The bank professionals
We have almost agreed on the figure of the amount lost in the Punjab due to the Coop Scandal. While Salman Taseer puts the figure at Rs 17 billion, Chief Minister Wyne says the losses are close to Rs 16 billion, both have got a vested interest in inflating or deflating the amount respectively. Giving the benefit of doubt to the accused and for the sake of good order, we will take the lower figure, when Rs 16000 million or thereabouts has evaporated into thin air, what is a 1000 million between friends — or even enemies?
The fortune adrift because of the Coop scandal is hitting the headlines and the pocket-books of unwary depositors, the irrecoverable loans that the nationalised banks and DFIs have been dishing out for many years have gone out of media focus. Unfortunately for the liquidity of the financial institutions and the economy of Pakistan, the money thus lost will have much more far-reaching consequences than the Coop scam. The lack of liquidity means that credit is that much harder to obtain for the lower end of the business spectrum. Contrary to traditional thought, heavy and medium industries cannot pull the economy along by themselves, it is the vast mass of small business people in private enterprise who generate the financial turnover that makes an economy vibrant. If the economy had only been dependant upon the upper range of industry, the socialist economies would have been in fashion rather than going bankrupt.
The cumulative impact of the money drained out of the economic basket of Pakistan has meant that middle level and small businessmen have had to turn increasingly to the curb market to obtain the ready cash to keep their commercial and industrial enterprises going along. The cost of this credit is extremely high and it is usually short-term, resulting in lack of long-term planning and reduced profitability. Honest commerce seldom has a wide margin as profit and as such exorbitant credit costs makes for unhealthy balance sheets.
Because the politically influenced loans have repeatedly soured, we have tended to ignore the fact that besides political nepotism, a majority of the credit approved and disbursed was at the discretion of banking professionals, inefficiency and/or corruption in this exercise may remain hidden because the red flag of political patronage is a more visible target. The exercise of privatisation of banks may gloss over the need that banking professionals who have engaged in malfeasance and have accumulated great wealth, need to be brought to task. Some are now rumoured to be bidding to open private banks themselves, one cannot begin to imagine the consequences on the whole nation if we legitimize white collar crime by condoning it rather than bringing the culprits to book.
As the BCCI scandal has shown, the level of morality among some of the elite of our banking professionals has been quite low. While some of the accusations internationally made are laughable, it was an open secret that some of BCCI’s “Untouchables”, particularly in the Middle East, had risen to their posts because of their ability to supply “entertainment” rather than their professional banking expertise. Such depraved behaviour became the accepted industry average for advancement, with other criminal malfeasance an accepted part of “promotional activities”. Here we must not generally tar and feather all BCCI executives, a vast majority of them remained exceptional bankers in all senses of the word and the fact that the BCCI bubble did not burst sooner is no small part due to their professional expertise and dedication. While the high-flying elite of BCCI were going their merry way, philandering and lining their own pockets, the BCCI professionals gave excellent service to the majority of their customers who were small and middle level business ventures. BCCI thus suffered from a bad case of dual personality. As the Amjad Awan case in Miami has shown, the BCCI elite also had only lip-service loyalty to subordinates executing their policies, abandoning them at will to the mercy of local authorities.
While some of our own nationalised banking hierarchy tried their best to emulate BCCI’s corporate culture, the fact remains that these people were readily identifiable by their reputations. Given the opportunity and rope, they proceeded to show their mettle. One President of a major bank did his business, drink in hand, sitting at the feet of those who mattered. It is customary to blame politicians, but why should they be blamed? The blame should be laid squarely at the doors of those bankers who prostituted their conscience for individual benefit for themselves. These unscrupulous and wretched lot lined themselves up behind political Godfathers while teaching them how to loot the financial institutions. Money buys a lot of friends and influence, street justice has a historical propensity to equalize such excess. Despite this filth, a majority of our banking professionals have come out clean, despite having to suffer hardships during the period that they become “Conscientious Objectors” to organised white collar crime. Their fate was to be transferred from bank to bank, kept in cold storage in the Pakistan Banking Council or simply put out in limbo on forced/enforced leave. In refusing to countenance malfeasance of the highest order, they kept their heads and conscience clear.
Most of them faced privation and insult in silence, out of the fear of the times or out of self-respect to sustain their livelihood and their families. Most continued to work in routine, mundane tasks allotted to them by the then Princes of the Banking Industry. Of the Bank Presidents who survived with their reputation and credibility intact, the most well-known are Maqbool Soomro, President of Habib Bank, who was sidelined for many months, another senior personage is Mohammad Zaki, President of the Pakistan Banking Council and previously President of Muslim Commercial Bank (MCB) with Enam Elahi, President of National Bank, making up the trio. Collectively and individually they symbolize the clean banking professionals on which the healthy commercial reputation of the Pakistan banking industry has persevered inspite of being tarnished somewhat internationally because of the BCCI scandal. Pakistani banking profession does not have to search for excellence, it is inherently present in a vast majority of their executives.
Pakistani expertise in Banking is a well respected fact world-wide. At the very top of the ladder in sheer excellence is Mr. Moeen Qureshi, who joined the IMF in 1958 and is retiring after 33 years in November 1991, having been Senior Vice President (Operations) of the World Bank, the effective No. 2 slot, for many years. Pakistanis should indeed be proud of this illustrious son. There have been three Vice Presidents from the Third World in the World Bank all three have been Pakistani. These people could not have risen to senior posts in this prime international financial institution without having the necessary expertise, credibility or qualifications. Almost all the international commercial financial institutions have a large number of Pakistanis as employees because of their known banking and financial expertise. The BCCI debacle is certainly going to cause a credibility problem for Pakistanis aspiring for employment in future in international banking circles, though one daresays this would be quite unfair, a vast majority of BCCI employees remained unaware of the scams that took place through “creative accounting” at the upper levels of BCCI’s hierarchy.
The time has come for the Pakistan banking industry to consolidate its reputation by coalescing around the genuine professionals like Mohammad Zaki, Maqbool Soomro, Enam Elahi etc who have gained a solid reputation by repudiating the easy route of approving/disbursing politically inspired credit requests against their better banking judgement, whatever may be the pressure. They symbolize the tremendous talent within the nationalised banks, the credibility they have fostered is necessary for good banking practices. A second wave of superb financial whiz-persons headed by the Yacoobs (Mr Rashidullah, Mrs Sanober) and Hussain Lawai have raised the level of private banking and the money market to new heights of achievement. For the well-being of Pakistan’s economy, it is imperative that confidence in our banking industry be restored, it can only be done by supporting those individuals who have stood the test of time despite extraneous demands of the nefarious kind. As sensible a person as the Finance Minister of Pakistan, Mr. Sartaj Aziz, has said that if there is a run on any financial institution, even the likes of the National Bank of Pakistan (NBP) (or some such as has happened on the Coop Finance companies), would be hard put to maintain solvency. With this background it becomes all the more important that the intelligentsia and masses feel that the approval and disbursement of credit will be done strictly according to merit, with weightage given to the lower end of the spectrum and that the process adopted by the credible professionals of our banking industry will stand the test of accountability. One need mention here the tremendous reputation the NDFC has acquired for professional expertise, particularly in the field of project appraisal and evaluation, going according to a strict but approachable criteria.
Pakistan has been spared the merciless lash of runaway inflation and loss of confidence in paper money that many countries have had to endure. The resource-rich country of Zaire is a recent case in point, with buying power of the money becoming worthless, even disciplined paratroop units have mutinied, resorting to widespread loot and arson. Before the stage comes where we start moving money around in wheel-barrows to purchase a loaf of bread, we need to get our financial houses in order. Luckily for us we have outstanding individuals in the money-world, but do we also have the will?
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