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NATIONAL BANK OF

PAKISTAN
COMMERCIAL BANKING
4/7/2010

April 7, 2010

ORGAINZTIONAL STRUCTURE OF NBP |


COMMERCIAL BANKING
ORGANIZATIONAL STRUCTURE OF NATIONAL BANK OF PAKISTAN

TO:

MR. NADEEM ALTAF

FROM:

M. MOBASHAR ALI 08117032

ASIF MEHMOOD 08117033

MUZAMMAL HUSSAIN 08117039

IMRAN KHAN 08117043

SALMAN-UL-MUSTAFA 08117044

IRFAN MEHMOOD 08117036

MBA (BANKING & FINANCE)

SECTION A
April 7, 2010
EXECUTIVE SUMMARY

This project is about the organizational structure of NATIONAL BANK OF PAKISTAN


widely known as NBP. In this project we visit to the RHQ SIALKOT and got the
information about their working Groups and their under divisions of NBP in Pakistan.
This project gives you the idea about departments of the NBP as well as how and what
are the functions performed by these departments. According to our knowledge and
information gathered about departments is summarized and possibly explained where
necessary and an organizational chart also developed in this regard. We also included in
it, the rights and limitations against sanctioning of loan to consumer, firm (partnership),
& Corporation. With the figures explained according to each level of hierarchy.

April 7, 2010
CHAIRMAN & PRESIDENT

BOARD, CORP. AFFAIRS, PRIVATE & OPERAT. COMMITEE

Credit/Risk Operations Audit & Compliance HR Manag. &


Management Group Inspection Group Admin.
Group Group Gorup

Commercial Treasury Special Asset Information Corporate &


& Retail Management Management Technology Investment
Banking Gro. Group Group Group Banking Group

Cash Manag. & Overseas Islamic


Trade Finance Banking Banking
Group Group Group

April 7, 2010
Board, Corp.Affairs, Privat. & Operat. Commitee

Credit Committee, Shares, Admin., Comp. & MIS

Credit & Risk Management Group

Risk Review & Credit Management Student Loan Corp., Commercial,


Industrial Research Service & Co- Scheme Agri., & Consumer
Division ordination Credit

Credit Credit policy/


Monitoring procedure & SME
Credit

April 7, 2010
Corporate & Investment Banking
Group

Corporate & Corporate & Corporate & Equities


Investment Banking, Investment Banking, Investment Banking,
Karachi Lahore Islamabad

Operations
Group

Treasury Logistic Support & Engineering (North Core Banking


Settlement Security & South) Application Support

Comeseter Services Retail Products


& Govt. Business Support

April 7, 2010
Audit & Inspection Group

Administration Monitoring & Internal Audit & EDP Audit &


Budget & Training Evaluation Inspection Automation

System & Secretarial Regional Audit


Support offices

HR Management & Admin Group

HR & Organizational Training Staff Loan & Employees Benefits


Development Division Welfare Division Division

HR- Policies & Personnel & Ind. Recruitment &


Projects Division Relation Division Placement Division
April 7, 2010
Commercial & Retail Banking Group

Agriculture Division SME Division Commercial Credit/ Retail/


/ Administration (Lahore) Banking Collection& Recovery

CMU PR & Karobar


Marketing

Treasury Management Group

Interbank Money Market & Foreign Corporate FX Sales


Trading Securities Exchange Sales

Money Market Financial Taxation Budget &


Sales Control Division Business Review

Equity & Investment SBP Returns


April 7, 2010

/ NIT Trustee
Special Assets Management Group

SAMG North SAMG South SAMG-


Head Office

Information Technology Group

Infrastructure & System I.T. Security


Procurement Unit Development Administration Documentation & Q.A

April 7, 2010
Overseas Banking
Group

Funds
Management

Islamic
Banking Group

Business Funds &


Development Finance

Compliance
Group

SBP Inspection
April 7, 2010
Explanation of work performed by the GOURPS of NBP.
Corporate & Investment Banking Group:

• The C & IBG unit has been structured to provide adequate focus and professional
approach towards enhancing NBP’s share of business within existing and more
importantly new business from larger corporate customers
• With complex product structure according to various markets, more emphasis on
relationship management and provision of a high quality and responsive customer
service, C & IBG expected to double its portfolios for the next coming years
• CIBG’s present roles includes:
§ Corporate and Investment Banking
§ Transaction structuring
§ Tailor made solution for corporate customers
§ Manage existing equity portfolios

Commercial & Retail Banking Group:

• C & RBG is the largest business group within NBP offering a wide range of services, it
includes following services:
§ Mark-up based asset and liability products
§ Fee based products and services
• For the risk management in these services it has:
§ Standard operating procedures
§ Management information system
§ Verifications
§ Collections and recoveries
§ Write offs and write backs
• It deliver services through Regional offices, Branch Network, & Sales Teams

Treasury Management Group:

National bank treasury is currently regarded as a market leader in both foreign exchange and
rupee denominated products because of its emphasis on service quality. We offer
April 7, 2010

• Narrowest bid / offer spread and quickest on line quotes


• Customized solutions to minimize risk and optimize returns as per the needs and
circumstances of the clients
• Focus on building sustained and long term relationship with institutional, corporate and
retail clients.
• Local presence across the nation as well as internationally.

Special Asset Management Group:

• SAMG was established in NBP to reduce Non-Performing Loans Portfolios


• Credit risk and review process complements the credit classification process, which
takes broader judgment factors into account, including collectability and loss
probabilities, and forms the basis for remedial management processes utilized by the
Bank
• SAMG intends to use specialized techniques and negotiations skills to recover maximum
possible amount from the Non-Performing Loans (NPLs) in accordance with existing
policies of the Bank, e.g. rescheduling or restructuring, through court etc.

Overseas Operations:

• NBP overseas operations are segregated into developed and developing countries for
synergy of operating environment

Developed Countries Developing Countries


Americas Region Afghanistan operations
European Region Central Asian Region
Far East Region Middle East, Africa & South Asia
Cario office in Middle Eastern Region

Islamic Banking Operations:

• Islamic Banking is providing currently the Following Functions:


• Ijarah
• Murabaha
• Mudaraba and Musharaka
• Liability Products governed by Islamic Laws and principles

Cash Management & Trade Finance Services Group:

• It is performing the following objectives under NBP:


o Increase target market share in cash management services
o Offer new cash management solutions according to trend
April 7, 2010

o Further exploit treasury lines for the bank


o Reduce services turnaround time and improve quality
• Its services includes:
o Under Cash Management
• Account maintenance and reconciliation
• Home remittances
• International clearing services
• Tax collection
• Payroll management
o Under Trade Finance Services
• Export bills collection and discounting
• Import reimbursement services
• L/C advising, confirmation and discounting
• Funds transfer service for other banks
• Manitenance of Nostro and Vostro balances

Operations Group:

• The team of operation groups is working to change the face of this Bank by way of
improving its physical outlook, effective implementation of its systems & controls and in
the quality of service provided to its customers.
• To change the general perception held towards the Group of a back office and an
expense incurring Group which actually is an income generating engine
• Aiming at ‘Zero Complaints’ through application of sophisticated database.

Information Technology Group:

IT focuses on the followings:

• Existing IT infrastructure with planned upgrade in various phases for hardware,


software, networking and communication infrastructure
• Assisting business units to achieve and upgrade existing information system
requirements through software and system upgrades
• Ensure adequate level of resource deployment through hiring specialists and
outsourcing for critical support function within IT group
• Ensure business continuity and disaster recovery planning with implementation of
policies to manage IT risk.

Human Resource Management Group:

HR Group focuses on the followings:

• Optimum staffing level will be determined based on specific personnel needs of the
April 7, 2010

business groups for undertaking business development and develop a strong middle
management tier.
• Compensation structure will be revised to market comparable salaries for all key
positions responsible for account solicitation, product development and relationship
mangers
• Rationalization of existing staff based on skill set, experience and career aspirations
• Hire professionals with specialized areas of expertise for undertaking complex product
development and implementation
• Continuous training based on industry dynamics and changing customer needs.

Compliance Group:

Compliance Group focuses on the followings:

• Implementation of Basel II principles for managing and mitigating organizational risk


• Reporting irregulations and exceptions, identified by audit & inspection group and by
regional compliance functionaries, on monthly basis to the relevant group heads or to
the president if required
• Consolidation of regional compliance reviews for submission to the relevant authority
for review
• Progress reports related to different functions within the organization are submitted to
relevant authorities on a periodic basis
• Coordinate with regulatory authorities and external auditors for compliance related
issues

Credit Management Group:

Credit Management Group focuses and performing effectively the followings:

• All credit related functions


• Documentation
• Sanction and approval (see Figures at the end)
• Policy formulation / dissemination
• Credit monitoring
• Post disbursement monitoring
• Portfolio management
• Remedial management
• Credit management services

Audit and Inspection Group:

The Audit Commission, an independent public body, carries out various inspections of how the
Council conducts its affairs and publishes its findings in reports. In particular inspection
April 7, 2010

concentrates on our accounts, performance management and financial aspects of corporate


governance (e.g. how well NBP prevent and detect fraud and corruption).
NBP also carry out internal audit to ensure that statutory financial responsibilities are achieved,
and to assist managers in the effective delivery of services, seeking to ensure value for money.
NBP maintain close cooperation with the external auditor to reduce overall audit costs.
To Exercise different functions, management has powers as well as restrictions to act and
behave according to the instructions provided and take into account when these instructions
were amended. To check the proper implementation BOARD has made a committee named as
STEERING COMMITTEE that will check and respond to BOARD. The list of powers and limits is
given as follows:

Powers
1. The powers are to be exercised against all types of acceptable securities and collaterals
within the parameters of Prudential Regulations, Banking Laws, Companies Act,
Standard Procedures manual and Bank’s Policies issued from time to time.
2. The powers are subject to SBP restrictions, policies, and regulations in vogue and
amended from time to time.
3. The president may delegate higher limit to an individual or Regional Management
Committee by name and the powers so delegated.
4. These powers are subject to utilization of CREDIT & RISK GROUP and COMMERCIAL
AND RETAIL BANKING GROUP, CORPORATE & INVESTMENT BANKING GROUP as
explained in the figures (1,2,3,4,5,&,6) given below.

Limitations
1. The president is empowered to exercise unlimited financial powers vide BOD decision.
2. Powers and amounts represented in the next figures only for a time limit unless
otherwise specified.
3. All the sanctioning amounts provided in the following figures are annual.
4. All purchases to be strictly as per bank’s rules and the Procurement policy of NBP
5. To check expenses are under budget, Regional Management Committee on monthly
basis review all the expenses and a statement thereof to be sent to the Chief of
Operations Group, Head Office.

April 7, 2010
Figure 1: Against Liquid Securities

DSCs, SSCs, BONDS, TDRs, FDRs, etc.

CUSTOMER TYPE Limited Company Firm (Partenership) Individual (Busi. & Ind.) Individual (Consumer)
LEVEL AUTORITY Funded Non Funded Funded Non Funded Funded Non Funded Funded Non Funded
BOD Unlimited (Within regulatory parameters)
The board of directors in its meeting, resolved that all the authority for credit approvals is delegated to the credit.
HEAD OFFICE

CREDIT COMMITEE However, Credit Proposals that fall within the purview of the Board as per directives of SBPshall continue to be
put up to the Board.

SEVP/EVP/Group Chief 200.00 Unlimited 125.00 Unlimited 75.00 Unlimited 10.00 Unlimited
Risk Mangement
SEVP 200.00 300.00 125.00 250.00 75.00 150.00 10.00 20.00
Group Chief
EVP 200.00 300.00 120.00 240.00 60.00 120.00 7.50 15.00
REGIONAL
MANAGEMENT 125.00 Unlimited 100.00 Unlimited 50.00 Unlimited 5.00 Unlimited
COMMITEE
REGION

EVP 75.00 150.00 60.00 120.00 25.00 50.00 3.00 6.00


REGIONAL CHIEF
Powers to be 45.00 90.00 30.00 60.00 20.00 40.00 2.00 4.00
SVP
excercised
jointly by RBC VP 30.00 60.00 20.00 40.00 15.00 30.00 1.00 2.00
and RRMC
AVP 20.00 40.00 15.00 30.00 10.00 20.00 0.50 1.00

MANAGER Jointly with Risk Manger, wherever available


90.00 Unlimited 30.00 Unlimited 20.00 Unlimited 2.00 Unlimited
BRANCH

SVP
VP 60.00 Unlimited 20.00 Unlimited 15.00 Unlimited 1.00 Unlimited

AVP 40.00 Unlimited 15.00 Unlimited 10.00 Unlimited 0.50 Unlimited

OG-I to OG-II 20.00 Unlimited 4.00 Unlimited 2.00 Unlimited 0.50 Unlimited

• Credit committee will also have authority to approve / confirm actions of the HO, REGIONS,
Branch.
• For SMEs powers granted for Commercial Lending will continue to be exercised, until such time
specific powers based on products to be introduced are determined and announced by
Commercial Banking Group / Risk Management Group / Retail Banking Group.
April 7, 2010
Figure 2: Against Pledge

Cotton, paddy, Rice, Sugar, Wheat, Pulses, Manufactured Goods, Products, Equipment, etc.

Rs. In
(For Industry, Business & Trade only) Million
CUSTOMER TYPE Limited Company Firm (Partenership) Individual (Busi. & Ind.)
Non Non
LEVEL AUTORITY Funded Funded Funded Funded Funded Non Funded
BOD Unlimited (Within regulatory parameters)

The board of directors in its meeting, resolved that all the authority for credit
HEAD OFFICE

CREDIT COMMITEE approvals is delegated to the credit. However, Credit Proposals that fall within the
purview of the Board as per directives of SBPshall continue to be put up to the
Board.

SEVP/EVP/Group Chief Risk 150.00 300.00 100.00 200.00 75.00 150.00


Mangement
SEVP 150.00 300.00 100.00 200.00 75.00 150.00
Group Chief
EVP 100.00 200.00 75.00 150.00 40.00 80.00
REGIONAL MANAGEMENT
80.00 160.00 50.00 100.00 30.00 60.00
COMMITEE
REGION

EVP 50.00 100.00 40.00 80.00 20.00 40.00


REGIONAL CHIEF
Powers to be SVP 30.00 60.00 20.00 40.00 10.00 20.00
excercised jointly
VP 25.00 50.00 15.00 30.00 5.00 10.00
by RBC and RRMC
AVP 15.00 20.00 10.00 20.00 5.00 10.00

MANAGER Jointly with Risk Manger, wherever available


30.00 60.00 20.00 40.00 10.00 20.00
BRANCH

SVP
VP 20.00 40.00 10.00 20.00 3.00 6.00

AVP 0.00 0.00 0.00 0.00 0.00 0.00

OG-I to OG-II 0.00 0.00 0.00 0.00 0.00 0.00

• Credit committee will also have authority to approve / confirm actions of the HO, REGIONS,
Branch.
• For SMEs powers granted for Commercial Lending will continue to be exercised, until such time
specific powers based on products to be introduced are determined and announced by
Commercial Banking Group / Risk Management Group / Retail Banking Group.
April 7, 2010
Figure 3: Against Mortgage of Immovable property including Fixed assets of Industry.

Rs. In
(For Industry only) Million
CUSTOMER TYPE Limited Company Firm (Partenership) Individual (Busi. & Ind.)
Non Non Non
LEVEL AUTORITY Funded Funded Funded Funded Funded Funded
BOD Unlimited (Within regulatory parameters)
HEAD OFFICE

CREDIT COMMITEE The board of directors in its meeting, resolved that all the authority for credit
approvals is delegated to the credit. However, Credit Proposals that fall within the
purview of the Board as per directives of SBPshall continue to be put up to the Board.
SEVP/EVP/Group Chief 100.00 200.00 70.00 140.00 35.00 70.00
Risk Mangement
SEVP 100.00 200.00 70.00 140.00 35.00 70.00
Group Chief
EVP 80.00 160.00 50.00 100.00 30.00 60.00
REGIONAL
MANAGEMENT 80.00 160.00 50.00 100.00 30.00 6.00
COMMITEE
REGION

REGIONAL EVP 40.00 80.00 35.00 70.00 15.00 30.00


CHIEF Powers
to be SVP 25.00 50.00 15.00 30.00 5.00 10.00
excercised
VP 20.00 40.00 10.00 20.00 5.00 10.00
jointly by RBC
and RRMC 10.00 20.00 5.00 10.00 2.50 5.00
AVP
MANAGER Jointly with Risk Manger, wherever available
25.00 50.00 15.00 30.00 5.00 10.00
BRANCH

SVP
VP 20.00 40.00 10.00 20.00 5.00 10.00

AVP 10.00 20.00 5.00 10.00 2.50 5.00

OG-I to OG-II 2.50 5.00 1.00 2.00 0.50 1.00

• Credit committee will also have authority to approve / confirm actions of the HO, REGIONS,
Branch.
• For SMEs powers granted for Commercial Lending will continue to be exercised, until such time
specific powers based on products to be introduced are determined and announced by
Commercial Banking Group / Risk Management Group / Retail Banking Group.
April 7, 2010
Figure 4: Against Other Securities

Purchase of inland Bills, Purchase of or Finance against Bank Drafts & Payment Orders, Foreign Bills
Purchased, Negotiation of Export Documents.

(For Industry Only) Rs. In Million

purchase of Bank Instruments (Pay negotiaition of Export Documents Purchase of Bills under firm
FACILITY order/Draft) contract with collateral security
Individual Individual
Limited Limited Individual
Limited Co. Firm (Busi. & Firm (Busi. & Firm
Co. Co. (Busi. & Ind.)
LEVEL AUTORITY Ind.) Ind.)
BOD Unlimited (Within regulatory parameters)
HEAD OFFICE

The board of directors in its meeting, resolved that all the authority for credit approvals is delegated to the credit.
CREDIT COMMITEE
However, Credit Proposals that fall within the purview of the Board as per directives of SBPshall continue to be put up to
the Board.
SEVP/EVP/Group Chief 150.00 75.00 35.00 50.00 30.00 25.00 50.00 25.00 10.00
Risk Mangement
SEVP 150.00 75.00 35.00 50.00 30.00 25.00 50.00 25.00 10.00
Group Chief
EVP 100.00 50.00 25.00 40.00 25.00 20.00 40.00 20.00 7.50
REGIONAL
MANAGEMENT 55.00 30.00 15.00 35.00 20.00 15.00 35.00 15.00 5.00
COMMITEE
REGION

REGIONAL EVP 40.00 20.00 5.00 25.00 10.00 5.00 20.00 5.00 3.00
CHIEF Powers
to be SVP 20.00 15.00 5.00 15.00 5.00 2.00 15.00 5.00 2.00
excercised 10.00 5.00 2.00 10.00 5.00 2.00 10.00 5.00 2.00
jointly by RBC VP
and RRMC AVP 5.00 2.00 1.00 5.00 2.00 1.00 5.00 2.00 1.00

MANAGER Jointly with Risk Manger, wherever available


20.00 15.00 5.00 15.00 5.00 2.00 15.00 5.00 2.00
BRANCH

SVP
VP 10.00 5.00 2.00 10.00 5.00 2.00 10.00 5.00 2.00

AVP 5.00 2.00 1.00 5.00 2.00 1.00 5.00 2.00 1.00

OG-I to OG-II 2.00 1.00 0.50 2.00 1.00 1.00 2.00 1.00 0.50

• Credit committee will also have authority to approve / confirm actions of the HO, REGIONS,
Branch.
• For SMEs powers granted for Commercial Lending will continue to be exercised, until such time
specific powers based on products to be introduced are determined and announced by
Commercial Banking Group / Risk Management Group / Retail Banking Group.
April 7, 2010
Figure 5: Consumer & Retail Financing and Financing to Small & Medium Enterprises

Rs. In
Million
SCHEME Small & Medium Enerprises
Consumer &
Retail Non Non Non
LEVEL AUTORITY Financing Funded Funded Funded Funded Funded Funded
BOD Unlimited (Within regulatory parameters)
HEAD OFFICE

CREDIT COMMITEE The board of directors in its meeting, resolved that all the authority for credit approvals is delegated
to the credit. However, Credit Proposals that fall within the purview of the Board as per directives of
SBPshall continue to be put up to the Board.
SEVP/EVP/Group Chief
30.00 60.00 25.00 40.00 12.50 25.00
Risk Mangement
SEVP 30.00 60.00 25.00 40.00 12.50 25.00
Group Chief
EVP 30.00 60.00 25.00 40.00 12.50 25.00
REGIONAL
MANAGEMENT 25.00 45.00 20.00 35.00 10.00 25.00
COMMITEE
REGION

REGIONAL EVP 15.00 30.00 10.00 20.00 5.00 10.00


CHIEF Powers
to be SVP 10.00 20.00 5.00 10.00 3.00 6.00
excercised
VP 5.00 10.00 2.00 4.00 0.50 1.00
jointly by RBC
and RRMC 2.00 4.00 1.00 2.00 0.50 1.00
AVP
MANAGER Jointly with Risk Manger, wherever available
10.00 20.00 5.00 10.00 3.00 6.00
BRANCH

SVP
VP 5.00 10.00 2.00 4.00 0.50 1.00

AVP 2.00 4.00 1.00 2.00 0.50 1.00

OG-I to OG-II 1.00 2.00 1.00 2.00

• Credit committee will also have authority to approve / confirm actions of the HO, REGIONS,
Branch.
• As per approved powers of Retail Banking Group by Board of Directors (Figure 6)
• Definition of SME, Limits Securities and Pricing will be in accordance with Guidelines provided by
SBP and Bank from time to time. This chart only represents the sanctioning authority.
April 7, 2010
Figure 6: SANCTIONING POWERS – SECURED PRODUCTS

Rs. In Million
Regional Office Level Head Office Level

Sanctioning Sanctioning
Level Of Hierarchy Powers Level Of Hierarchy Powers [Max]

Regional Business Chief / Product / Credit Analyst


Regional Risk Management Chief 3.000 /Mortgages 1.500

Regional Management Team 5.000 Initiation Head 5.000

Credit Head - retail 7.500

Group Chief - Retail Banking Group 15.000

Jointly by Groups Chief - RBG &


RMG 25.000

To be signed by GC-RMG and one


other credit committee member 35.000

credit committee > 35.000

April 7, 2010
HOW FOREIGN BANKS PENETRATE IN PAKISTAN

April 7, 2010
Pakistan is a country that exports or imports many of the products made or required by it. Its
export contribution to GDP is 14.1 billion (as decreased by the recent crises of power and
suicidal attacks). Similarly its trend toward importing has been increased by the last years.
Hence, in recent decades, international trade in goods and financial services has become
increasingly important. To facilitate such trade, many banking institutions have also become
international, because they found opportunity to break the circle of monopoly of the
Government in different developing countries and to earn the above average profits, one of the
countries is Pakistan. When foreign banks come into Pakistan, Government of Pakistan make
many of the banks privatize, during Zia-ul-Haq leading, that were previously owned by the
Government. Banks have expanded internationally by establishing foreign subsidiaries and
branches or by taking over established foreign banks. The internationalization of the banking
sector has been spurred by the liberalization of financial markets worldwide. Developed and
developing countries alike now increasingly allow banks to be foreign-owned and allow foreign
entry on a national treatment basis.
Financial liberalization of this kind proceeds, among other reasons, on the premise that the
gains from foreign entry to the domestic banking system outweigh any losses. Several authors
have addressed the potential benefits of foreign bank entry for the domestic economy in terms
of better resource allocation and higher efficiency. Some writers specifically mentions that
foreign banks may
1. Improve the quality and availability of financial services in the domestic financial market
by increasing bank competition, and enabling the greater application of more modern
banking skills and technology,
2. Serve to stimulate the development of the underlying bank supervisory and legal
framework, and
3. Enhance a country’s access to international capital.
Foreign ownership of banks is often thought to improve overall bank soundness, especially
April 7, 2010

when the foreign parent banks belong to well-regulated financial systems that are themselves
healthy. Such parent banks are expected to provide greater access to the capital and liquidity
that bolster balance sheet strength, and to transfer to local banks the skills and technology that
enhance risk management and internal controls. More broadly, foreign bank presence is
expected to fortify emerging market financial systems by encouraging higher standards in
auditing, accounting and disclosure, credit risk underwriting, and supervision opined that
foreign banks improve the quality and availability of financial services in the domestic financial
market by increasing bank competition, and enabling the application of more modern banking
skills and technology.

April 7, 2010