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Barclay's chief says banking needs better
regulation Mr. Andrew Buxton, Chairman of Barclay's Bank, rated the second largest UK Bank, visited Colombo recently as the chief guest at the Sri Lanka Association of Professional Bankers meeting. Barcklays Bank is represented in 70 countries and Mr. Buxton is said to be the highest banker in the world to visit this country. President of the Chartered Institute of Bankers - held all over the world to be the highest institution of the banking profession - Mr. Buxton is also a member of the Central Bank of England. He says Sri Lanka had survived the Asian currency crisis because she had a stable liberalization policy and good regulation of banks. Dinesh Weerakoody interviewed Mr. Buxton for ‘The Island’ Q: You spoke on the topic 'the global banking scenario-beyond year 2000 this morning can you summarize for me the key issues your highlighted? A: Firstly I talked about the consolidation that is going on in the banking industry particularly in the United States and in Europe where large banks are merging that's been a major trend in the US now for some time, very big mergers and lot of takeovers as well. I talked about the impact of technology because technology is having a big effect on the service industry not just only on the banking sector, particularly on the administration side because it's enabling organizations to replace staff with technology. It also has an effect on customer service because technology helps to improve customer service, it gives customers more information about the business. I talked about regulation because I believe that the regulation in the world needs to be improved. I think that some of the financial turbulence in South East Asia could have been avoided by better regulation. And I also talked about customer service because banks need to improve customer service and show the customer they really care, banks on the whole don't have very good reputation on customer service. Last night I talked about investing in staff and investing in employees and the way in which changes in the banking industry are affecting the status of staff. Q: In relation to the South Asian currency crisis which you identified when you were discussing about the need for good regulation. What lessons could our country learn from this crisis? A: I think this country has gone a long way. The fact that this country survived the crisis actually points to a stable liberalization policy and good regulation. This also means the country's financial system is stable, so I believe that what has happened in South East Asia has been avoided because of the good policies that this country has been running. It is always possible for a country to go further in the liberalization process, liberalization brings in competition into the industry it also brings in innovation and consequently the consumer benefits. Better regulation also results in a more stable industry because banks are quite heavily regulated and they should be. One of the things I was arguing for, at this seminar is for banks to be heavily regulated. And think that this country has history of good regulation. Q: You brought out strongly the issue that the risk in the banking industry has increased. What is the basis for your argument? A: Banks are now running bigger international businesses than they used to. I think the competition has also increased. The markets are more active; they are faster than they used to be. This doesn't juts affect the banks but it also affects the customers. It means that the customer base is more unstable. I think the competition is forcing banks into markets that they don't understand, have limited knowledge and sometime it forces them into taking lending decisions that may be they shouldn't take. For example a company that wants new banking facilities goes to one bank and that bank lays down various conditions so it goes to another bank and says would you like to do business with us, now the other banks is very keen to do the business because at the moment that company is not a customer, so maybe it takes a risk that is shouldn't take, now that's do with competition. I think the banking industry is now very competitive than it used to be as a result more risk is being taken. Q: What would be the impact of the European Monitary Union for Global Banking? A: I think there will be a major impact. I talked about consolidation and we've already seen some consolidation in Europe that is influenced by the monetary union, for instance in Belgium one of the Dutch banks has already taken over a bank in Belgium and one of the other Dutch banks wanted to invest in Belgium we will see the establishment of a very large market, in monetary union. The Bond market in Euro will rival the size of the Bond market in the US. I think that there is a good chance that the Euro will become a 2nd reserve currency. So it going to be a very big liquid market for investors and at the same time I think it's going to influence the consolidation of banks around Europe. Q: At what stage do you think Britain will go in? A: I think Britain is likely to enter in year 2002 or 2003 . Q: Currently why is the sterling so strong? A: For two reasons. Firstly the UK economy has been doing very well. Secondly because there has been some uncertainty about the strength of the Euro and so there has been a flight of money into sterling and this will continue. Q: You were saying that banks should get rid of its complicated grading systems and move towards a flat structure. Please explain A: What I said was that I believe that banks should cut the number of grades. I think grading structure is very restrictive because people are always thinking about how to get up the grading structure. What they really should be thinking about is how to serve the customer. In addition customer doesn't like people moving all the time. One of the complaints I used to hear from Barclay customers is that we never get to know my manager or he has moved on to another job. So we have started giving guarantees to the customers that managers will be on their jobs for minimum of 4 years. We would like them to be there, longer. You can only do that if you setup a grading structure that allows managers to be paid more whilst remaining in the same job grade. You have to give them the opportunity to earn more and you do that by a bonus system linked to targets. Also I must say that a complicated grading structure also disperses responsibility and encourages employees not to be accountable for their actions. Q: You said in your presentation that people are the only source of competitive advantage and which competitors find hard to copy. Can you elaborate? A: Well I think it's a combination of things banks are big employers of people and it is very important that those people should be satisfied and should be able to contribute to the business. If I am talking about customer service, isn't it a good idea that the cashier should smile at the customer? When the customer comes in. That's a little thing. Isn't it important that the employee should feel part of the company so that they want to serve the customer better? My belief is that the three most important constituents for a company are its customers, its staff and its shareholders, in no particular order, that isn't an order of importance and I would say that they have equal importance. Now that doesn't mean to say that the staff should be paid more than anyone else in the market or that the company management should undertake large expenses for staff, that is not sensible. What I mean is that the company should find ways of involving its staff and making them feel valued. Proper training and helping them to change because this banking business is going to change quite a lot over the next ten years through the impact of technology. That's going to have a big impact on the staff. There is going to be fewer employees and I said yesterday that in Europe we are finding that technology is having a very big impact on the numbers of staff employed particularly in administration. But at the same time the number of staff employed on the customer service jobs are increasing because the customer is demanding a higher standard of service. Q: Then, how does Barclay Bank attract, develop and retain key employees? A: First of all we help our employees to take responsibility for themselves. We have moved away from the "one size fits all" approach to training. This involves innovative training methods. In addition to this we have a very intense training program, right from the moment people join the bank. Secondly we have valued and quality programs, which try and involve staff in the business, in making suggestions we back that with community programs to try and support the community initiatives that the staff want to support. Some parts of our business are better than the others. I mean I can't say that we are good at everything. There are lots of programs that one can institute that involve the staff and the business by that make them feel valued. Therefore, incentivising staff by aligning their goals to the goals of the business in the eyes of the customers and shareholders is an important function for the Human Resources Department. We must always remember that a bank's greatest asset is its people. Q: Do you also use share options as a retention strategy? A: Yes. We have share options schemes which involve about two thirds of our staff. We have 49000 staff in the UK who are involved in our share option scheme. Q: Is job hopping also problem for your bank? A: There is more jobs hopping now than it used to be. Staff used to come to banks thinking that they are going to be there for 40 yrs. until they retire. I don't think they do now, I think most staff come in thinking that they will try the job may be, they'll stay for fifteen years and then change their job. I don't think there is an expectation now that people will necessarily stay with the same company until retirement. Of course this has had an implication for us in relation to funding their pensions, so we have just moved to a money purchase scheme rather than a final salary scheme because of that. We would like to employ people for long as possible, I mean when we employ somebody in the beginning of their employment life we expect to employ them right throughout their life. So we plan on that basis. I think many people today, expect to change jobs at some point in their career. Expectations of employees have changed drastically over the years. Q: Where does Information technology fit in to your business excellence model? A : Well investment in technology is a very important investment for any bank. I think it is very important for any service company. Barclays in 1997 invested around 650 million pounds in new technology. The total cost of this technology with maintenance and improvement is about 1.1 billion pounds so we are spending very large amounts. From that we do get a comparative advantage. Problem with technology is that if you have good system somebody will copy and you probably don't get more than one year, if your are lucky, to edge out your competitors. No doubt, technology is enabling banks to offer a better wider service to the customers. Q: Will technologies replace the face to face bit in the future? A: Well there is personnel face to face bit of business I think the public wants. I am saying that branches will never disappear because I do think that part of banking will have to be done face to face. I think the customer wants that. The other challenge of course is to be able to have a personal service. Q: How would technology be used to provide a better service? A: When the service is automated you try to use your information to get as much information possible about the customer. For an example in our card business in the UK if you hold a Barclay card within the computer we will have a customer history for you. We will know what sort of things you will spend your money on. Once they have sufficient amount information about you. We can then use that information for fraud prevention. Say if that card is stolen and it is being used for different types of purchases we would pick that up on the computer. And very often we have found that the customer doesn't even know that it's gone, but we know it first because we known it has been used for a different type of transactions. The information we have on a customer can also be used to establish communications with the customer because we know what sort of things are going on in the customer's life. I've been told for instance that when somebody has a child they start thinking about a pension because they start thinking about the future. Now supposing in our card business system we notice somebody buying things from mother care we can ring them up and say, would you like a pension? So we can use information pro actively to establish contact with the customer. Q: Where do you see information technology leading us to and what would be the implications? A: In the last ten years alone in the UK, 3000 bank and building society branches have closed but in the same period 8000 automated teller machines have appeared. Around 80000 jobs have been lost in the retail banking side. Also around 25000 new jobs have been created in telephone banking services. Today, only 50% of Barclays' customers use our branches. In fact, people can do their banking now on that small video screen on their mobile phone. I think information technology will go very much further than it is now. I talked a little bit about the Internet. Interned services banking can be delivered from anywhere in the world. I think the security has to improve. It has improved a lot over the last few years. Barclays' is launching an Internet service by the end of this month. We have already been operating on the Internet we have an Internet site called Barclay square and that has been a mail service on which people can use their cards to buy things from various different shops. That's been on the Internet now, for two years. Q: As a final question, what are the new type of banking products that you are offering your retail and corporate clients? A: Well in particular we are using our asset management business. Barclays is one of the leaders in asset management in the world. We manage about 520 billion dollars worth of funds and we are using our skills in asset management to improve the range of services that we offer to our customers. We have a sizeable stock broking business in the UK, We are now setting up an internet dealing service. We have introduced a lot of benefits for our branch customers by using technology. In the UK, you can do any business you like, in any of our branches without having to go into your branch.
The Central Bank's Spot Rates for transactions with Commercial Banks announced on the morning of July 21st, 1998 were as follows:
The approximate middle exchange rates of following currencies calculated on the basis of cross rates quoted by Gulf International Bank, Bahrain as it appeared in Reuters Financial Information System on July 21st, 1998 were as follows:
Average rates at which the following currencies were quoted by Commercial Banks in Colombo for Telegraphic Transfers at mid-day on July 21st, 1998 were as follows:
Average Weighted Prime Lending
Rate (AWRP) and Lowest Prime Rate (LPR) Average Weighted Deposit Rate
of Commercial Banks (AWDR)
* Ex Dividend Price |
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