SINCE 2010, the United States has accumulated $321 billion on account of penalties levied on its top banks for financial misconduct.

A paper from Bocconi University publicised the fact with punitive action taken by the European Union regarding the matter. Steps are being taken worldwide to make banking a safe and stable component of the economy.

In Singapore, bankers have demonstrated exemplary behaviour by propagating essential knowledge to the customers and shifting them to digital banking avenues. This reduces frequent visits to the bank and decreases behavioural disputes between customers and bankers.

A careful analysis depicts that banks in Pakistan are incurring huge “costs of unethical behaviour,” with banks losing up to 4pc of business each fiscal year

However, in Pakistan, bankers do not assume the responsibility of educating their customers. Financial audits primarily revolve around the corresponding branch business, whereas a behavioural audit of bankers is focused on their individual mannerisms.

Unfortunately, Pakistan is lagging behind when it comes to behavioural audits, which results in inability on the part of bankers to manage stress leading to a higher probability of substandard customer service delivery.

Though the State Bank of Pakistan (SBP) has already issued regulations regarding customer service, with the customer being at the core of the banking business, misconduct by bankers remains high. High net-worth customers are served earlier while customers who have little cash in their accounts are treated unfairly.

The reason behind this is that auditors are more prone to identifying discrepancies in banking operations and less likely to investigate the attitude of the bankers while interacting with clients.

Here, the behavioural audit of the bankers becomes unavoidable mainly for attaining four major goals: delivery of high quality customer service, promulgation of SBP regulations, retention of the existing clients, and elevation of the bank’s image.

A careful analysis depicts that banks in Pakistan are incurring huge “costs of unethical behaviour”. Banks losing up to 4 per cent of business during each fiscal year; this business keeps on rotating from bank to bank, producing no solution for the customers. Several forms of misconduct are prevalent in banks across the country.

Some examples are: crediting a customer’s account wrongly, non-compliance to the rules while accepting utility bills payments, debiting the cheques of the deceased accounts without due diligence, miss-selling banking products.

Further, concealing the hidden costs and features of the products, showing little interest while conducting know-your-customer procedures, paying no heed to ATM operations, paving the path for money laundering, and exchanging harsh words with walk-in customers.

What actions can halt the bankers from misbehaving with the stakeholders? The SBP should issue instructions to the banks to conduct separate behavioural audits of bankers periodically. The banking Mohtasib should pay special attention to the complaints from the users of banking systems.

The usual delays should be eschewed immediately. The banks can chalk out a plan at regional levels to train their branch staff regarding proper behaviour while performing their duties. Intolerant bankers should be fined by the respective central office and such penalties should be credited to the SBP’s relevant department.

It must be ensured that the consumers receive actual information to make timely financial decisions. The bankers should be equipped to resolve disputes arising from time to time. The SBP must include a separate head of bankers’ behaviour in its manual of Prudential Regulations.

Already, the guidelines regarding risk management, corporate governance, banking operations, and KYC procedure have been defined by the SBP. Drafting the same regulations for bankers’ professional demeanour has become inevitable.

waheedmba@yahoo.com

Published in Dawn, The Business and Finance Weekly, June 25th, 2018

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