Archives

by Goonathillake Atapattu, Chartered Banker

It was reported, some time ago, both in the Sinhala and English print media that the governor of the Central Bank of Sri Lanka had stated that, as part of the financial sector reforms envisioned for the economy of Sri Lanka, the state-owned commercial banks, the Bank of Ceylon and the People's Bank would have to be privatized at the appropriate time. Since privatization of state-owned institutions has been popularly perceived as a bitter pill forced down the throats of an unwilling Sri Lankan population, the Governor of the Central Bank appeared to have sweetened the pill by adding that the employees of the two state-owned banks would, when privatization takes place, become shareholders of the two banks.

The Governor's statement raised a huge hue and cry from various quarters. The most vociferous, quite understandably, was the Bank Employees Union, the officials of which, issued statements to the press accusing the Government of doing a complete volte face on the promises made by the Government at various times previously, that the two institutions would continue to be sacred cows and inviolate and that the Government would not allow anyone to touch them. Since then, Sri Lanka's national newspapers have carried articles by various persons for and against privatization of the two state-owned banks, two of which "State owned banks and privatisation" by Ranjith Fernando (DN of 25th April) and "Marketing vs Structural viewpoint" by Somachandre Wijesuriya (DN of 10th May 2002) touched on certain aspects and I would wish to take this opportunity to examine some pertinent issues relating to this subject purely from the point of view of drawing the readers' attention to those which, I feel, are vital to the on-going debate.

The importance of the development of human resources was never realized by the two state banks throughout their history of existence. Is there any other evidence of this needed than the pathetic situation of the two banks having to import Chief Executive Officers from abroad to oversee the restructuring of the two institutions at fantastic cost to themselves and this, it had better be emphasized, after more than 60 years of indigenous management in the case of BoC and more than 40 years for PB.

The responsibility for this sorry state of affairs should be borne in equal proportion by the past senior management of the two banks and the Ceylon Bank Employees Union, the members of which, led by a young person dressed like a matador in a Spanish amphitheatre spoiling for a bull fight, are distributing leaflets, these days, at the Fort Railway Station with the ostensible purpose of mobilizing public opinion against privatization.

The Bank Employees Union, in its heyday of trade union militancy, fought bitter battles with the management of both state-owned banks against direct recruitment of university graduates into the Bank's executive grade and prevailed upon the management to recruit into the executive grade from those of its membership on the basis of experience and seniority. The Union's argument was that since the major portion of its membership comprised clerical, cashier and similar grades, the avenues available to them to get into the executive grades would be severely restricted if direct recruitment to the executive grade was allowed to be implemented. The bank management gave in to these union demands and thereby effectively shut out the prospects of trainable young university graduates getting into the executive grades. The majority of the clerical and allied staff who got promoted to the executive grade purely on the basis of seniority and experience were not equipped either academically or professionally to shoulder the responsibilities of an officer in the executive grade in that they had no vision and breath of outlook so essential to the optimum performance of their new responsibilities. With the liberalization of the financial system and the emergence of competition, the state banks' executive staff, who were accustomed to play around in cloistered and captive markets found themselves breathless and totally unprepared, confronted as they were, with the aggressive marketing of financial services products by competitor banks.

Experience and seniority, although important criteria in the business of banking, are by themselves, not sufficient to confront the challenges of modern day banking, so that when the competitors were poaching the state banks' traditional markets, the executive grade officers of the state banks chose to withdraw into their cocoon, as it were, of state patronage and protectionism, without trying to win back the clientele base that was being undermined by the competitors. This malaise penetrated the entire executive hierarchy of the state banks and conditioned them to the lulled into a false sense of complacency about the impregnability of the state banks.

Most American banks, both state and national and also multinational British banks conduct regular head-hunting sessions with the universities of the respective countries in order to recruit the best talent available for their banks.

Whilst graduates with first classes in mathematics, physics and economics commanded a premium in the banking executive job market in the 1980s, this single discipline focus changed in the 1990s to a multi-discipline approach, whereby those with MBAs from good universities got a distinct advantage over single discipline graduates.

What started in America and Britain spread throughout Europe and even in South East Asia, where countries like Malaysia and Indonesia started sending hordes of students to American and British universities to study for MBAs with a view to meeting the ever increasing demand for persons with such qualifications arising in the respective countries' banking systems.

With the increasing complexity of modern day banking, the practice of bringing together multidisciplinary teams to play a role in the high level management of some key part of a bank grew to be a well established feature in some of the multinational banks and for this purpose, it was those persons with MBAs who stood the best chance of selection.

It is a great tragedy in the case of the two state-owned banks that the banks' management had no vision of human resources development within their institutions and when virtually the whole world was rapidly moving to a knowledge-based economic and financial system, the management of the two state-owned banks were content to run their institutions with personnel promoted from the ranks through the process of seniority and experience without taking suitable steps to recruit well qualified university graduates and develop a second line of management in the banks' hierarchical setup.

News | Business | Features | Editorial | Security
Politics | World | Letters | Sports | Obituaries |

Produced by Lake House
Copyright 2001 The Associated Newspapers of Ceylon Ltd.
Comments and suggestions to :Web Manager