mr. Adil Islam Head of Corporate Banking Mr. Syed Akhtar Hossain Uddin Human Resources Manager Mr. Munir Hussain Marketing Manager
Mr. Wasim Adnan Wahed

Chief Operating Officer Number of Offices 5 (Dhaka, Motijheel, Gulshan, Dhanmondi & Chittagong) Number of ATMs Number of employees Technology 11 200 Offers full online banking from branch to
21 branch and also from Dhaka to Chittagong. Service Coverage & Services Serves individual and corporate customers within Dhaka & Chittagong.
HSBC Bangladesh currently provides services from two of its full service branches one in Dhaka and the other one in Chittagong. Besides these offices there are two personal banking Booth offices located at Gulshan & Motijheel. There are currently 8 ATMs operating in Dhaka and 1 in Chittagong. The list of these offices are shown below along with there their addresses. Branches & Booths Dhaka Main Office (Full service branch with two ATMs) Anchor Tower, Sonargaon Road - Dhaka Gulshan Office (Personal Banking Booth with one ATM) Gulshan Avenue, Dhaka Motijheel Office (Personal Banking & Remittance office with 1 ATM) Rajuk Avenue, Motijheel- Dhaka Dhanmondi Office (Full service branch with one ATM) Rd. 27 Dhanmondi Dhaka Chittagong office (Full service branch with Two ATM) Osman Court, 70,Agrabad Chittagong Offsite ATMs 1. Uttara model town, Uttara - Dhaka 2. Mumtaz plaza, Dhanmondi - Dhaha 3. Kemal Ataturk Avenue, Banani - Dhaka 4. Concord Twin Towers, Shantinagar Dhaka 5. Nasirabad Chittagong 6. Jamal Khan Chittagong
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2.6 Management of HSBC Bangladesh
HSBC, Bangladesh is one such company that has to over come a lot of hurdles to reach the position it now holds. At present, Mr. Steve Banner is the CEO; Mr. Adil Islam is the chief of Corporate Banking; Mr. Adnan Wahed is COO, Mr. Mamoon Mahmud Shah is the Chief of Personal Banking, and Mr. Syed Akhtar Hossain is the Human Resource Manager at HSBC Bangladesh. These five men at the top carried out their management roles exhaustively. They equally contributed to HSBCs superior leadership, by carrying out their unique roles. They worked well together, respecting each others abilities, & arguing openly & without any rancour when they disagreed. To maintain a close touch with the organization each man works in separate area of HSBCs complex. Their offices are indistinguishable from all other cubicles where HSBCs junior executives & secretaries work in. There are no office walls in HSBC and all the staff starting from the CEO to the lower operating level employee share the same premises under one roof. There are no Specialized cabins for top management and executives and also no executive dining rooms. This has created a management team that is unified, cohesive & energetic. Each and every employee of HSBC takes pride of being an employee at HSBC and his or her pride comes from the freedom of direct communication with the top management. The management of HSBC is supportive in the sense that the top management deliberately supports the suggestions, values, ideas, innovation and hard work of the employees and officer. Again high amount of employee participation is encountered in the management process. There are also systems for awards, incentives, and status for innovative ideas and hard works. Again the management style can also be termed as Collegial as high amounts of team work and participation exists between the top and bottom parts of HSBC. Thus, according to my perspective of management style at HSBC
23 Bangladesh falls somewhere between supportive and collegial. A graphical presentation is shown below:
AUTOCRATIC Power Authority Obedience Dependence on Boss Subsistence SUPPORTIVE Minimum Leadership Support Job performance Participation Status and recognition Awakened drives
CUSTODIAL Economic Resources Money Security and benefits Dependence on organization Security COLLEGIAL Passive cooperation Participation Teamwork Responsible Behavior Self -discipline Self actualization Moderate HSBC enthusiasm
Figure 2.1: Four-Layer Management Philosophy of HSBC.
HSBC follows a 4-layer management philosophy in Bangladesh. These are Managers, Executives, officers & Assistant officers. The CEO is the top most authority of all the levels. Managers are the departmental heads that are responsible for the activities of their departments. They are the heads of the department and formulate strategies for that department. e.g. Human Resources Manger. Executives have the authority next to managers. They are basically responsible for certain activities & organizational functions. e.g. Admin Executive. These two layers represent the management level of HSBC Bangladesh. Officers are the next persons to stand in the hierarchy list. They are the typical mid-level employees of HSBC organizational hierarchy. The operating level employees of HSBC who are ranked as Assistant Officer fill the last layer of this hierarchy. They perform they
24 day-to-day operational activities of HSBC.

CHIEF EXECUTIVE COMMITTEE
The organizational structure of HSBC Bangladesh is designed according to the various service and functional departments. The Chief Executive Officer (CEO) heads the chief executive committee, which decides on all the strategic aspect of HSBC. The CEO is the person who supervises the heads of all the departments and also is the ultimate authority of HSBC Bangladesh. He is responsible for the all the activities of HSBC Bangladesh and all its consequences. He administers all the functional departments and communicates with the department heads for smooth functioning of the organization. The HSBC Chief Executive Committee is formed with the heads of all departments along with the CEO. The structure of this top-most authority is shown in the following figure. Besides the CEO the CEC is staffed with 6 more managers: Manager of Human Resources, Manager of Services, Manager of Financial Control Department, Chief of Personal Banking, Chief of Corporate Banking and Manager of Marketing.
Figure 2.3: Organizational Structure of HSBC.
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2.7 An Overview of Functional Departments
Figure 2.4: An Overview of Functional Departments

2.8 Functional Areas of HSBC
Operations of HSBC Bangladesh HSBC activities are performed through functional departmentalization. So, the departments are separated according to the functions they perform. Within the major departments there are some other subsidiary departments that allow smooth operation of their own major departmental function.
Human Resources Department:

The Human Resource Manager currently heads this department. The major functions of this department are Recruitment, Training and developments, Personnel Services and Security. The HR department is very are very much concerned with the discipline that is set up by the HSBC group. HSBC group has got strict rules and regulations for each and every aspect of banking, even for non-banking purposes; i.e. The Dress Code. The structure of the HR department is shown below:
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Figure 2.5: Structure of Human Resource Department All these major personnel functions are integrated in the best possible way at HSBC, which results in its higher productivity. The Human resource officer monitors the employee staffing and administration activities. The Training officer supervises Training, development & rotation activities.
Performance Appraisal
The company follows both rating and descriptive systems for the performance appraisal. Although the appraisal system is non-participative but the employees are annually assessed with a joint consultation with their immediate supervisor and departmental head. Rating is mainly done on the following factorsi) ii) iii) iv) v) vi) vii) viii) Knowledge of work Accuracy and Reliability Speed General intelligence Sense of responsibility and duty Diligence Initiative and self confidence Readiness to work for and with others
Personal Banking Division (PLB):
27 PLB is the most flourishing department of HSBC Bangladesh. This department basically deals with the management of products and services offered to the individual consumers. Within a span of only five year HSBC PLB has grown tremendously and is still growing with its innovative products and service offerings. Chief of PLB, JOE B. Bennett a British national, manages this department. He is the person behind the astounding growth of PLB department in HSBC Bangladesh. Chief of PLB manages and supervises the Personal Banking activities of the branch network of HSBC Bangladesh. The 4 branches of HSBC basically deal with the personal banking activities and provide various accounts services to individual customers. The departments under PLB credit is shown in the following diagram:
Figure 2.6: Structure of Personal Banking Division
Branch network:
28 There are four branches of HSBC, 3 situated at different Dhaka and 1 at Chittagong. Only the Dhaka office (head office) branch & Chittagong branch deals with both corporate and personal banking. There functions are to provide various financial services to the consumers. These include customer services, sale of various PLB products, opening new accounts, providing cash, remittance and other teller services, etc. the branches are quite decentralized for better delivery of services to customer and have their own premises and facilities.
Credit Department:
The personal banking credit department deals with the consumer credit schemes such as the Personal loan, Car loan. Education loan, tax loan, personal secured loan, etc. which are tailored to meet the demand of individual customers. The manager of PLB credit who approves and administers all the activities heads this department. He is staffed with one loan approval officer, one loan processing officer, two assistant officers and one MIS clerk. The approval officer mainly rejects or approves the credit requests. After being checked by the approval officer, the credit requests go to the processing officer for further processing of the application.
ATM Center:
The ATM center ensures smooth operation of the ATM machines that are located at Dhaka and Chittagong. The ATM center is responsible for regular replenishment of the off-site ATMs and servicing of all the ATMs. Currently a total 8 ATMs are in operation. The ATM center also deals with issuance, termination and servicing of the ATM cards. On an whole, the ATM center is the department that is solely responsible for all the activities related to ATM and is the facilitating department that enables customers 24 hour banking support.
ATB center:
ATB refers to Automated Tele Banking. This department deals with the back office servicing of the HSBC phone banking services provided to customers. This department is basically responsible for the activation of ATB, ATB pin generation, and ATB security
29 management, ATB blocking and troubleshooting of all ATB problems. This department is fairly new and was constructed on January2001.
Corporate Banking Division:

This division if HSBC provides financial services to organizational clients. HSBC is a worldwide leader in banking and financial services whose success is based on its relationships with its corporate clients. Whether it is locally or around the world, HSBC offers a comprehensive range of services that can be tailored to the individual needs of the company. The Head of this department is the Chief of Corporate Banking. He is also the Vice-CEO of HSBC Bangladesh. The chief of CB manages the activities of corporate banking of HSBC Bangladesh. Corporate Banking of HSBC Bangladesh includes Corporate Institutional Banking (CIB) Trade Services (HTV), and Hexagon. These subdivisions are discussed briefly in the following sections along with a structure chart of Corporate Banking division of HSBC Bangladesh.
Figure 2.7: Structure of Corporate Banking Division
Corporate Institutional Banking (CIB):

As their major customers operate internationally, HSBC services them internationally. Operating through the major centers and in close liaison with HSBC Investment Bank,
30 Corporate and Institutional Banking provides the full range of the Group's capabilities at local and global levels, with a particular focus on payments and cash management, trade and securities custody. HSBC also offers local financial institutions and banks access to wide range of financial services available on an international basis. The services are tailored to suit the needs of the companies. CIB has two separate wings: Relationship Management Department and Hexagon. These are discussed below:
Relationship Management Department:

The RM department consists of various relationship managers who are assigned to different corporate client to better satisfy their needs. These RMs communicate with the clients and are solely responsible for the companies they deal in. Any information regarding a corporate client must be communicated through the respective RM assigned to that corporate client. A relationship manager may be assigned more than one company and this decision depends on the chief of Corporate Banking.
Hexagon:
The Hexagon department deals with all aspects related to HSBCs unique banking software product - Hexagon. It is the global Electronic Banking system of HSBC, which offers the customers more convenient and efficient banking than ever before. It is an innovative desktop banking system developed by the HSBC group, which operates via the groups proprietary worldwide communications network.
HSBC Trade Services (HTV):

Trade services is known by various names in other banks, e.g. Trade Finance Foreign Exchange, Foreign Trade etc. However, the functions are the same. As the name suggests, this department is involved in facilitating trade, both international & within Bangladesh. HSBC is the leading provider of trade finance and related services to importers and exporters in Asia. Trade is considered a core business of the group. The groups presence in 81 countries of the world gives a good opportunity to control both ends of a trade transaction and keep the business within the Group. The various awards it has won from the leading publications of the world acknowledge HSBCs excellence in trade.
31 The trade service department has two separate subsidiaries: Credit Administration & Foreign Exchange Division. Credit Administration department basically deals with all the documentation, processing, administration and disbursement of the import-export services provided to corporate clients. This department is known to be the heart of HSBC trade services that administers and manages all the trade tools and facilities provided by HSBC Corporate Banking. Some important aspects of this department are LC advising, documentation, OD facilities, guarantees, etc. The For-ex division of trade services is solely concerned with the management of foreign exchange inflow and outflow. The For-ex division of trade service in relation with NSC and FCD manages the foreign currency traffic of HSBC that originates from Corporate Banking and trade services.
Marketing Department:
The sixth major department of HSBC is the marketing department. The marketing department of HSBC play a vital role in fostering the continuos growth HSBC in Bangladesh. A manager is assigned to this department who looks after the overall marketing operation of HSBC in Bangladesh. This department is basically concerned about marketing the companys products, services and building a strong corporate image. The marketing department of HSBC has three subdivisions: Direct Sales, Promotion & Marketing Administration. This division are discussed below:
Figure 2.8: Structure of Marketing Department Prepared by: Md. Kamrul Bari, Matric No: B013002
32
Direct Sales (DS):

An executive is assigned to this part of the marketing department. The Direct Sales division coordinate & manages the sales activities of all the Mobile Sales Officers (MSO) of HSBC Bangladesh. The MSOs basically makes sales of the company various Personal Banking products such as, savings accounts, consumer loan, etc outside the banking premises. There are a total of more than 50 mobile sales officers (MSO) employed in the cities of Dhaka and Chittagong. A MSOs are assigned to specific branches for making sales activities more smoothly. The DS executive sets sales strategies & targets for the Sales officers and manages the whole team of MSOs in Bangladesh. The direct sales department also decides upon the commission and remuneration of the mobile sales officers as their salary structure is based on sales performances. Thus this part of the marketing division is very important for the overall growth of the Personal Banking Division.
Promotion:
This part of the marketing department deals with all the promotional activities of HSBC Bangladesh. Prime responsibilities of this department are: Maintaining strong public relations with various media intermediaries, Advertising the companies products and services, and building a strong corporate image of HSBC in Bangladesh.
Public Relations:
The promotion department organizes various environmental and social activities in order to build a strong corporate image of HSBC in the minds of customers as well as in the media. Maintaining strong relationship with news media is another major duty of this department.
Advertising:
The promotion also coordinates all the advertising of HSBC products within Bangladesh. Some of the advertising tools that are frequently used by the company are as follows: a) Newspapers Advertising: Regular advertisements of various products and
33 services of HSBC are given in some of the countries most renowned daily newspapers. b) Billboards: Huge colourful billboards with HSBC logo are found in various major areas of Dhaka and Chittagong. These billboards emphasize on the needs of customers and shows HSBC logo as solution to their needs. c) Road Side Signposts: Medium sized multi colour signposts focusing on various products of HSBC are found on the roadsides of various posh areas such as, Gulshan, Dhanmondi, Baridhara, Motijheel, etc. d) Mailers: various product updates and new product information are regularly sent to existing customers of HSBC. e) Brochures: Various colourful broachers featuring specific products of HSBC are being displayed and distributed to existing and potential customers via branch offices and Mobile sales officers.
Finance Department of HSBC Bangladesh

This is considered as the most powerful department of HSBC. It keeps tracks of each and every transaction made within HSBC Bangladesh. It is headed by Manager of FCD who ensures that all the transactions are made according to rules and regulation of HSBC group. Violation of such rules can bring serious consequences for the lawbreaker. The functions of FCD are briefly discussed below along with an organ gram of the department: Foreign Correspondence (FC): FC keeps records of all the accounts of HSBC. All the vouchers, notes, advices and transaction reports of the branches are sent to FC for record keeping purposes. FC also prepares the financial statements for the banks and decided upon banks assets and liabilities. It also deals with the returns that are submitted to the Central Bank on regular interval. Treasury: This department works under FCD. Their main job is to take decisions regarding purchase and sell of foreign Currency. The purpose of Treasury's operations is to utilize the funds effectively and arrange funds at a lowest possible rate of interest, through
34 maintaining effective relationship with other banks and following the Government rules and foreign exchange regulations
Figure 2.9 : Structure of Finance Department
Services Department of HSBC:

This is an integral and vital part of the bank. The services department ensures smooth operation and functioning within and between all the departments of HSBC. It also provides continuous support to the core banking activities of HSBC. The Manager of Services heads this department who formulates and manages various critical issues of the services function of HSBC. He is followed by a group of executives who are the heads of various subsidiary divisions that operate within the services department. The Services Department is considered as the backbone of all other departments. The various subsidiary divisions within this department are Administration, IT, Internal Control (IC), Network Services Center (NSC), and HUB. A structure of the services department is presented below followed by a briefing of the subsidiary divisions:
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Figure 2.10: Structure of the Services Department Administration: Like that of any other organizations, the Admin department of HSBC makes sure that the organizations moves on with all its departments and staffs operating according to all the rules and regulations of the company. It also prevents any bottlenecks within the work process and ensures smooth functioning. The admin department has two divisions general administration and Business support services. The general admin division is pretty much similar to the admin departments of other companies that ensure discipline and regulatory concerns. The business support services provide supports to the departments during employee leaves and sudden terminations so that the department can function without problems.
36 IT This department gives the software and hardware supports to different departments of the bank. As HSBC is engaged in online banking, the role of IT is very crucial for the bank. This department is the most active department of HSBC where employees always standby to solve any problems in the system. The managers and executives of IT division work continuously to develop the total IT system of HSBC so that it can be operated with ease, accuracy and speed. Internal Control: HSBC has internal auditors who visit on regular basis and submit the report to the higher authority for audit purposes. This gives different departments the chance to know their mistakes and take necessary corrective actions. Again, the Bank annually administers a company wide audit program to evaluate the overall performance of the bank in Bangladesh. HSBC Universal Banking (HUB): The HSBC banking system is called HUB. HSBC does the online banking and it is HUB, which sets up the parameter for that. This HUB is linked with the HSBC group via satellite and each and every transaction made by HSBC within Bangladesh is being recorded at the HSBC Asia-pacific headquarters at Hong Kong via HUB. Thus the HUB is the most powerful and important equipment of HSBC Bangladesh that monitors and tracks any fraud and faults made with HSBC Bangladesh. Network Services Center (NSC): This department can be described as the Power House of HSBC Bangladesh. NSC does the back office job for the bank. The main four jobs that are performed by NSC are Clearing, Scanning of signature cards, issuing checkbooks and sending & receiving Remittances. The following are the methods that NSC used to remit money for customers: Telegraphic Transfer (TT), Demand Draft (DD) & Cashiers Order.
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Payment and Cash Management (PCM):

PCM deals with the inter-bank payment. PCM strategies are designed to ensure efficiency, profitably and comprehensive support.
Hexagon
offers comprehensive cash management services in an easy-to-use and highly
secures system. This provides timely and accurate account information and gives total control over finances. Everyone can pay to third parties at ease and can effect instant fund transfer between ones own accounts. This will take effect instantly. So, no more signature and fax hassle for an instruction.
Documentary Credit
3.1 Literature Review
As natural resources are unevenly distributed in different countries, a country cannot produce everything it needs. Some countries are good at producing dairy products; some are specialized in iron and steel industries. As a result, a country will buy what it needs from countries that are good at producing them and in return will sell its products to countries who require them. The products will be moved from one country to another by means of aircraft, railways, trucks, ships or a combination of two or more modes of transport. This buying and selling of goods is international trade and is participated in by different parties. Banking institutions play a vital role international trade. International trade is an exchange of goods between a buyer (importer) and a seller (exporter) for a predetermined price. All export and import are executed through banks. In HSBC bank, the international trade international trade is handled by trade service department or briefly called as a pet Prepared by: Md. Kamrul Bari, Matric No: B013002
38 name HTV (HSBC Trade Services) throughout the bank all over the world. In HSBC, letter of credit or (L/C) credit is called Documentary Credit or DC. In this chapter, DC will be used as a synonym of letter of credit or L/C.
3.2 Documentary Credit
In simple terms; a Documentary Credit is a conditional bank undertaking of payment. Expressed mire fully, it is a conditional Undertaking given by bank [Issuing Bank] at the request of a customer [Applicant] or on its own behalf to pay a seller [Beneficiary] against stipulated documents provided all the terms and conditions of the Credit is complied with. These stipulated documents are likely to include those required for commercial, regulatory, insurance or transport purposes such as commercial invoice, certificate of origin, insurance policy or certificate and a transport document of a type appropriate to the mode [s] of transport used. Documentary credits offer both parties to a transaction a degree of security, combined with possibility, for creditworthy party, of securing financial assistance more easily. Documentary credits thereforeA bank's written payment undertaking On behalf of a buyer To pay a seller A given sum of money Upon presentation of documents representing the supply of specified goods These documents meeting the terms of the letter of credit And being presented within a specified time And at a specified place
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Figure 3.1: Documentary Credit: A Typical Transaction
DC Cycle
This is how things usually happen in the life of a DC. 1. Buyer and Seller sign sales contract.
2. 3. 4. 5. 6. Buyer requests his bank (Issuing Bank) to issue a DC in favour of Seller. ( Imports- DC Opening) Issuing Bank sends the DC to a branch/correspondent bank in the sellers country (Advising Bank). Advising Bank authenticates and advises the DC to Seller (Exports DC Advising) Seller ships the goods. Seller presents documents to the Nominated Bank for negotiation/
40 payment/acceptance. 7. 8. 9. 10. 11. The Nominated Bank checks the documents and pays Seller if documents are in order. (EXPORTS - DC Negotiation) Nominated Bank sends documents to Issuing Bank. Nominated Bank claims reimbursement from the Issuing Bank or from a bank specified in the DC. Issuing Bank delivers documents to the BUYER after settlement. (IMPORTS - Bills Receivable) Buyer exchanges the documents of title with the carrier, or carriers agent for the goods.
3.3 Types of Documentary Credit
3.3.1 Documentary Credit according to Degree of Security a) Revocable L/C
A revocable L/C can be amended or cancelled without prior warning or notification to the seller. This means the Buyer has maximum flexibility, as DC can be amended or cancelled without prior notice to the seller, up to the moment of payment by the bank at which the issuing bank has made the credit available. The Seller however faces the risk that the DC can be amended or cancelled while the goods are in transit and before the documents are presented or before payment is made. b) Irrevocable L/C
An Irrevocable L/C can be amended only with the agreement of all parties. This means the Buyer has less flexibility, as the credit can only be amended or cancelled if all parties agree. The DC is issued in this form because the buyer and seller have agreed to this in the sales contract. The Seller however, has a greater assurance that he will receive payment. But he remains dependent on the undertaking of a foreign bank. c) Confirmed Irrevocable
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As there are often two banks involved - the issuing bank and the advising bank (who passes the DC onto the beneficiary) - the seller can ask the buyer to arrange through his bank (the issuing bank) for an irrevocable DC to be confirmed by the advising bank. If the advising bank agrees, the irrevocable DC becomes a confirmed irrevocable DC. This means the Buyer has little benefit from this, as it is an additional requirement by the seller. The Seller however, has a double assurance of payment, since a bank usually in the sellers country has added its own undertaking to that of the issuing bank. Confirmation charges are normally borne by the seller. 3.3.2 Documentary Credit according to Payment Method a) Sight Credit When the payment terms stipulate the presentation of sight draft, the beneficiary (the seller) receives the proceeds of the credit upon presentation and examination of the documents. The negotiating bank after making payment to the exporter sends the documents to issuing bank. After determining that the documents are in order, the issuing bank delivers them to the buyer and at the same time debits the buyer's account, which offsets reimbursements to the seller's bank. b) Acceptance Credit/Term Credit (Credit with time drafts) In case of acceptance credit the exporter draws a time draft either on the issuing or confirming bank or on the buyer or on another bank depending upon the credit terms. The payment date may be for example 90 days after the invoice date or the date of transport documents. When the documents are presented the draft is accepted instead of payment being made. c) Deferred Payment Credit The credit with deferred payment differs slightly in its effect on the beneficiary from the time draft. The main difference is the lack of a draft. Upon presentation of the proper documents, the bank so authorized issues a written promise to make payment on the due date. Term credits i.e. acceptance credits and deferred payment credits are financing instruments for the buyer. During the payment period, the buyer can often sell the goods Prepared by: Md. Kamrul Bari, Matric No: B013002
42 and pay the credit amount with the proceeds. d) Credit with Advance Payment Some letters of credit provide for advance payment of a portion of the credit prior to compliance with all the credit provisions. The purpose of this advance is to give the exporter, the fluids necessary to purchase or process merchandise especially for the buyer. 3.3.3 Special types of Letter of Credit a) Standby L/C (SLCs) An SLC possesses all the elements of a commercial DC. Basically, it is a DC issued to cover a Non-Performance (default) by one party to the contract. An SLC issued in favor of the beneficiary stipulates that a sum will be paid to the beneficiary upon demand in the event the beneficiary submits a signed statement setting forth that there has been default or non-performance. Standby credits are most commonly used as a form of guarantee by a parent company for credit facilities given to a subsidiary company. The SLC ensures payment to the branch supplying credit facilities to the subsidiary company if and when the subsidiary company fails to repay outstanding obligations when due. Standby credits may also be used: In support of importers open account purchases To cover brokerage firms margin requirements To serve as bid and performance bonds in the construction industry or service contract business. To cover advance payment/performance bond To provide insurers agents worldwide reimbursement of claims paid To enable corporations issuing commercial paper to obtain a better borrowing rate since the offering is priced on the credit rating of the bank issuing the standby credit rather than on the corporations credit rating
b) Revolving credits
43 When the terms and conditions of a credit state that the amount is renewed or automatically reinstated without specific amendments being required the credit is said to be a revolving credit. A revolving credit allows for flexibility in commercial dealings between importers and exporters, particularly when there are likely to be regular future shipments of the same type of goods. Credits of this nature can revolve in relation to time or value. c) Red Clause Credit Originally this clause in credits was written in red ink to draw attention to the unique nature of the credit. The purpose of this clause in the DC is to allow the beneficiary to obtain a pre-shipment advance from the advising or confirming bank. This advance to the beneficiary is on the responsibility of the issuing bank. A beneficiary would require such a clause in the DC when he is unable to secure a packing credit advance from his bankers against the DC. The beneficiary may need this advance to purchase raw materials to manufacture the goods or make cash payments for the goods purchased from another supplier or to purchase quota. The applicant of the DC decides to what extent and under what conditions he will allow the beneficiary to receive the advance. The red clause must specify the total value of the advances. This may be given as a percentage of the DC amount. d) Transferable L/C Transferable Credit is an irrevocable DC designated as transferable.This DC is one that can be transferred by the original beneficiary (First Beneficiary or Transferor) to another party (Second Beneficiary or Transferee). If the Transferable DC allows for partial shipments, such a DC may be transferred to one or more second beneficiaries, each party receiving its own portion of the transaction. The second beneficiary is not allowed to transfer to another or third beneficiary. e) Back-to-back L/C
44 A back-to-back documentary credit is sometimes referred to as a counter credit. This is opened at the request of an exporter who is the beneficiary of an export DC (Master DC), and should only be opened for undoubted customers. When the beneficiary of an export DC applies for a back-to-back DC he assumes the role of a middleman between the actual supplier of the goods and the ultimate buyer. The advantage of this type of credit is that it allows the middleman who may have limited financial resources to purchase goods from a supplier who would only sell on DC terms. The middleman opens the DC in favour of the seller for a smaller amount than the master DC The difference between the master DC amount and the back-to-back DC is the middlemans profit. -- In back-to-back credit operations the shipping documents tendered by the supplier are usually used by the middleman who secures payment under the export or master DC. Documents that are submitted by the middleman would be the invoices and Bill of Exchange. -- The terms and conditions of a back-to-back credit are usually the same as those of the export credit i.e. on a mirror basis.
Requirements of the back-to-back or baby credit may differ from the master DC in the following areas:
The value of a back-to-back credit is less than that of the master DC. Latest shipment date and expiry date on the back-to-back credit are earlier than those specified in the master DC. The period allowed for presentation of documents is usually at least 7 days less then that allowed in the master credit. Back-to-back credits are normally stated to expire at the counter of the issuing branch. -- The main reasons for this is to allow the middleman sufficient time to prepare his documents for presentation under the master DC. -- This is also required by the issuing bank of the back-to-back DC to have enough time to check the documents submitted by the supplier. -- Banks do not open or establish back-to-back DCs readily, as they have to be satisfied that the terms and conditions of the master DC can be fully met by the beneficiary. Prepared by: Md. Kamrul Bari, Matric No: B013002
45 -Where possible banks may often first try to persuade the customer to obtain a
transferable DC. Similarities between Transferable and Back-to-Back Credits: Both credits involve a middleman as seller. They both involve substitution of documents. When issuing a back-to-back or transferring a credit, terms to be observed: Price (DC amount and unit price) might be reduced Expiry date and shipment date might be brought forward Date of presentation of documents might be curtailed Insurance amount of the second DC might be increased to comply with the amount required under the master DC Any documents which cannot be substituted, i.e. certificate of origin
Differences between Transferable and Back-to-Back Credits:

Back-to-back credits involve two DCs. Transferable credits involve only one DC. Back-to-back credits need not be designated transferable. Transferable credits must be designated as transferable. Back-to-back credits are issued on the responsibility of the Bank. The Bank transfers transferable credits without any responsibility. Back-to-back credits allow certain flexibility in documentary requirements; transferable credits allow none except as set out in ICC 500 Art. 48. Back-to-back customers require a special credit facility, whereas transferable credits do not.
3.4 Parties to a Letter of Credit
The Buyer, who places orders and imports goods (meaning to bring into the country). Prepared by: Md. Kamrul Bari, Matric No: B013002
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The Seller, who manufactures and exports goods (meaning to ship out of the country) and issues invoices. The Manufacturer, if the seller does not make his own goods. The Shipping Company, (or Airline Company) who transport the goods overseas and issue Bills of Lading (or Air Waybills) as receipt of goods. The Insurance Company which insures the goods against risk. An insurance policy or certificate is issued to this effect. Governments and Embassies who give permission to import or export specific types of goods by issuing Import and Export Licenses, and Consular Invoices respectively. The Customs and Excise, who levy import duty and issue Customs Invoices. Various Professional bodies, who issue Inspection Certificates certifying that the goods have been inspected and meet certain quality standards. Lawyers, who draw up contracts of sale. Agents, who represent either the buyer or seller overseas. Shipping Registries, who ensure that the carrying ship is seaworthy. Chambers of Commerce, who issue Certificates of Origin. Banks, who participate in most trade transactions to some extent, from full finance to the processing of simple remittances. Issuing Bank/Opening Bank The Bank which at the request of his customer (importer) opens a Letter of Credit is named as Issuing Bank. The Issuing Bank is the buyer's bank/opening bank of the credit. Advising Bank It is the correspondent bank of the issuing bank of the credit through which the credit issued by the opening bank is advised at seller's country. Advising bank may also be a negotiating bank.
47 Negotiating Bank The bank who negotiates/purchases/discounts the documents tendered by the Exporter as per terms of the credit is known as negotiating bank. Confirming Bank Performing the same service as an Advising bank, the confirming bank, in addition, becomes liable to pay for documents in conformity with the letter of credit's terms and conditions. Accepting Bank A bank that (as specified in the letter of credit) accepts time usance drafts on behalf of the importer is called an accepting bank. The accepting bank can also be the issuing bank. Paying Bank The bank that affects payment to the beneficiary (as named in the letter of credit) is known as Paying Bank/ Drawee Bank. Reimbursing Bank If the Issuing Bank does not maintain any account with a bank that will be negotiating documents under a L/C, then arrangement is made to reimburse the Negotiating Bank for the amount to be paid under a credit from some other bank with whom the Issuing Bank maintains his account. The latter bank is termed as Reimbursing Bank.
3.5 Import DC Opening of Trade Services
3.5.1 Relationships with the Importer: When DC terms are agreed in a sales contract, the importer will have to have a relationship with a bank to facilitate the transaction.
48 The importer requires special services from his bank to provide and HTV ( HSBC Trade Services) offers his client some extra-ordinary services such as: Assurance that he (the importer) does not have to pay the seller until he is certain that the seller has fulfilled his side of the contract The possibility of obtaining loans to finance the cost of the imports until he receives proceeds from the sale of those goods Advice and assistance on trade transaction procedures Advice and assistance with foreign exchange activity
As the importers bank, HTV has correspondent relations with other banks or it will have its own branches in the country of the exporter to whom it will send its DC opened on account of its customer, the importer. An importer will, therefore, need a close relationship with HSBC in order to open a DC that in essence provides for payment to be made against documents that represent the goods and makes possible the transfer of rights to those goods.
Import Services :
With over 130 years of experience supporting importers globally, HSBC is well positioned to fulfill your trading needs. A full range of import services handled by experienced staff is available, ensuring that your import documents are processed without delay.
Documentary Credits Import Collections Import Finance Shipping Guarantee
3.5.2 Pre-Requisite for Opening of a L/C a) b) Must be a client/account holder. Request letter from the client to open L/C.
49 c) d) e) f) g) Original IRC (Import Registration Certificate) duly renewed up to current date should also be produced to the bank for verification and return. Valid Membership Certificate from a registered Chamber of Commerce and Industries/Trade Association. . Trade License. Income Tax declaration in triplicate/TIN Certificate. INDENT issued by the local indenting agent or PROFORMA INVOICE issued by the foreign supplier/contract/purchase order/sale order (duly accepted by the importer). h) Fixing up of margin of L/C on mutual basis.
3.5.3 Documents Required from the Importer a) DOCUMENTARY CREDIT APPLICATION (supplied by the Bank) duly filled in by the importer or his authorized Agent. This application is an agreement between the importer and the Bank. This form is to be affixed with tk. 150/- adhesive stamp. b) INSURANCE COVER NOTE (Marine/Air/Post) in favor of the Bank. c) One set of IMP FORM (4 copies) [see Appendix B] duly signed by the importer. 3 (three) copies are to be left blank and are to be filled in after the documents arrive from the Negotiating Bank. The remaining one copy is kept for Bill of Entry purpose, which is signed by the Bank for submission to Bangladesh Bank along with the monthly return for sale of foreign exchange for the import covered under the L/C. d) e) UNDERTAKING for Fluctuation of Foreign Currency duly signed. LC AUTHORISATION FORM in lieu of Import License duly signed by the importer and permission from Bangladesh Bank (may be taken by the client and/or by the Bank on behalf of the importer). 3.5.4 Steps Involved in Import Procedures
1.
Procurement of IRC from the concerned authority
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2. 3.
Signing purchase contract with the seller. Requesting the concerned bank (importer's bank to open an L/C (irrevocable) on behalf of the importer favoring the exporter/ seller/ beneficiary
4.
The issuing bank opens/ issues the L/C in accordance with the instruction/ request of the importer and request another bank (advising bank) located in seller's /exporter's country to advise the L'C to the beneficiary. The issuing may also request the advising bank to confirm the credit, if necessary.
5. 6.
The advising bank advises/informs the seller that the L/C has been issued. As soon as the exporter/seller receives the L/C and is satisfied that he can meet L/C terms and conditions, he is in a position to make shipment of the goods.
7.
After making shipment of goods in favor of the importer the exporter/s submits the documents to the negotiating bank for negotiation.
8.
The negotiating bank scrutinizes the documents and if found o.k. Negotiate documents and sends the said documents to the L/C issuing bank
9.
After receiving the documents the L/C issuing bank also examines the document and if found o.k. And makes payment to the negotiating bank.
10.
The L/C opening bank then requests the importer to receive the document payments.
3.5.5 Registration of Importer:
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To carry on the business of import the first thing one needs is registration with the licensing authority of the area. To get this registration, the interested person /institution submits the application along with the following Papers documents directly to the Chief Controller Imports and Exports or respective zonal office of 1. 2. 3. 4. 5. 6. 7. Income Tax Registration Certificates. Nationality certificate. Certificates from Camber of Commerce and Industry or Registered Trade Association. Bank solvency certificate. Copy of Trade license. And any other document if required by CCI&E. Partnership deed in case of partnership firms Certificate of Registration Memorandum and Articles of Association in case of limited company. The nominated bank of the applicant will scrutinize the papers and verify the signature of the application. After scrutinization and verification, the non-bank will forward the same to the respective CCI&E office with forwarding such duplicate through banks representative. The CCI&E office will acknowledge duplicate copy of the forwarding schedule and return back to the bank representative. On being satisfied, after scrutinization of the documents the respective office of CCI&E will issue Import Registration Certificate (IRC) to the application. Registration is not required for import of goods by Government department authorities and statutory bodies recognized educational institutions and hospital addition, registration is not required for import of goods, which do not involve foreign exchange. 3.5.6 Import Formalities Import of goods from outside Bangladesh is regulated by the Ministry of Commerce in accordance with Imports and Exports (Control) Act 1950 and the Notifications issued there under. Goods from South Africa and Israel or goods originated from these countries are not importable. Import of goods into Bangladesh is not permissible on the flag vessel Prepared by: Md. Kamrul Bari, Matric No: B013002 CCI & E.
52 of Taiwan, South Africa and Israel. Import formalities to be observed by an importer for import of goods into Bangladesh are briefly enumerated below: The intending importers holding a valid IRC may approach his nominated Authorized Dealer to open L/C for the import of the permissible item as per current Import Policy Order (IPO). For establishing the intended L/C, the importer is required to submit the following documents/papers with the Authorized Dealer: a) L/C application in the printed format of the designated bank (A.D.) duly filled in and signed by the importer or his authorized agent. This L/C application is also an agreement between the importer and the bank. This form is to be stamped with Tk.50 adhesive stamp affixed on it under the Stamp Act in force in Bangladesh. b) The importer must also submit the LCA Form, together with Indent/Contract/Purchase Order/Proforma Invoice/Sale Order (duly accepted by the importer) along with L/C application. c) The importer has also to obtain Marine Insurance cover for the import and submit the Marine Insurance cover note for the purpose of opening the L/C. d) e) Original IRC (duly renewed up to current date) should also be produced to the bank for verification and return. Membership Certificate of Local Chamber of Commerce and Industries as well as Municipal Trade License issued in favor of the importers should also be submitted to the bank for verification and return. f) Authorized Dealer should also, in this connection, get a full set of IMP Form duly signed by the importer which subsequently is to be submitted to Bangladesh Bank along with monthly return for sale of Foreign Exchange for the import covered under the L/C.
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3.5.7 Points to be scrutinized on Receipt of L/C Application from the Importer a) b) c) d) e) f) Verify the signature of the importer with the specimen signature available with the Bank. Imported items are in accordance with Indent/ Pro-forma Invoice. Item being imported is not banned or restricted. L/C clauses contravene the exchange control regulations. The indent bears signature of the indenting agent as well as that of the importer. The marine insurance Cover Note mentions the items to be imported and the port of shipment, the destination, the mode of shipment and risk covers. g) The indenters IRC number & registration number with Bangladesh Bank have been quoted. If the above documents are found in order, the Bank approves the amount of margin on the basis of his past performance, his financial position, marketability of the goods, the type of credit to be opened and the type of financing the importer needs after arrival of the goods. Head Office sanctions the margin only after careful consideration to safeguard the interest of the Bank. 3.5.8 Opening Of L/C After receiving the above documents and on scrutiny of the documents on the basis of importers application, Indent/ Pro-forma Invoice, the Bank performs the following tasks: a) b) Prepare the L/C (Irrevocable L/C) 6 sets signed by two authorized signatories of the Bank. Reimbursement Authority (2 copies) After preparation of the above documents (by Issuing Bank), send the following documents to Advising Bank with a forwarding letter enclosing therewith a duplicate copy of Letter of Credit in favor of the beneficiary:
54 o Send two copies of L/C papers (one for Negotiating Bank and another for the Exporter/Seller) with a forwarding letter to the Negotiating Bank. Also send "Reimbursement Authority" separately to reimbursement Bank. o Original copy of Reimbursement Authority (1 copy) and a copy of L/C be sent to the reimbursement Bank separately. In case L/C - At sight Reimbursement Authority to be sent to Advising Bank to honor reimbursement claim of the claiming/Negotiating Bank against above noted credit by debit to our Head Office A/C No.____ maintained with Advising Bank in that country. In case L/C - Deferred Payment A clause be incorporated in the Original L/C that "claim reimbursement on maturity date" from Head Office account. 3.5.9 Prior Permission of Bangladesh Bank for Import All imports into Bangladesh against cash foreign exchange resources of the country are subject to prior permission of the Bangladesh Bank in the form of registration of Letter of Credit Authorization Forms from the Bangladesh Bank Registration Units stationed at all offices of the Chief Controller of Imports and Exports. Ministries and Govt. Departments may; however, import goods against specific allocations given to them by the Ministry of Finance subject to obtaining specific clearance from the Exchange Control Department of Bangladesh Bank and no L.C. Authorization Form, Import Permit or Clearance Permit are required for their import. For import under External Economic Aid, Loan/ Credit, Commodity Exchange and Wage Earner's Scheme, no L.C. Authorization Form is required to be got registered with Bangladesh Bank Registration Unit unless otherwise specifically mentioned by Bangladesh Bank in any Foreign Exchange Circular for any particular category/item of import. Imports under Secondary Exchange Market Scheme (SEM), however, necessitate Prepared by: Md. Kamrul Bari, Matric No: B013002
55 prior registration of L.C. Authorization Forms with the Bangladesh Bank Registration Units
3.6 Export DC Advising
Relationship with the Exporter Where DC terms are agreed in a sales contract, the exporter may nominate the bank to which the issuing branch should send the DC. The DC issuing bank will send the DC to either a branch or to a correspondent bank so that it can be authenticated. Included in the DC will be an authorization to a specifically nominated bank to negotiate, (unless negotiation is not restricted, in which case, any bank) to pay or accept, bills of exchange under the DC for correctly tendered documents. The beneficiary should have a bank account in order to facilitate the transaction. For example, the beneficiary will need the convenience of receiving: Remittance of proceeds from drawings under the DC to his own bank. Advice and assistance on trade transaction procedures. Advice and assistance with foreign exchange activity. Prompt payment of the bill proceeds to improve the liquidity of his business. Country-risk information and reports on the ability of the opening bank to pay.
The beneficiary will be able to receive all the above services from any Group Office. Very often the beneficiarys bank will not be the same as the bank nominated to negotiate, pay or accept the Bill of Exchange. Facility Limits are not usually set for the negotiation of bills under DCs. In fact the bank authorized to negotiate, pay, accept will generally negotiate, pay or accept any DC as long as the beneficiary is reputable and known to them, the DC opening bank is of good standing, and there is certainty of being reimbursed by that bank.
56
Export Services:
To benefit from HSBC's export services, you do not need to have special facilities, or even an account with us. Simply request your buyers to advise your documentary credits through us and benefit immediately from our international network.
Pre-shipment Finance Post-shipment Documentary Credit Advising Finance
Advising means forwarding of a Documentary Letter of Credit received from the Issuing Bank to the Beneficiary (exporter). Before advising an L/C the Advising Bank must see the following: 1. Signatures of Issuing Bank officials on the L/C verified with the Specimen Signatures Book of the said bank when L/C received by airmail. 2. If the Export L/C is intended to be an operative cable L/C, Test Code on the L/C invariably be agreed and authenticated by two authorized officers. 3. 4. 5. L/C scrutinized thoroughly complying with the requisites of concerned UCPDC provisions. Entry made in the L/C Advising Register. L/C advised to the Beneficiary (exporter) promptly and advising charges recovered.
3.7 Amendments to Letter of Credit
After issuance and advising of a Letter of Credit, it may be felt necessary to change some of the clauses of the Credit. All these modifications are communicated to the Beneficiary through the same Advising Bank of the Credit. Such modifications to a LC are termed as amendment to a Letter of Credit.
57 There may be some of the conditions in a Credit are not acceptable by the beneficiary. In this case, beneficiary contact applicant and request for amendment of the clauses. On receipt of such request applicant approaches his banker i.e. issuing bank with a written request for amendment to the Credit. The issuing Bank scrutinize the proposal for amendment and same are not in contravention with the Exchange Control Regulation and bank's interest bank may then process for amendments form an integral part of the original Credit.L/C amendments are to be communicated by telex, SWIFT or mail. If there are more than one amendment to a Credit, all the amendment must bear the consecutive serial number that the advising bank can identify the missing of any amendment. The Issuing Bank has toa) Obtain written application from the applicant of the credit duly signed and verify the bank. b) c) d) In case of increase of value, application for amendment is to be supported by Indent/ Pro-forma Invoice evidencing consent of the beneficiary. In case of extension of shipment period, it should be ensured that relative LCA valid/revalidated/increased up to the period of proposed extension. Amendment on increase of Credit amount and extension of shipment of shipment period because amendment of Insurance Cover Note also to be submitted. e) f) Proper recording and filing of amendment is to be maintained. Amendment charges (if on account of applicant) will be recovered and necessary voucher is to be passed. The following clauses of L/C are generally amended1. 2. 3. 4. Increase/decrease value of L/C and increase/decrease of quantity of goods. Extension of shipment/negotiation period. Terms of delivery i.e. FOB, CFR: CIF etc. Mode of shipment.
58 5. 6. 7. Inspection clause. Name and address of the supplier. Name of reimbursing bank.
3.8 After Shipment of Goods
The beneficiary of the L/C (supplier) after effecting shipment of the goods as per terms of the L/C, prepares/collects mil set of B/L, Bill of Exchange, Commercial Invoice and necessary documents as required under the terms of the L/C and presents the drafts to the negotiating bank along with the supporting documents for negotiation. The negotiating bank negotiates the drafts and if they find the documents in order as per terms of L/C, they make payments to the beneficiary and forward the Drafts and the shipping documents to the L/C opening Bank under cover of a forwarding letter containing necessary instructions for L/C opening Bank. The negotiating bank also obtains reimbursement of the amount paid against the Draft either by debit to Nostro account of the L/C opening Bank or otherwise as stipulated in the L/C. When does Negotiating Bank send documents for collection to Issuing Bank (Advising Bank)? a) In case discrepancies are found by the Negotiating Bank. (seller/exporter). c) In case Negotiating Bank does not want to negotiate (purchase) documents/does not want to effect payment without collection of documents from the Advising Bank (L/C Issuing Bank).
3.9 Documents of Import Bill
b) In case of minor discrepancies, at the request of the beneficiary
Import Bill comprises of the following documents: Documents

Source
59
a) b) c) d) e) f) g) h)
Covering letter of Bill of Exchange or Draft Bill of Lading Declaration to Bill of Lading. Shipment Airway Bill. Commercial Invoice Packing List. Certificate of Origin. Pre-shipment Inspection Certificate/Clean Report of Findings (CRF).
Negotiating Bank. Exporter Shipping Air Line Exporter Exporter Chamber of Commerce Indus. Local Agent of seller.
i) j) k) l) m)
Shipment Advice Beneficiary's Certificate. Weight Note. Custom Certificate, Other documents, if called for under the credit.
Shipping Agent
Scrutiny Of Shipping Documents/Lodgment of Import Bills On receipt of shipping documents from the negotiating bank, the same should be very carefully scrutinized to ensure that they have been drawn strictly as per terms of the relative credit. The Bank will look into the following main points and scrutinize the documents with reference to the terms of the credit: a) The documents have been negotiated within the stipulated date and the amount of the draft is within the L/C amount. The draft has been drawn in accordance with the L/C terms and is endorsed to the order of the Bank.
60 b) The invoices have been properly and correctly drawn and signed by the supplier giving full description of the merchandise along with unit price as per Indent. The Invoice must bear the LCA number, IRC number of the importer, ITC schedule number and Registration number of the Indenter. c) The Bill of Lading is a clean "Shipped on Board" B/L showing freight prepaid and is duly endorsed to the order of the Issuing Bank. The B/L must not show any adverse clause about the condition of the goods. The port of shipment, port of destination, date of shipment, name of consignee, notify party as shown in the B/L must agree with those mentioned in the L/C. The B/L must bear the authorized signature and cover the merchandise described in the Invoice. d) e) f) The Certificate of Origin given by the supplier should be in conformity with that mentioned in the L/C. Other documents such as packing and weight lists should also accompany A copy of the Insurance declaration is attached to the documents that should be sent by the beneficiary to the importer/insurance company immediately after the shipment has taken place. g) h) Verify if the foreign correspondent's dues are charged in accordance with the instructions contained in the L/C. All other documents required in the L/C are received. If any discrepancy is noticed, the same should be brought to the notice of the importer immediately for his written instruction before lodgment in BLC and payment is made. If the importer refuses to accept the documents, the negotiating bank should be advised within 3 working days of receipt of the documents by cable/telex for instruction with regard to the disposal of the goods and the documents. (Other trade documents---- seeAppendix A) the shipping documents and must correspond with the terms of the L/C.
Performance Analysis of HSBC

4.1 Level of Customer Satisfaction
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LEVEL
Satisfaction Highly satisfied Neutral Dissatisfaction Highly dissatisfied
FREQUENCY
15 9 11 8 7
PERCENT
30 18 22 16 14
TOTAL
50
100
35 30 25 20 15 10 5 0
30 22 15 9 11 8 7 18 16 14
1
SATISFACTION HIGHLY SAT NEUTRAL
2
DISSATISFACTION HIGH DIS
ANALYSIS:
This graph is based on level of satisfaction regarding customers point of view. This level of satisfaction is based on the service standard. Here the products mean the service provided by the Trade Services Department and if it matches with expectations then the customer experiences satisfaction if not then dissatisfaction. According to the chart, it is apparent that majority (30%) of the respondents are satisfied with the service that they got from the bank. The interesting fact is that 22% of the respondents are in neutral position i.e. they don't know whether they are satisfied or not. 4.2 Comparison with other Banks regarding Level of Satisfaction of Service (Customers viewpoint) Ranking of The Banks
Name of the Banks Frequency Percent
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HSBC SCB Amex CA Agricole Bank Asia Citibank NA Nationalized Commercial Banks Other Private Commercial Banks Total 9 11 6 8 3 4 4 5 50 18% 22% 12% 16% 6% 8% 8% 10% 100
25% 20% 15% 10% 5% 0% HSBC Amex Bank Asia Nationalized Commercial Banks SCB CA Igricole CItibank NA Other Private Commercial Banks 18% 12% 6% 8% 8% 22% 16% 10%
ANALYSIS:
This graph shows the ranking of different banks leading in Bangladesh regarding customer viewpoint. According to that, 22% of the total customers conduct business with Standard Chartered that is the highest and 18% conduct transaction with HSBC. 4.3 Volume of Different types of L/C in HSBC regarding the degree of Security
TYPES
REVOCABLE IRREVOCABLE CONFIRMED 30%
VOLUME
20% 50% 20% 30% Revocable Irrevocable Confirmed
50% Prepared by: Md. Kamrul Bari, Matric No: B013002
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ANALYSIS:
This graph is based on the volume of different types of L/Cs according to security provided by the bank. There are several types of L/Cs issued by Import department such as Revocable, Irrevocable, Confirmed etc. The graph shows the percentage of these L/Cs. From here we can see that the Irrevocable L/Cs are in most common L/C (50%). And then revocable & confirmed are in 20% & 30% respectively. Irrevocable L/C constitutes a definite undertaking of the issuing bank, provided that the terms and conditions of the credit are complied with.
4.4 Customer viewpoint regarding the Products of HSBC
Products
L/C Import Loan Bill Discounts Export Loan Shipping Guarantee
Frequency
16 9 8 12 5
Percent
32% 24% 16% 18% 10%
Total 50 35 30 25 20 15 10 5 Prepared by: 0 Md. Kamrul Bari, Matric No: B013002 Frequency Percent
L/C 100
Import Loan Bill Discounts Export Loan Shipping Guarantee
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ANALYSIS:
This graph has a clear indication of the various products of HSBC. Banking products means the services that a bank provides to its customer. In export and Import business i.e. trade services of HSBC, it is observed that L/C has the top most priority to the customer. On the other hand, the bank earns their major revenue from Trade Services Department. And the other products: import loan(24%), bill discounting(16%), export loan(18%), and shipping guaranty(10%) volume accordingly.
4.5
Volume of different types of L/C according to Payment
methods
TYPES
Sight Acceptance Deferred Standby Back to Back
VOLUME
25% 25% 20% 10% 20%
25 20 15 10 5
0 Prepared by: Md. Kamrul Bari, Matric No: 1 B013002 Sight Acceptance Deferred Standby Back to Back
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ANALYSIS:
This graph shows the different types of L/Cs regarding payment method. It means when customer opens L/C they have to ensure the payment method that in which method they will pay the bill. In that case the bank provide them a specific time period and by this time the customer have to complete their payment otherwise the bank will charge interest. In this method the sight and acceptance L/Cs are in same position. And rest of the L/Cs that means deferred, back-to-back and standby have 20%, 20%, 10% volume respectively.
4.6 Revenue/Profit from L/C
Year
2001 2002 2003
Month
Jan-Dec Jan-Dec Jan-Jun
Amount (MIO BDT)

5300 8815 7782
%
106 147 -
Target (MIO BDT)

5000 6000 -
10000 8815 9000 The above table shows the revenue earnings or profit from Import L/C of year 2001, 2002 7782 and 2003 (up to June). From the table, we can easily see that the Cost Earning of L/C is 8000 increasing from year to year. The following graph also shows the same trend. 7000 6000 6000 5000 5300 Target (MIO BDT) 5000 Revenue Earns/Profit from L/C Amount (MIO BDT) 4000 3000 2000 1000 Prepared by: 0 Md. Kamrul Bari, Matric No: B013002 2001 2002 2003
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ANALYSIS:
The graph shows the achievements which cross the business target. Here we can see that the organization earns the huge amount of profit from the Letter of Credit.
4.7 Performance of HSBC for the Community
Each year, employees select charities to focus fundraising and donation activities. HSBC further supports employees and their chosen charities by making corporate donations. Some of the charities that the Bank are involved in this year include: 2004
Charity Concert Warm clothes to the poor Chittagong Lions Foundation The Children Leukemia and Support Services The Friendship The Seid Trust charity
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2003
Charity Golf Tournament Warm clothes to the poor International Federation of Red Cross and Red Crescent Societies (IFRC) Shishu Polli Plus Blood donation drive with Sandhani and Red Crescent Society SAARC Women's Association Out of Focus
2002
Charity Golf Tournament Acid Survivors Foundation Centre for the Rehabilitation of the Paralyzed (CRP) Others
HSBC believes that support for primary and secondary education, in particular for the underprivileged, is crucial to the future development and prosperity of every country. School of Hope is an example of this support. 2004
School of Hope
2003
School Environment Fair 2003 in Gazipur School of Hope
HSBC is deeply conscious of its responsibilities to the environment, believing that the needs of today's society should not be fulfilled at the expense of future generations, and that sustainability is paramount. 2004
World Environment Day photography competition
68 2003
World Environment Day photography competition
2002
Investing in Nature
SWOT Analysis
SWOT Analysis
In order to analyze the performance of trade services of HSBC Bank, I have conducted a SWOT analysis through some in-depth interviewing of the target corporate customers and also some of their officers. In the process of making a SWOT, customers and employees point out some major strengths and weaknesses as well as some threats and opportunities regarding the various issues of the Bank such as service level organizational identity
69 operational efficiency technology employee efficiency etc. along with many other issues. I hope the outcome of this analysis presented in next few pages can be very much helpful to evaluate the performance level of Trade Services Department of HSBC Bank as well as overall banking activities.
SWOT Analysis at a glance (from customers view point)
70 Strengths Strong corporate identity Distinct operating procedure Distinct schedule Strong employee bonding and belongings Efficient performance Young enthusiastic workforce Empowered work force Companionable environment Equalization MBO One-to-one meeting Modern equipment & technology Visually appealing facilities
Weaknesses
Narrow operating span High charges of L/C Inefficiency in monitoring courier service Discouraging small entrepreneurs Absence of strong marketing activities More innovative products must be offered Lack of customer confidence Too many contract workers Low remuneration package Diversification International Credit Cards High cost for maintaining an Account Lack of training facility
Opportunity
Acquisition Distinct operating procedures Country wide network Experienced managers Huge population Weak marketing message by local & foreign banks
Threat
Upcoming banks Default culture Similar products are offered by other Banks Industrial downward trend due to recession, inflation & unemployment
5.1 Strengths
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Strong corporate identity According to the customers, HSBC is the leading provider of financial services identity worldwide. With its strong corporate image and identity, it has better positioned itself in the minds of the customers. This image has helped HSBC grab the personal banking sector of Bangladesh very rapidly. Distinct operating procedure HSBC is known worldwide for its distinct operating procedures. The company's Managing for Value strategy satisfies customers needs better and also keeps the firm profitable. Distinct schedule Everyone in HSBC from the appraiser to the top management has to work to the same schedule towards a different aspect of the same goal, interfacing simultaneously at all level over quite a long period of time. As a result, customers can get instant services as and when required. Strong employee bonding and belongings HSBC employees are one of the major assets of the company. The employees of HSBC have a strong sense of commitment towards organization and also feel proud and a sense of belonging towards HSBC. The strong organizational culture of HSBC is the main reason behind its strength. Efficient Performance It has been seen from customers opinion that HSBC provides hassle-free customer services to its client comparing to other financial institutions of Bangladesh. Personalized approach to the needs of customers is its motto. Young enthusiastic workforce The selection & recruitment of HSBC emphasizes on having the skilled graduates & postgraduates who have little or no previous work experience. The logic behind is that HSBC wants to avoid the problem of 'garbage in & garbage out'. And this type of young & fresh workforce stimulates the whole working environment of HSBC. Prepared by: Md. Kamrul Bari, Matric No: B013002
72 Empowered Work force The human resource of HSBC is extremely well thought & perfectly managed. As from the very first, the top management believed in empowering employees, where they refused to put their finger in every part of the pie. This empowered environment makes HSBC a better place for the employees. The employees are not suffocated with authority but are able to grow as the organization matures. Companionable Environment All office walls in HSBC are only shoulder high partitions & there is no executive dining room. Any of the executives is likely to plop down at a table in its cafeteria & join in a lunch, chat with whoever is there. One of the employees has said, "Its exciting to know you may see & talk to the top management at any time. You feel a real part of things". Equalization At HSBC workshops are conducted periodically. On the workshops, all people participate as equals, with new members free to openly challenge top managers. MBO HSBC also has Management by Objectives (MBO) everywhere. Each person has multiple objectives. All the employees must have to get the approval of their bosses on what they are going to do. Later, they review as how well they have performed their job with their management as well as the peer group. One-to-one meeting The MBO makes the review of a communication device among various groups. The key to the system is a "one-to-one" meeting between a supervisor & a subordinate. In the meeting, the problems in dealing with customers are put forward first & everyone dug it to solve them. Modern equipment & technology HSBC owns the best banking and information technology in Bangladesh. Its ultra modern banking systems starting from terminal pc's to HUB's are based on the international HSBC group standards and are the latest. The Hexagon product is one of the best examples in this context.
73 Visually appealing facilities HSBC has some of the best visually appealing branches and office premises in Dhaka & Chittagong that highly attract customers attentions and customers also feel the international environment while banking with HSBC. 5.2 Weaknesses
Besides the strengths, customers as well as employees identified some major weaknesses of the bank. Narrow operating span HSBC has a very narrow operating span in Bangladesh. It has only 2 full service branches in Bangladesh situated only at Dhaka and Chittagong. Various geographic segments are currently not availing the services of HSBC due to inconvenient branch location or absence of neighborhood branches. But customers want more neighborhood branches to facilitate their business. High charges of L/C Presently HSBC charges same rates for all types of import L/C. But for import L/C of exports-oriented industry, HSBC should reduce the charge of L/C. As a result, exporter will be benefited and the country will earn more foreign exchange. Inefficiency in monitoring courier service According to customers, HSBC cant strictly monitor the courier services that are engaged in delivering mails and documents. Huge amount delivery failures are being piled up at branches. For this reason, the foreign documents of L/C cannot reach at right place at right time. So, the bank should have some control over its couriers and ensure proper delivery of mail and documents. Discouraging small entrepreneurs HSBC provides clean Import Loan to most of its solvent clients. But they usually do not want to finance small entrepreneurs whose financial standing are not clean to them. Absence of strong marketing activities
74 HSBC currently don't have any strong marketing activities through mass media e.g. Television. TV ads play vital role in awareness building. HSBC has no such TV ad campaign. Lack of customer confidence AS HSBC is fairly new to the banking industry of Bangladesh average customers lack the confidence in HSBC and judge the bank as an average new bank. Too many contract workers According to the customers, HSBC has contract workers who lack the commitment with superior quality service, as they are dissatisfied as being a contract worker. This hampers the bank's service quality as a whole. More innovative products must be offered In order to be more competitive in the market, HSBC should come up with more new attractive and innovative products. This is one of the weaknesses that HSBC is currently passing through. Low remuneration package The remuneration packages for the entry-level officers are considerably low. Since other foreign and local banks offer a more lucrative salary package, it will be difficult for HSBC to attract an MBA in future with its current salary package. Diversification HSBC can peruse a diversification strategy in expanding its current line of business. The management can consider options of starting merchant banking or diversify it to leasing and insurance. As HSBC is one of the leading providers of all financial services, in Bangladesh it can also offer these services. International Credit Cards This is one of the most popular and emerging products in Bangladesh, which offers customers total financial mobility. Various other banks and institutions are currently offering this product. HSBC can also take advantage of this product and grab the market share. High Cost for maintaining account The account maintenance cost for HSBC is comparatively high. Other banks very often
75 highlight this. In the long run, this might turn out to be a negative issue for HSBC.
5.3 Opportunities
Acquisition HSBC is one of the experts in acquiring various firms and organizations. In Bangladesh, it can also diversify quickly by acquiring various local established banks and increase it's total operation within Bangladesh rapidly. Distinct operating procedures Repayment capacity as assessed by HSBC of individual client helps to decide how much one can borrow. As the whole lending process is based on a client's repayment capacity, the recovery rate of HSBC is close to 100%. This provides HSBC financial stability & gears up HSBC to be remaining in the business for the long run. Country wide network The ultimate goal of HSBC is to expand its operations to whole Bangladesh. Nurturing this type of vision & mission & to act as required, will not only increase HSBC's profitability but also will secure its existence in the log run. Experienced Managers One of the key opportunities for HSBC is its efficient managers. HSBC has employed experienced managers to facilitate its operation. These managers have already triggered the business for HSBC as being new in the market. Huge Population Bangladesh is a developing country to satisfy the needs of the huge population, a large amount of investment is required. On the other hand, building EPZ areas and some Govt. policies easing foreign investment in our country made it attractive to the foreigners to invest in our country. So, HSBC has a large opportunity here. Weak marketing massage by local & foreign banks The basic assumption of trade business is that customer will come to the bank and ask for service that is why local & foreign banks are not that much enthusiastic about letting
76 know their service features. This is an opportunity for HSBC to develop messages regarding their services.
5.4
Threats
Upcoming Banks The upcoming private, local & multinational banks posses serious threats to the existing banking network of HSBC: it is expected that in the next few years more commercial banks will emerge. If that happens the intensity of competition will rise further and banks will have to develop strategies to compete against and win the battle of banks. Similar products are offered by other banks Now-a-days different foreign and private banks are also offering similar type of products with an almost similar profit margin. So, if all competitors fight with the same weapon, the natural result is declining profit. Default culture This is a major problem in Bangladesh. As HSBC is a very new organization the problem of non-performing loans or default loans is very minimum or insignificant. However, as the bank becomes older, this problem will arise enormously and the bank may find itself in a more threatening environment. Thus HSBC has to remain vigilant about this problem so that proactive strategies are taken to minimize this problem. Industrial downward trend due to recession, inflation & unemployment Bangladesh is economically unstable country. Flood, draught, cyclone, and newly added terrorism have become an identity of our country. Along with inflation, unemployment also creates industry wide recession. These caused downward pressure on the capital demand for investment.
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Recommendations
1. Although HSBC is earning highest profit from L/C, but their position in import business is not as higher as other bank. So. they should increase their investment so that they can lead the highest position in Bangladesh. 2. Although the approach of HSBC Bangladesh is proactive in finding good customers but the small entrepreneurs dont get many facilities from the bank in terms of L/C. In that case, HSBC should change their approach so that small entrepreneurs and business can get the proper services. 3. Since HSBC provides clean Import Loan to most of its clients they usually do not want to finance firms whose financial standing are not clean to them. But they can provide Govt. Import Loan financing to those clients a well as arranging more loans against imported merchandise. 4. Presently HSBC charges same rates for all types of import L/C. But for import L/C of exports-oriented industry, HSBC should reduce the charge of L/C. As a result, exporter will be benefited and the country will earn more foreign exchange. 5. HSBC should strictly monitor the courier services that are engaged in delivering mails and documents. Huge amount delivery failures are being piled up at branches. For this reason, the foreign documents of L/C cannot reach at right place at right time. So, the bank should have some control over its couriers and ensure proper delivery of mail and documents. 6. Inefficiency in maintaining the Import Register because they maintain the Register by the messenger who are employed by the third party. For reducing this lacking, they should maintain the Import Register by their related employees. Though HSBC Bank has established its image as one of the best service provider for its potential customers; still they are yet not the market leaders. The Bank has to overcome the shortcomings in the near future and offer new innovative products to retain its position as a leader amongst other banks year after year.
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Conclusion
Corporate banking is the traditional strength of Hongkong & Shanghai Banking Corporation Ltd., which is one of the largest banking and financial service organizations in the world. HSBC is determined to build long-term customer relationship to its corporate client. As a part of this, HSBC is trying to expand their business with the market leaders of each sector of business. This report mainly focuses on how HSBC Bangladesh is providing documentary credit facilities to target customers and how its trade services are making transaction methods more acceptable worldwide. And identifying its major strengths and weaknesses based on some performance analysis is also the focusing point.
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Bibliography
Howard R. Goldsmith, A Guide To Growth, Profits and Market Share,1989. Englewood Cliffs, NJ: Prentice-Hall HSBC Handbook, The ABC Guide to Trade Service. Different Foreign Exchange Guidelines
http ://www.hsbc.com http://www.hsbc.com.bd http://www.hsbc.com/about hsbc.htm http://www.hsbc.com/hsbc group.htm http://www.hsbc.com/our solutions/hexagon.htm http://www.hsbc.com/about hsbc/tradeservice.htm
Appendix A
Trade Documents
A documentary credit instructs the beneficiary to present documents to a bank. Prepared by: Md. Kamrul Bari, Matric No: B013002
80 The documents are intended to show that he has shipped his goods in accordance with his agreement with the buyer. When the bank receives these documents: 1. A checker reads the credit and amendments, if any. 2. He determines what documents it requires and sees whether he has received them, making sure each requirement has been satisfied by the documents. He also checks whether the documents are consistent with each other. 3. If any of the documents are missing, do not satisfy the requirements of the credit, or are not consistent with each other, the checker writes this down. These errors are called "discrepancies" and advice on what to do about them is set out in the following chapter. 4. He or his superior approves purchases of the bill and arranges payment to the beneficiary. 5. He disposes of the documents in accordance with instructions contained in the credit. 6. He claims reimbursement from the reimbursing bank in accordance with instructions contained in the credit. If dealing with documents in the Exports Department, it must be stressed that the physical checking of documents is only the first part of the checking process. Despite the fact that "all parties concerned deal in documents not in goods", the underlying transaction is of a financial nature, and thus a checker must place equal importance on following the credit instructions concerning, and minimizing the period of, reimbursement.
Discrepancies
Exports Department
Where discrepancies are noted, whatever their nature, there are usually six alternatives: 1. If correctable and time permitting, return the documents to the beneficiary for correction.
81 2. Request the issuing bank to obtain the applicant's authority to amend the credit to alter its terms to meet the documents as presented (this is rarely done unless there are to be a number of future negotiations). 3. Take an indemnity from the beneficiary against any loss as a result of negotiating the documents with the stated discrepancies. 4. Pay under reserve where local practice/law permits 5. Cable the issuing bank for authority to negotiate documents despite the discrepancies. 6. Send the documents for approval and payment under UCP500 (the last resort).
Imports Department
The issuing bank is allowed a reasonable time (not to exceed 7 banking days following the day of receipt of documents) to examine the documents (UCP 500 Art 13(b)). If any discrepancies are found when checking the documents received under a documentary credit the procedures to be followed are: 1. Contact the applicants of the credit advising him of the discrepancies found and ask whether he will accept them. Note that if the applicant has fallen out of good standing with the Bank, the Account Officer or superior may wish to refuse on the Bank's behalf alone. 2. If the applicant does not accept the discrepancies within 24 hours, cable the remitting bank advising details of the discrepancies and state that the documents are being returned or held at its disposal pending further instructions in accordance with Article 14(d). It is essential that the cable advice is sent in the form stated otherwise the bank may forfeit the opportunity to claim later that documents are not in order. (UCP 500 Art. 14(e).
Endorsement of Documentary Credits

The correct endorsement of the documentary credit is the responsibility of the checker. Incorrect endorsements, particularly with regard to partial shipment, can open
82 possibilities for the beneficiary to ship goods which do not conform to the terms of the credit: e.g. over shipment of one particular item because the credit was not endorsed to the effect that this item was fully shipped under a previous drawing. Any endorsement must contain the following information:

Amount negotiated Quantity shipped (if partial shipment and if definite quantities are stated in the credit) Bill reference number Checker's initial and chop An indication that the bill was negotiated under a letter of indemnity if this was the case
Transport Documents:
Goods might be transported in a number of different ways to an overseas country. Whatever method of transport is used, a transport document is issued.A transport document is a document that indicates loading on board or despatch or taking in charge. Its functions are to provide evidence of receipt of the goods (by the carrier) and it can serve to evidence contract of carriage. In some cases, the transport document is also a document of title to the underlying goods.There are different types of transport documents used in international trade. They are described under the following general headings:
83 Marine/Ocean Bill of Lading Multimode Transport Documents Freight Forwarders Transport Documents Waybills Receipts
Commercial documents
There are different types of commercial documents that are used for one purpose or another in international trade. The main commercial documents are invoices and the most important of the invoices for the bank is the Commercial Invoice. Its functions are:

It is a record of the transaction. It is a statement of the goods shipped. It states the cost of the goods. It is a demand for payment.
Let us look at the different types of commercial documents under the following general headings: Commercial Invoice is both a statement of goods shipped and a bill. It describes the goods shipped and lists the cost. Whilst other documents may describe the goods in general terms the description in the invoice must correspond with that in the credit (UCP 500 Article 37 (c).
84
85
Weight List/Weight Note

A weight list is a document that may be issued by the seller, or often by a third party and merely indicates the weight of the goods.
Certificate of Weight
A Certificate of Weight is a document certifying the gross and net weights of each packaging unit.
Certificate of Analysis
A Certificate of Analysis is a certificate that states the ingredients and proportions revealed by an analysis of chemicals, drugs, etc.
Inspection Certificate
An Inspection Certificate is a certificate declaring the result of an examination of the goods. It protects the buyer from being supplied with sub-standard or worthless goods since banks deal in documents only and not in goods.
Packing List
Packing List is a document that sets out the details of the packing of the goods. It is often required by the customs authorities to enable them to make spot or more thorough checks on the content of any particular package.
Certified Invoice
A certified invoice is an ordinary signed commercial invoice specifically certifying: That the goods are in accordance with a specific contract or Pro-forma, or That the goods are, or are not of a specific country of origin, or Any statement required by the buyer from the seller.
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Financial Documents:
In international trade, there are two financial documents, which provide for payment by the buyer:
A Bill of Exchange
A bill of exchange is usually defined as: a. b. c. d. e. f. g. h. An unconditional order in writing addressed by one person (the drawer) to another (the drawee) signed by the person giving it (the drawer) requiring the person to whom it is addressed to pay on demand, or at a fixed or determinable future time A certain sum of money To, or to the order of, a specified person or to bearer (the payee)
In other words, a draft is a demand for payment. It may be drawn payable at sight or at usance.
A sight bill is payable on demand, or at sight.
A term bill or usance bill is payable at a fixed or determinable future time. The drawee agrees to pay on the due date by writing an acceptance across the face of the bill.
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2. A promissory note
Another way in which payment can be made is by a promissory note where the importer signs and delivers a note in which he promises to pay at some future time. A promissory note is usually defined as: a. b. c. d. e. f. An unconditional promise in writing made by one person (the maker) to another signed by the maker engaging to pay, on demand, or at a fixed or determinable future time a certain sum of money or, or to the order of, a specified person or to bearer (the payee or beneficiary) This differs from a bill of exchange in that the party who owes the money rather than the party who will receive the money draws it up.
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Export DC Advising
Receive Export DC / DC Amendment through * Swift *Telex or * Mail
Verify / Check authenticity
Sort A/P DC / DC Amendment
Input the DC in HIE System
Take the Advice copy print
Attached the Advice Copy on the DC/ Amendment Inform the Customer
Customer
Debit customer A/C for charges and send the DC to customer by courier
Non Customer
Advising received charges are
Delivery the Amendment
DC/DC
File the office copy in expired date order
Reminders send to customer after 5 days

Cable information sent to Issuing Bank for uncollected DC/Amendment after 10 days
Send the expired DC/DC Amendment to Central Store
Export Bills
Receive Export bills from customers over the courier & by trade express
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Stamp received date & time on request form
Check the completeness of request form, No. of documents and verify the signature
Export bill checking against DC (if applicable)
Booking onshore documents into the HIE system. Endorse B/L/AWR & draft Dispatch the export bills
For offshore documents, bill schedule are faxed/scanned to DAK from CHG Booking offshore documents into the HIE system
Endorsement of the bills and fill up the export register Fill up duplicate EXP form, register update & prepare schedule for Central Bank and send to Central Bank
Prepare bill presentation schedule in PC after getting the bill no. Endorse B/L/AWR
Dispatch the export bills
Fill the office copy
Endorsement of the bills and fill up the export register Fill up duplicate EXP form, register update & prepare schedule for Central Bank and send to Central Bank Fill the office copy

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1

s natural resources are unevenly distributed in different countries, a

Why International Trade is so important?

Why I have chosen Trade Services Department for my Internship?

1.1 ORIGIN OF THE REPORT

Prepared by: Md. Kamrul Bari, Matric No: B013002

Prepared by: Md. Kamrul Bari, Matric No: B013002

Prepared by: Md. Kamrul Bari, Matric No: B013002

Prepared by: Md. Kamrul Bari, Matric No: B013002

2.2 HSBC Group at a glance

Assets Profit (pre -tax) Staff

Prepared by: Md. Kamrul Bari, Matric No: B013002

Prepared by: Md. Kamrul Bari, Matric No: B013002

Prepared by: Md. Kamrul Bari, Matric No: B013002

Prepared by: Md. Kamrul Bari, Matric No: B013002

Prepared by: Md. Kamrul Bari, Matric No: B013002

Prepared by: Md. Kamrul Bari, Matric No: B013002

Prepared by: Md. Kamrul Bari, Matric No: B013002

Prepared by: Md. Kamrul Bari, Matric No: B013002

Prepared by: Md. Kamrul Bari, Matric No: B013002

15 Definition Sustainable earning between US$ 100 -200 million.

HSBC Principal Business Entities

Prepared by: Md. Kamrul Bari, Matric No: B013002

HSBC Group Values

2.4 HSBC in Bangladesh

Prepared by: Md. Kamrul Bari, Matric No: B013002

Prepared by: Md. Kamrul Bari, Matric No: B013002

Mr. Wasim Adnan Wahed

Prepared by: Md. Kamrul Bari, Matric No: B013002

Prepared by: Md. Kamrul Bari, Matric No: B013002

Prepared by: Md. Kamrul Bari, Matric No: B013002

Figure 2.1: Four-Layer Management Philosophy of HSBC.

Prepared by: Md. Kamrul Bari, Matric No: B013002

24 day-to-day operational activities of HSBC.

Figure 2.3: Organizational Structure of HSBC.

Prepared by: Md. Kamrul Bari, Matric No: B013002

Figure 2.4: An Overview of Functional Departments

Human Resources Department:

Prepared by: Md. Kamrul Bari, Matric No: B013002

Personal Banking Division (PLB):

Prepared by: Md. Kamrul Bari, Matric No: B013002

Figure 2.6: Structure of Personal Banking Division

Prepared by: Md. Kamrul Bari, Matric No: B013002

Prepared by: Md. Kamrul Bari, Matric No: B013002

Corporate Banking Division:

Figure 2.7: Structure of Corporate Banking Division

Corporate Institutional Banking (CIB):

Prepared by: Md. Kamrul Bari, Matric No: B013002

Relationship Management Department:

HSBC Trade Services (HTV):

Prepared by: Md. Kamrul Bari, Matric No: B013002

Direct Sales (DS):

Prepared by: Md. Kamrul Bari, Matric No: B013002

Finance Department of HSBC Bangladesh

Prepared by: Md. Kamrul Bari, Matric No: B013002

Figure 2.9 : Structure of Finance Department

Services Department of HSBC:

Prepared by: Md. Kamrul Bari, Matric No: B013002

Prepared by: Md. Kamrul Bari, Matric No: B013002

Prepared by: Md. Kamrul Bari, Matric No: B013002

Payment and Cash Management (PCM):

offers comprehensive cash management services in an easy-to-use and highly

3.2 Documentary Credit