BANQUE DU CAIRE 1 Banking in Egypt A market with a population of 70 million and a GDP per capita of...
-
Upload
stanley-briggs -
Category
Documents
-
view
215 -
download
0
Transcript of BANQUE DU CAIRE 1 Banking in Egypt A market with a population of 70 million and a GDP per capita of...
1 BANQUE DU CAIRE
Banking in Egypt
• A market with a population of 70 million and a GDP per capita of $1,000
• 62 banks compete primarily on price• Dominated by 4 government-owned
banks with about 50% of market• Total deposits of $62 bil & total
loans of $47 bil• Low customer penetration rate
2 BANQUE DU CAIRE
Banque du Caire: Background• Established in 1952. Third largest
bank in Egypt. Government owned• Financial highlights:
– Assets: $7 bil– Net Loans: $4 bil– Deposits: $6 bil– Net Worth: $400 mil– Net Profits: $11 mil
3 BANQUE DU CAIRE
Banque du Caire: Background2
• Other important numbers:– Credit customers: 12,000– Liability customers: 500,000– Employees: 10,800 (down from
12,000)– No. of branches & units: 226
4 BANQUE DU CAIRE
Banque du Caire: Background3
• Main problem areas– Weak management systems– Quality of loan portfolio– Excess staff which is unmotivated &
untrained
• Leading to:– Inability to privatize bank at this
stage
5 BANQUE DU CAIRE
Banque du Caire: Background4
• The Government has therefore decided on the following route to privatization:– Short-term: Privatize Management– Medium- to long-term: Privatize
Ownership
6 BANQUE DU CAIRE
Banque du Caire: Background5
• Privatize management:– Private sector management of a
government-owned institution still operating under public sector rules
– First such set-up in banking– Only second such approach in Egypt
7 BANQUE DU CAIRE
Phases of the Reform Process• Short-term/Immediate actions
– Problem identification– Achieve control through identified
main levers & centralization• Short- to Medium-term actions
– Modernize work processes through:• Implementation of new systems &
procedures• On-going staff training• Testing of implemented systems
8 BANQUE DU CAIRE
Phases of the Reform Process2
• Medium-term actions– Decentralize decision making process– Aggressive business acquisition
9 BANQUE DU CAIRE
Reform: Getting to Know the Place• What are the critical problems facing the
organization?• Work process:
– What decisions are being made?– By whom?– How are they being made & implemented?
• Key persons:– Who are they?– What are their loyalties & motivations?– Identify potential candidates for reform
leadership (agents of change)
10 BANQUE DU CAIRE
Reform: The First Steps – The Team• Hire senior team from outside
– Same culture & language– Work well together– Demonstrated capabilities
• Limited reliance on outside consultants
“The single most important factor in establishing the permanence of
change”
11 BANQUE DU CAIRE
Reform: The First Steps - Evaluation• Staff quality• Risk & control• Systems & operations• Credit culture & process• Product offering• Distribution channels• Customer service• Financial capacity
12 BANQUE DU CAIRE
Reform: The First Steps – Critical Control Levers• Centralize decision making authority as
credit culture was not sufficiently developed or instituted
• Strengthen the audit function & make it fully independent
• Shock the system regularly with quick fixes and management changes:– To affirm that new management is in place– To institute a mind-set of change
13 BANQUE DU CAIRE
Reform: The First Steps – Critical Control Levers2
• Identify agents of change from within the bank
• Review, update & change operating procedures with the objective of:– Strengthening bank processes– Clarifying lines of authority and
responsibility– Tracking & managing performance
14 BANQUE DU CAIRE
Reform: Human Resources – The Main Issues• Significant level of overstaffing• Large number of staff is related• Generally resistant to change• Limited use of PC’s & resistant to
technology• High percentage of non-professional
staff• Low mobility
15 BANQUE DU CAIRE
Reform: Human Resources – The Solution• Intensive training programs for all critical
functions• Identify & train future leaders• Communication through frequent meetings &
by becoming embedded in the bank’s grape vine• Improved & transparent performance
evaluation• Maintain existing benefits. Improve bonuses for
high achievers• Targeted new hires
16 BANQUE DU CAIRE
Reform: Human Resources – The Solution2• Introduce early retirement program with
more than 10% of staff taking advantage of it in less than 2 years
• Deal with long-festering issues such as speeding up the handling of employee investigations (67 cases pending, down from 737)
• Increase sense of healthy insecurity with a strong & quick reward & punishment system
• Lobby government to change applicable labor laws & policies to support program
17 BANQUE DU CAIRE
Reform: Human Resources – The Solution3• Deal with employee misconceptions
displayed through the never-ending rumor mill:– Significant layoffs– Reduced monetary rewards– Limited promotion opportunities with best
positions filled from outside– No new credit extensions
• Initial emphasis on fighting rumors replaced by concentration on implementation of reform program
18 BANQUE DU CAIRE
Reform: The Bank’s Technology• Change the bank’s technology systems
allowing the linkage of all units on a real time basis to:– Improve controls & supervision– Support credit administration & risk
management functions– Generate real time MIS– Ease introduction of new products
“The second most important change factor as it involves reengineering all of the bank’s
processes”
19 BANQUE DU CAIRE
Reform: The Missing Blocks• Fill up the missing corporate
functions:– Independence of audit function– Treasury– Risk management– Credit administration– Performance evaluation
20 BANQUE DU CAIRE
Reform: The Outside Constituencies• Customers
– The final objective of the reform process is to have satisfied customers whose needs the bank can service in a timely & profitable manner
– Towards this end we are remodeling & changing work flow in branches to:• Speed-up customer service• Improve work environment• Change the bank’s image
21 BANQUE DU CAIRE
Reform: The Outside Constituencies2
• Customers– Embarked on an ad campaign with the
realistic slogan of:
“The world is changing & so are we”– Campaign only promises what we can
deliver now to avoid creating false expectations
– Campaign & remodeling had positive effect on both customers & staff
22 BANQUE DU CAIRE
Reform: The Outside Constituencies3
• The Government– Absolutely critical as both owner & regulator:
• Took bold decision to appoint new Chairman from private sector, reconstitute the board of directors & approve appointment of senior management team from outside
• Provide outside source of compensation to match market levels
– Consistent commitment & support to the process & the new management in the face of strong resistance from disaffected parties which included a smear campaign
23 BANQUE DU CAIRE
Reform: The Outside Constituencies4
• The Government– Institutionalizing the reform process
through a new banking law– Refrain from interfering in bank
business– Commitment to inject additional
capital– Support on labor issues
24 BANQUE DU CAIRE
Banque du Caire: Where Are We Now?
• Management team is largely in place & well entrenched:– Work is very challenging & rewarding– Our shareholders are happy
• Magnitude of problems has been determined & boxed in
• Institutionalizing the changes to the management process
• Most staff willing to learn & endorse change, others are mostly resigned to it
• Operating results are much improved• Working on The Vision and the strategic plan to
ensure market leadership
25 BANQUE DU CAIRE
Banque du Caire: Where Are We Now?2
• Creating a new culture– Introduce a sense of initiative &
urgency– Process driven with clear lines of
responsibility– Risk awareness & control– Customer oriented– Refrain from “passing the buck”
26 BANQUE DU CAIRE
Banque du Caire: Where Are We Now?3
• Our success has encouraged the government to adopt a similar strategy in all the other government-owned banks with the recent privatization of their management
27 BANQUE DU CAIRE
Reform: Greatest Risk
Ensure at all times that new management does not get side-
tracked by the day-to-day business and loses sight of the new corporate
vision
“The new management must set up and control the reform agenda at
all times”