Executive Summary

There has been a revolution in the communication media in Bangladesh through the introduction
of Internet and other forms of secure dial up media. This has an enormous impact on the
banking sectors of the country. Now due to electronic Banking except for cash customers are no
longer require coming at the bank. It has not only benefited the customers but the bank as well.
From the Banks point of view this has helped prevent customers queuing up at the bank counters
thus helping to minimizing the cost as well as the workload for the employees. HSBC has been
one of the pioneers in Electronic banking in Bangladesh. HSBC has been a pioneer in Electronic
banking in Bangladesh. At HSBC electronic banking comes in two modes Hexagon and
HSBCnet. Both of them are developed by HSBC. Hexagon is access through a dial-up mode by
the customers. HSBCnet on the other hand is Internet based. At the moment HSBC has more
than hundred corporate customers using the electronic banking facility. HSBC maintains one of
the worlds largest private data communications networks and one of our most successful
customer service driven technological innovations is Hexagon. Hexagon provides corporate and
institutional customers with PC access to cash management services, trade services, securities
services and other information through a single-platform using a fully integrated proprietary
system. There are about 60,000 Hexagon users worldwide, with more than 130 corporate users
in Bangladesh. Hexagon is able to offer a wade range of solution such as Account information,
Payments & transfer, Pay order & Demand draft issuing, Telegraphic transfer, LC application
opening and amendment, Trade enquiry, Market information, Offline services, Integration with
Excel, Salary Payments, Cheque writer to its clients.
HSBCnet is and Internet platform that provides a single point of entry to the online solutions
offered by our Corporate, Investment Banking and Markets business. These solutions include
HSBC's award-winning research, plus a range of cash management and treasury and capital
markets products and services, presented in a format that can be personalized to meet the
individual needs of our customers. The core benefits to be offered to HSBC clients, via HSBCnet
are Access The Customers account from ANYWHERE with Internet PC, improved security and
audit controls, multiple user access levels for different functions (balance inquiry, payment

preparation, payment authorization etc.) and SmartCards and SmartCard readers for extra
security for payment authorizers. The Core HSBCnet Features are balance and transactions
reporting, account Statements viewing, in REAL TIME!, account and transaction inquiries by
date, amount, and other criteria, daily statement download and printing capability for long term
record/reconciliation, variety of reports in a wide variety of formats in ONE platform, for every
banking service we provide (collections and payments of all types) and upcountry collections
and payments reports.
The future of Internet banking is enormous. Now banks are not just thinking it as a product but
as a delivery channel as well. This is not exception for HSBC.
HSBC is provides the best-of-breed integrated cash management solutions to The customer
consisting of Integrated Receivables Solutions (IRS), Integrated Payments Solutions (IPS),
Liquidity Management Solutions (LMS) delivered through our Integrated Delivery Channels
(IDC), also known as HSBCnet.
In Bangladesh HSBC can focus on their strengths to materialize the opportunities hidden for
them in the banking industry and also they can work on their weaknesses to develop the product
effectively and grab more opportunity hidden in the banking industry. With their strengths HSBC
can also reduce the threats existing in the market. They have global strength with their solid
brand image and experience and skills as well, with which they are being able to satisfy the
customers with their wide range of products and services. Bangladesh is growing market where
new businesses are coming up and in this emerging market and HSBC can introduce its products
and services effectively to the upcoming corporate. Moreover, it is an emerging market, various
multinationals operating in the country will expand and new multinationals will come. These
multinationals have huge need of electronic banking products for Payment, Collection and
Delivery need to manage their expanding business. They also need liquidity management for
proper funding and by focusing on these opportunities; HSBC can create an effective corporate
portfolio in the country.

PART-1

E-Banking: Strategy, Prospects, problems

(The new horizon in banking industry)
Focus on HSBC

1. Introduction

1.1 Origin of the Project:

project is to fulfill the internship requirement with an Organization.

1.2 Background of the Study:

There has been a revolution in the communication media in Bangladesh through the introduction
of Internet and other forms of secure dial up media. This has an enormous impact on the
banking sectors of the country. Now due to electronic Banking except for cash customers are no
longer require coming at the bank. It has not only benefited the customers but the bank as well.
From the Banks point of view this has helped prevent customers queuing up at the bank counters
thus helping to minimizing the cost as well as the workload for the employees.
HSBC has been one of the pioneers in Electronic banking in Bangladesh. I am working in the
Global Payments & Cash Management department of HSBC, which mainly deals with the
product development and sales. Electronic banking is also a part of it. This gives me the
opportunity to dual more on different aspects of the electronic banking.

1.3 Purpose:

For this term project, my objective is to know in depth about the electronic banking specially of
HSBC. The purpose of doing this report is to know about how the theory that we have learned in
our course works in the real world.
This report will help us to know about:

Overview of HSBC Globally and locally

Electronic Banking

Features & benefits of HSBC Electronic Banking.

Customer Guild & security feature of the electronic Banking.

Competitors Electronic banking

Gap analysis and comparison of the electronic banking

Future of electronic banking.

1.4 Methodology:
This report is designed as an exploratory case study and is totally dependent on the published
secondary data.

1.5 Sources and Methods of Data Collection:

There are two basic data collection methods:

Primary data;

Secondary data.

Primary Data:
It is often known as the survey data, but in case this study I had to interview different personals
holding responsible post in HSBC and SCB.
Secondary Data:
Secondary Data were collected in the following ways:

Texts regarding Electronic Banking

Brochures of cash management services of HSBC and SCB

Internet sources.
4

Data gathered within the organization (HSBC) itself. Basically some reports are used
as the source of the internal secondary data.

1.6 Limitations of the Study:

I will mainly dual on the types of electronic banking offered by HSBC and its features. At HSBC
electronic banking comes in two modes Hexagon and HSBCnet. Both of them are developed by
HSBC. Hexagon is access through a dial-up mode by the customers. HSBCnet on the other hand
is internet based. At the moment HSBC has more than hundred corporate customers using the
electronic banking facility. I will also do a comparative analysis on the electronic banking
offered by other banks. My repost will also include future prospect of electronic banking.

PART-2
2.1 Banking Sector Performance of Bangladesh
The banking sector in Bangladesh comprises of four types of scheduled banks, namely,
nationalized

commercial

banks

(NCBs),

government

owned

development

finance

institutions(DFIs), private commercial banks (PCBs) and foreign commercial banks (FCBs). At
presentthere are 49 banks with 6253 branches in operation in the banking sector of Bangladesh.
In 2003 market share of the NCB's on the asset side declined substantially while that of PCB's
increased markedly. More specifically, NCBs share declined to 41.7 percent of the total assets as
against 45.6 percent in 2002 while PCBs share rose to 40.8 percent in 2003 as against 36.2
percent in 2002 . The foreign commercial banks held 7.3 percent of the industry assets in 2003,
showing a slight increase by 0.5 percentage point over the previous year.
NCB's dominance on the deposit side also declined in 2003. Total deposits of the banks in 2003
rose to Taka 1140.3 billion from Taka 1023.5 billion in 2002 showing an overall increase by 11.4
percent. However, the NCBs share in total deposits decreased from 50.3 percent in 2002 to 46.0
percent in 2003. On the other hand, PCBs' deposits in 2003 rose to Taka 468.2 billion or 41.1
percent of the total industry deposit as against Taka 377.0 billion or 36.8 percent in 2002. FCBs'
deposits in 2003 increased to Taka 84.5 billion or 7.4 percent of total deposits as against Taka
71.9 billion or 7.0 percent in the previous year. The DFIs' deposits in 2003 were Taka 62.6 billion
as against Taka 59.5 billion in 2002 showing an increase of 5.2 percent over the year.

2.2 Global overview of HSBC

2.2.1 Introduction to HSBC:
The Hongkong and Shanghai Banking Corporation Limited, headquartered in London, the HSBC
Group is one of the largest banking and financial services organizations in the world. The
Hongkong and Shanghai Banking Corporation Limited is the founding and principal member of
the HSBC Group which, with some 7,000 offices in 81 countries and territories and assets of
over US$746 billion at 30 June 2002, is one of the worlds largest banking and financial services
organizations. The Hongkong and Shanghai Banking Corporation Limited is the largest
incorporated bank in Hong Kong, with 70% of the adult population holding an account with
HSBC. It is one of the territorys three note-issuing banks, accounting for 62.6% of its banknotes
and has been appointed Settlement Institution for the US dollar clearing system in Hong Kong,
the first non-American bank in the world to win US dollar clearing business. The Bank and its
subsidiaries have some 590 offices in 20 countries and territories in the Asia-Pacific region and
employ over 40,000 people.

2.2.2 HSBC Holdings plc:

Although the Group's holding company, HSBC Holdings plc, was formed as recently as 1991,
many of its principal constituent companies opened for business over a century ago and have
long experience in their home and international markets. With listings on the London, Hong
Kong, New York and Paris stock exchanges, around 190,000 shareholders in some 100 countries
and territories hold shares in HSBC Holdings plc. The shares are traded on the New York Stock
Exchange in the form of American Depository Receipts.

Through an international network linked by advanced technology, including a rapidly growing ecommerce capability, HSBC provides a comprehensive range of financial services: personal
financial services; commercial banking; corporate, investment banking
and markets; private banking; trade services; cash management; insurance; consumer and
business finance; pension and investment fund management; trustee services; and securities and
custody services.

2.2.3 HSBC Group Vision:

The HSBC group vision is To become the worlds leading financial services company and
balance group earnings between the OECD and the emerging markets.
The essence of HSBC brand is integrity, trust and excellent customer service. It gives confidence
to customers, value to investors & comfort to colleagues.

2.2.4 HSBC Governing Objective:

HSBCs governing objective is we will beat the mean Total Shareholders Return performance
of a peer group of financial institutions over a three year rolling average and target to double
shareholder returns in five years.

2.2.5 HSBCs Business Principles and Values:

HSBC's reputation is founded on adherence to these principles and values. All actions taken by a
member of HSBC or staff member on behalf of a Group company should conform with them.
The HSBC Group is committed to five Business Principles:

Outstanding customer service

Effective and efficient operations

Strong capital liquidity

Conservative lending policy

Strict expense discipline

8

HSBC also operates according to certain Key Business Values:

The highest personal standards of integrity at all values

Commitment to truth and fair dealing

Hand-on management at all levels

Openly esteemed commitment to quality and competence

A minimum of bureaucracy

Fast decisions and implementation

Putting the Groups interests ahead of the individuals

The appropriate delegation of authority with accountability

Fair and objective employer

A merit approach to recruitment/selection/promotion.

A commitment to complying with the spirit and letter of all laws and regulations

The promotion of good environment to the welfare and development of each local

community.

2.2.6 HSBC Brand and Corporate Identity:

The Hexagon logo of HSBC derives from HSBCs traditionally flag, a white rectangle divided
diagonally to produce a red hourglass shape. Like many other Hong Kong company flags in the
19th century, the design of the flag was based on the cross of St. Andrew, The Patron Saint of
Scotland. The hexagon adopts and extends the geometry of the flag into a unique and
internationally acceptable form and may be said to convey many meanings such as expansion,
interdependence and communication. The Banks Board of Directors approved the concept in
November 1982. Implementation of the new corporate identity started in February 1983. One of
the first appearances of the hexagon was on the 1982 Annual Report and Accounts of The Hong
Kong and Shanghai Banking Corporation Limited, published in March 1983. HSBC brand and
corporate identity represents what HSBC wants its brand to mean to its customer. It is derived
from the groups.

2.2.7 Corporate Character:

HSBC is a prudent, cost conscious, ethically grounded, conservative, trustworthy international
builder of long-term customer relationships.

2.2.8 The HSBC flag:

The traditional HSBC house flag is a white rectangle divided diagonally to produce a red
hourglass shape. Like many other Hong Kong company flags originating in the 19 th century, the
design of the flag was based on the Cross of St Andrew.
Principal members of the HSBC Group
Company by date of entry into the HSBC Group (name in Birthplace

Date

2000)

origin

of Date
entry

(name at entry into the Group)

The Hongkong and Shanghai Banking Corporation Limited Hong Kong 1865

1865

Hongkong and Shanghai Banking Company Limited

HSBC

Bank

Middle

East London

1889

1959

Limited Hong Kong 1933

1965

The British Bank of the Middle East

Hang

Seng

Bank

Hang Seng Bank Limited

HSBC

Bank

USA Buffalo

1850

1980

Canada Vancouver

1981

1981

Limited Sydney

1986

1986

plc Birmingham 1836

1992

Marine Midland Bank, N.A.

HSBC

Bank

Hongkong Bank of Canada

HSBC

Bank

Australia

HongkongBank of Australia Limited

HSBC

Bank

Midland Bank plc

HSBC

Trinkaus

&

Burkhardt

KGaA Dsseldorf

1785

1992

Trinkaus & Burkhardt KGaA

10

of

HSBC

Guyerzeller

Bank

AG Zurich

1894

1992

Berhad Kuala

1994

1994

Mltiplo Curitiba

1952

1997

S.A. Buenos

1903

1997

USA New York

1966

1999

SA Geneva

1988

1999

Bank Guyerzeller AG
HSBC

Bank

Malaysia

Hongkong Bank Malaysia Berhad

HSBC

Bank

Brasil

Lumpur

S.A.-

Banco

Banco Bamerindus do Brasil S.A.

HSBC

Bank

Argentina

Banco Roberts S.A.

HSBC

Aires
Bank

Republic New York Corporation

HSBC

Republic

Bank

(Suisse)

Republic National Bank of New York (Suisse) SA

2.2.9 History of HSBC Group:

The HSBC Group's name is derived from The Hongkong and Shanghai Banking Corporation
Limited, the founding member of the modern Group. The bank owed its origins to the business
communities of the China coast in the 1860s. At that time, the finance of trade in the region was
not well developed and most transactions were still handled by the European trading houses, or
hongs, rather than by professional banks. By the early 1860s, local businessmen needed larger
and more sophisticated facilities. In Hong Kong, in particular, business leaders required
specialist-banking services - preferably from a bank that was locally owned and managed.
The founding of the bank in 1865 answered this need. The new company was the inspiration of
Thomas Sutherland, then the Hong Kong Superintendent of the Peninsular and Oriental Steam
Navigation Company, who produced a prospectus for a locally based bank operating on sound
'Scottish banking principles'. The prospectus attracted the support of a broad spectrum of Hong
Kong interests, including American and Indian trading houses as well as European firms, and the
initial capital of HK$5 million was quickly taken up in Hong Kong, Shanghai and Calcutta. On
this basis, the bank opened for business in Hong Kong on 3 March 1865. Then, as now, the
bank's headquarters were at 1 Queen's Road. One month later, on 3 April 1865, the bank's
Shanghai office opened for business. Initial response from customers in the two cities was
favorable, both from the foreign business community and from the compradors, the influential
11

Chinese intermediaries in charge of local staff and business dealings in the Chinese community.
The new bank's commitment to local ownership and management required a special arrangement
for incorporation. Rather than operate under existing British or colonial regulations - which
would have required a London head office - the bank's directors persuaded the Treasury in
London to accept incorporation under a special Hong Kong ordinance. This allowed the bank to
maintain a head office in Hong Kong without losing the privilege of issuing banknotes and
holding government funds. In this way, the bank (which had started life under a local Companies
Ordinance as the Hongkong and Shanghai Banking Company Limited) assumed the name The
Hongkong and Shanghai Banking Corporation in December 1866. Thereafter, the bank's
statutory framework remained basically unchanged until 1989, when registration under the Hong
Kong Companies Ordinance was completed.

2.2.10 Early business development:

Soon after its formation in Hong Kong and Shanghai, the bank established a network of agents
and branches around the world. In many of its branches and agencies in Asia, The Hongkong and
Shanghai Banking Corporation was the pioneer of modern banking practices. From the outset,
trade finance was a strong feature of its local and international business, an expertise that has
been recognized throughout its history. Bullion and exchange businesses were also important in
the early years. In Japan, where a branch was opened at Yokohama in 1866, the bank acted as an
adviser to the government on banking and currency. In 1888, it was the first bank to be
established in Thailand, where it printed the country's first banknotes. By 1900, the branch
network in Asia extended to India (1867), the Philippines (1875) and Singapore (1877), and to
cities in what are now Malaysia, Myanmar, Sri Lanka and Vietnam.
In the 19th century, international banking of this kind required innovation and high levels of risk.
In its early years, the bank had its share of setbacks, including over-commitment to a number of
local industrial ventures. From the mid-1870s, however, the bank renewed its focus on trade
finance. Thomas Jackson, Chief Manager on three occasions between 1876 and 1902, dominated
this period of the bank's growth and led it to become the foremost financial institution in Asia. In
12

achieving this reputation, Jackson and his successors were supported by a distinctive cadre of
managers and staff. These officers, many of whom had begun their careers with English or
Scottish joint-stock banks, were trained in London before taking up appointments in Asia.

2.2.11 The making of the modern HSBC Group:

When The Hongkong and Shanghai Banking Corporation acquired the Mercantile Bank and The
British Bank of the Middle East in 1959, the foundations were laid for today's HSBC Group. In
these cases, and by the later investment in Hang Seng Bank in 1965, the bank grew and
diversified through subsidiary companies with their own experience and expertise.
In the late 1970s, this 'group' approach was a key factor in the strategy for expansion in markets
where The Hongkong and Shanghai Banking Corporation was not well represented, particularly
in North America and Europe. The 51 per cent shareholding in Marine Midland Bank cost
US$314 million and nearly doubled the Group's assets, from HK$128 billion to HK$243 billion.
The remaining shareholdings were purchased in December 1987, making Marine Midland the
Group's principal subsidiary in the United States.
In Europe, The Hongkong and Shanghai Banking Corporation sought a stake similar in scale to
its holding in Marine Midland. In 1981, its plans to acquire the Royal Bank of Scotland,
countering a bid from Standard Chartered Bank, were thwarted when the UK Monopolies and
Mergers Commission ruled against both bids. Six years later, however, the bank signaled its
continuing interest in the major British banks when it purchased a 14.9 per cent interest in
Midland. A co-operation agreement between the bank and Midland allowed the two banks to
consolidate and rationalize their international activities by reciprocal transfers of business as, for
example, the transfer of Midland Bank Canada to Hongkong Bank of Canada in 1988.
The formation of HSBC Holdings plc in 1991, creating a holding company for the entire Group
with its shares quoted in London and Hong Kong, showed that the Group viewed Europe, and the
London market in particular, as a vital part of its future development. This strategy was made
clear when, in March 1992, HSBC Holdings announced that it would make a recommended offer
for Midland. In late April, Lloyds Bank, one of the other British clearing banks, indicated that it
was also considering an offer for Midland. That possible offer was dropped shortly after the
HSBC Group announced its final offer in June 1992, valuing Midland at 3.9 billion. The offer
13

became unconditional in July, lifting the Group's total assets from 86 billion in 1991 to over
170 billion in 1992. The Group's acquisition of Midland created one of the largest financial
organizations of its kind in the world. Attention immediately turned to integrating and
consolidating the business of the enlarged Group. The Group was especially keen to see a
synergy of the interests of the major subsidiary companies. The early results of this strategy
included the integration of treasury operations in London, New York and Tokyo, and the
introduction of common standards in technology. In 1992, the Group's new dealing room at
Thames Exchange, London, became the largest treasury trading operation in Europe. In the same
year, HSBC Investment Banking was formed to co-ordinate the merchant banking, securities and
asset management (through HSBC Asset Management) activities of the entire Group. In 1993
and 1994, the Group enhanced its special strengths in private banking and securities strengths in
private banking and securities business, the enlarged Group benefited from a greater level of coordination and a commitment to effective technology and training. The results of these efforts
were reflected in the Group's performance, with profits attributable to shareholders increasing
from 586 million in 1991 to more than 2,000 million in 1994 and US$5,408 million (3,342
million, HK$61,932 million) in 1999.
An important result of the acquisition of Midland was the transfer in January 1993 of the Group's
head office - but not that of The Hongkong and Shanghai Banking Corporation - from Hong
Kong to London to meet the requirements of the UK regulatory authorities. Although the Bank of
England now became the lead regulator for HSBC Holdings, the banking subsidiaries continued
to be regulated locally in their country of operation. The Group's traditional concern for rapid
Group's traditional concern for rapid meant that the new Group Head Office in London provided
only the essential central functions, such as strategic planning, human resource management,
legal and company secretarial, and financial planning and control. In 1998, HSBC announced
that these head office functions, together with most of the Group's London-based businesses and
operations, would be relocated to a new headquarters building in London's Docklands district.
The 44-floor tower, designed for HSBC by Foster and Partners, will be ready for occupation in
2002.
In the late 1990s, HSBC vigorously developed its role as one of the leading banking and
financial services organizations in the world. Its strategy of 'managing for value' emphasizes the
Group's unique balance of business and earnings between the older, mature economies and
faster-growing emerging markets. The commitment to major new subsidiaries in South America
14

in 1997, for example, extended the Group's reach in emerging markets. In contrast, the
acquisition in 1999 of Republic New York Corporation and Safra Republic Holdings S.A. for
US$9.85 billion reinforced HSBC's presence in highly developed markets - the United States,
Switzerland and Luxembourg. Republic, the third-largest deposit-taking bank in the New York
metropolitan area and a leading name in private banking, matched the Group's aim of delivering
wealth management in key financial centres around the world.
As part of the strategy, and also to strengthen its presence in the euro zone, HSBC announced in
April 2000 a US$11 billion recommended offer for Crdit Commercial de France. Established in
1894, CCF has 650 branches in France and 1894, CCF has 650 branches in France and
investment and private banking. Later in the same month, HSBC announced a world first in
financial services: it has joined forces with Merrill Lynch in a 50:50 partnership to create the first
global online banking and wealth management company. HSBC is also seeking wider access and
recognition in international markets. In November 1998, it announced the adoption of a unified
brand, using HSBC and the hexagon symbol everywhere it operates, with the aim of enhancing
recognition of the Group and its values by customers, shareholders and staff throughout the
world. In 1999, shares in HSBC Holdings plc were listed on the New York Stock Exchange,
adding to its listings on the London and Hong Kong stock exchanges. In parallel, HSBC's share
structure was simplified by introducing a single class of ordinary shares denominated in US
dollars.
Today, the HSBC Group occupies a leading position in the world of banking and finance. Its
international network now spans six continents. The Group is international in scope, reflecting
the long and colorful history of its member companies in different markets around the world.
This distinctive history and to grow further in the rapidly changing banking and finance
environment of today and tomorrow.

2.2.12 Highlights of the Group

HSBC grew organically and through strategic acquisitions in 2004.
The Bank of Bermuda joined the Group in February and minority stakes were acquired in Indias
UTI Bank and Chinas Bank of Communications Ltd. In the UK, HSBC bought the retail
financial services arm of the Marks and Spencer Group.

15

The HSBC brand was adopted by its Mexican subsidiary, G F Bital, early in the year and in
September the majority of the banks North American businesses, including Household
International, were united under the name HSBC North America.
HSBC continued its long-standing commitment to the environment, becoming a founder member
of the Climate Group in April and announcing its intention in December to become the first
major bank to go carbon neutral.
HSBC in 2003:
In April, the new Group head office in Canary Wharf in London officially opened to house some
8000 staff. HSBC's purchase of Household International Inc. added substantially to the Group's
business and profile in the United States; Households network of over 1300 branches in 45
states provided consumer finance to 53 million customers. In France CCF agreed to increase its
stake in French private bank Banque Eurofin S.A. to 83.95 per cent and to acquire two further
branches of Banque Worms. HSBC also acquired Keppel Insurance Pte Ltd, a provider of life
insurance and Islamic insurance in Singapore; and took full ownership of Equator Holdings Ltd.
HSBC in 2002:
From 2002, the HSBC identity carried the strap line of 'The world's local bank', emphasising the
Group's experience and understanding of a great variety of markets and cultures. The Group also
began its five-year 'Investing in Nature' programme, a partnership in environmental projects with
Earth watch, WWF and Botanic Gardens International.
HSBC acquired and recapitalized Grupo Financiero Bital in Mexico at a total cost of US$1.9
billion. This new member of the Group brought 5.5 million new customers and 1,400 branches in
to the network. Elsewhere, HSBC acquired a 10 per cent share of Ping An Insurance Company of
China, the second largest life insurance operator in the country.
HSBC in 2001:
Purchases during the year included the NRMA Building Society Limited in Australia, Demirbank
of Turkey and a 97 per cent interest in China Securities Investment Trust Corporation, Taiwans
leading asset management company. In December, the bank also took an 8 per cent share in the
Bank of Shanghai which was established in 1995 and operates a network of almost 200 branches

16

in the city. 2001 also saw the opening of the only branch in the HSBC network that is open 365
days a year - in Pune in Western India.
In April, HSBC announced a US$11 billion recommended offer for Crdit Commercial de France
(CCF). Established in 1894, CCF brought into the Group a network of 650 branches in France
and long experience of personal, corporate, investment and private banking, greatly
strengthening HSBCs presence in the euro zone. The deal was completed in July and in that
month HSBC Holdings plc was listed on the Paris Stock Exchange for the first time.
During the year HSBC launched HSBC Premier, a new international service for HSBCs most
valuable personal customers.

2.2.13 Commercial Banking:

Commercial Banking in Hong Kong teamed up with HSBC Asset Management and Treasury to
cross-sell investment funds. These focused on capital guaranteed funds and high yield deposits
and resulted in a 158 per cent increase in fee income. Initiatives were launched in Malaysia to
ensure that HSBC captures the trade business resulting from the Malaysian business
communities' growing interest in China and India. Singapore launched Business Vantage, a
packaged account service and delivery product, in India
launched Business Insurance Services with tailored products, including policies covering fire,
burglary, money-in-safe and public liability, and itroduced a Cash Plus Sweep facility, which
automatically sweeps idle or surplus funds into a higher yielding money market mutual fund.
HSBC Bank plc increased its share of the UK's business start-up market, helping more than
80,000 new businesses get off the ground, and reported a strong increase in customers switching
to HSBC. More established businesses moved their accounts to HSBC too, helping to swell the
customer base by 7 per cent. HSBC's business Internet banking is now live in Canada, the Hong
Kong SAR, India, Argentina, the UK ed States with over 200,000 registered users.

17

PART-3

3. HSBC in Bangladesh:
The HSBC Asia Pacific group represents Hongkong and Shanghai Banking Corporation, HSBC
in Bangladesh. The bank opened its first branch in Dhaka in 17 th December to provide personal
banking services, trade and corporate services, and custody services. The Bank- HSBC was
awarded ISO9002 accreditation for its personal and business banking services, which cover
trade services, securities and safe custody, corporate banking, Hexagon and all personal
banking. Other services of the bank include cash management, treasury, securities and
custodial service. HSBC is an ISO certified organization. This ISO 9002 designation is the first
of its kind for a bank in Bangladesh. The Hong Kong and Shanghai Banking Corporation
Bangladesh Ltd, primarily limited its operations to help garments industry and to commercial
banking. Later, it has expanded its business relations in sectors such as- pharmaceuticals, jute
processing and consumer products manufacturing organizations.
Realizing the huge potential and growth in personal banking industry in Bangladesh, HSBC
extended its operation to the personal banking sector in Bangladesh and within a very short span
of time it has been able to build up a huge client base. Extending its operation further, HSBC
opened a branch at Chittagong, two branch offices in Dhaka (Gulshan and Motijheel as well as
one in Dhanmondi) and an offshore banking unit on November 1998. At 31 st March 2000, the
number of employees of this bank in Bangladesh was 141. Recently HSBC has launched its 5 th
branch in Dhanmondi to extend its operation more.
In 1999 the paid-up capital of this bank was 434 million. Deposit of this bank was BDT 1,810
million in 1999. Among the deposit the called deposit was BDT 487 million and fixed deposit
was BDT 1,323 million. The amount of advance and investment was BDT 1,180 million and
BDT 100 million respectively. In 1999 this bank operated foreign exchange business of BDT
7,939 million. HSBC Bangladesh is under the strict of supervision of HSBC Asia Pacific Group,
Hong Kong. The Chief Executive Officer of HSBC Bangladesh manages the whole banking
18

operation of HSBC in Bangladseh. Under the CEO there are Heads of departments who manages
specific banking functions such as Personal banking, Corporate banking etc.
Currently HSBC Bangladesh is providing a wide range of services both two individual and
corporate level customers. Last year in the year 2000 the bank launched a wide array of personal
banking products designed for all kinds (middle and higher middle income) individual
customers. Some such products are personal loans, car loans etc. Recently the bank launched
three of its personal banking products Tax loan, Personal secured loan & Automated Tele
Banking service (ATB). These products are designed to meet the diverse customer needs more
completely.
HSBC in Bangladesh is also specializes in self- service banking through providing 24 hour ATM
services. Recently it opened two new ATMs at Shantinagar and Banani to better satisfy those
geographic segments. In total the branch currently has 9 ATMs located at various geographical
area of Dhaka and Chittagong.

3.1 Organizational Structure at HSBC, Bangladesh:

HSBC follows a 4-layer management philosophy in Bangladesh. These are Managers,
Executives, officers and assistant officers. The CEO is the top most authority of all the levels.
Mangers are the departmental heads that are responsible for the activities of their departments.
They are the heads of the department and formulate strategies for that department such as Human
Resources Manager. The executives have the authority next to managers and they are basically
responsible for certain activities and organizational functions like, Admin Executive. These two
layers represent the management level of HSBC Bangladesh.
Officers are the next persons to stand in the hierarchy list. They are the typical mid-level
employees of HSBC organizational hierarchy. These officers are responsible for managing the
operational activities and operating level employees. The operating level employees of HSBC
who are ranked as Assistant Officer fill the last layer of this hierarchy. They perform the day-today operational activities of HSBC.
19

The organizational structure of HSBC Bangladesh is designed according to the various service
and functional departments. The Chief Executive Officer (CEO) heads the chief executive
committee, which decides on all the strategic aspect of HSBC. The CEO is the person who
supervises the heads of all the departments and also is the ultimate authority of HSBC
Bangladesh and responsible for all kinds of activities of HSBC Bangladesh and all its
consequences. He admires all the functional departments and communicates with the department
heads for smooth functioning of the organization. The HSBC Chief Executive Committee is
formed with the heads of all departments along with the CEO. The structure of this top-most
authority is shown in the followingThe Chief Executive Officer

Manager,
Human
Resources

Manager,
Personal
Financial
Service

Manager,
Internal
Control

Chief
Operating
Officer

Head of
Corporate
Banking

Head of
Treasury

Figure#1 Executive committee of HSBC, Bangladesh

HSBC Bangladesh carries out all traditional functions, which a commercial Bank performs such
as Mobilization of deposit, disbursement of loan, investment of funds, financing export & import
business, trade & commerce and so on. Besides it also offers some specialized services to its
customers. Products and services offered by HSBC can be categorized according to the
customers they serve. Thus two major groups can be seen, they are individual customers or
consumers and corporate customers or organizations.

20

3.2 Current strategies:

As one of the largest banking and financial services organizations in the world HSBCs strategy
at different level can be an exciting coverage for Strategic Management study. In their strategic
choice HSBC came up with their own set of strategies that they thought would be best for their
organization. Like many other organizations they also do follow combination of strategies. They
combine functional level, Business level, Global level and corporate level strategy to get the best
result.

3.3 Banking activity:

As we can see competitor are one of the most important factor of external environment. In this
chapter of the report, we will be discussing about the HSBCs Corporate and institutional
Banking activities. As a matter of fact we will also discuss about the Corporate Banking of its
peers in banking sector of Bangladesh namely- Standard Chartered Bank, a multinational bank
operating its business in the country for about two decades and Dhaka Bank Limited, one of the
most successful private commercial banks form second generation banks of Bangladesh. We will
discuss about HSBCs activities first and later in this chapter we will discuss about its peers as
well. We will divide this chapter into three parts. The parts will be:

3.4 Activities in Bangladesh:

As in Bangladesh, the HSBC Groups history dates back to 1996 when The Hongkong and
Shanghai Corporation Limited opened its first branch. Today, the HSBC Group offers a
comprehensive range of financial services in Bangladesh including commercial banking,
consumer banking, payments and cash management, trade services, treasury and custody and
clearing.

Personal Banking:

With five branches, HSBC offers a full range of personal banking and related financial services
including current and savings accounts, personal loans, time deposits, travellers cheques and
inward and outward remittances.

21

Commercial Banking:

Commercial banking is a traditional strength of the HSBC Group. In Bangladesh, HSBC is a

popular choice for customers because of the Groups international reach and wide range of
financial services and products. Its customers range from sole proprietors to public listed
companies and foreign companies. HSBC has an offshore banking unit (OBU) license and can
therefore also provide foreign currency financing to qualifying customers. Above all HSBC is a
relationship driven bank.

Corporate and Institutional Banking:

Corporate and institutional banking provides dedicated relationship management services to

HSBCs clients in major corporate and financial institutions. The banks focus is on fostering
long-term relationships based on its international connections and extensive knowledge of Asia
and Asian business. A full range of corporate banking services provides customers with
integrated financial solutions.
Institutional banking focuses on clients from financial institution, including correspondent banks.
Its dedicated relationship management team is part of an institutional banking network that
serves the needs of customers worldwide.

Trade services:

Trade finance and related services are a long-standing core business of HSBC based on the depth
and spread of its corporate customer base, highly automated trade processing systems and
extensive geographic reach.

Payments and Cash Management:

HSBC is one of the leading providers of payments and related services to financial institutions,
corporate and personal customers in Bangladesh. Underpinned by the Groups extensive network
of offices and capabilities, payments and cash management assists companies in efficient cash
management through the provision of payments, collections, liquidity and account services. In
Bangladesh, HSBC has five offices in two cities and an extensive network of correspondent
banks covering major districts with nearly 200 outlets.

Custody and Clearing:

In Bangladesh, HSBC is a local custodian for global custodians and investment banks, which
benefit from its significant expertise and understanding of the securities clearing business.

Credit:
22

A transaction between two parties in which one (the creditor or lender) supplies money, goods,
services or securities in return for a promise of future payment by the other (the debtor or
borrower). Such transactions normally include the payment of interest to the lender.
In the case of a commercial bank, credit means lending or advances made by it. The bank itself
is the lender and the borrowers are the various types of customers of the bank. The cost to the
customers of borrowing from a bank is the interest and/or commission charge that they have to
pay throughout the life of the advance.

Banks normally provide credit in the following forms:

a. Over Drafts:
An overdraft provides a limit up to which a customer may overdraw his current account at any
time up to a certain date. Interest is calculated daily on the overdrawn amount and debited
monthly to the customers current account.
b. Loans:
When a loan is granted the full amount of the loan is debited to a Loan Account and credited to
the current account of the customer. Regular repayments are then made to the debit of the
borrowers current account. Interest covering the full period of the loan may be taken in advance
before the proceeds are credited to the customers account or alternatively debited
monthly/quarterly, etc. in arrears.
c. Bill Discount:
By discounting a bill, it means that we buy the bill (i.e. Bill of Exchange or Promissory Note)
before it is due and credit the face value of the bill less a discount charge to the customers
account. The transaction is practically an advance against the security of the bill and the
discount represents the interest on the advance from the date of purchase of the bill until it is due
for payment (the maturity date).
d. Import and Export Finance:
The financing of import and export of goods and merchandise may range from the establishment
of bills facilities for handling import/export transactions to the granting of overdraft or loans.

23

Foreign Exchange:

Foreign exchange is the conversion of one currency into another. It is an integral part of the
world financial system. Without foreign exchange, many aspects of our daily life, which we take
for granted, would not exist. If a business transaction involving money has been concluded
between residents of different currency areas, it necessarily involves a foreign exchange deal. A
foreign exchange deal is merely an exchanging of one currency for another. It is like any other
business deal in that one thing is exchanged for another. However, there is one major difference
between a foreign exchange transaction and a normal trade transaction. Usually we exchange
money for goods or goods for money. But in foreign exchange money is exchanged for money.
There are two main types of foreign exchange rates that may be used in foreign exchange
transactions. These are:
Spot rate
Forward rate
Spot rate - the spot rate is the exchange rate used for foreign exchange transactions that will be
settled in 2 working days time.
Forward rate - the forward rate is the exchange rate used for transactions that will be settled
beyond 2 working days.
Foreign exchange dealers and banks for transactions between themselves in the interbank market
mainly use spot rates.

The foreign exchange market:

The foreign exchange market is no exception. n the foreign exchange room, the traders are just
making a market in foreign exchange, pieces of paper denominated in foreign currencies. It
doesn't matter that at a vegetable market buyers and sellers face one another in a given physical
place, whereas in the foreign exchange trading room all transactions are made via the telephone
or telex throughout a geographical area that covers the world. It is an ongoing market in both
situations.

Treasury:

Treasury is the management of assets and liabilities to optimize return through the use of
financial instruments. The role of Treasury can be divided into three areas:
24

1.

It manages the bank's balance sheet in terms of funding assets and liabilities and the Bank's

exchange and interest rate exposures.To fulfil this responsibility Treasury uses all the tools
available to them in terms

of products. These are from basic spot to interest rate swaps, and

management information driven by the Bank's core systems: TREATS, HUB and CIF.
2.

It actively creates risk positions to generate trading income. For example, Foreign

Exchange.
3.

It satisfies customer needs by offering an efficient and competitive service.

The primary function of each of the Bank's Treasury centers throughout the world is the detailed
management of the Bank's assets and liabilities that fall within their sphere of responsibility.
They have specific responsibility for:
Maximising profitability through trading and marketing treasury products.
Controlling interest rate risk.
Controlling exchange risk.
Controlling credit risk, where it arises from treasury activity.
Controlling cash flows and liquidity.
Developing our Treasury capabilities and our presence in the market place.
It is important to stress that it is Treasury's responsibility to control all aspects of the
above and to ensure that all risk positions created in other areas of the Bank are taken-in under
the Treasury umbrella.

Corporate Products and Services:

The financial products of HSBC can be categorized into two groups1) Asset products
2)Liability products
Asset Products:
Asset products are the various types of credit and loan schemes offered to consumers.
Liability Products:
The liability products consist of all savings and deposit schemes offered to customers.

Corporate Credit:

25

When customers choose a bank to help support their business they want to be sure that it can
tailor solutions to meet their specific finance needs. At HSBC, they have a full range of products
and services, which include:
i. Overdraft:
A convenient and flexible form of short-term financing for routine operating expenses and
overheads of the company.
ii. Import and Export Loans:
Loans against import are available to customers when they purchase under Documentary Credit
or Documentary Collections terms. Pre-shipment finance is available to them to meet their
working capital requirements. Advances are granted upon production of a buyer's contract or
export DC.
iii. DP / DA Purchase:
A cash advance made to customers when they have exported goods to a buyer through
Documentary Collections, either on a Document against Acceptance (DA) or Documents against
Payments (DP) basis.
iv. Long-term Loans:
HSBC can customize a Term Loan to finance the fixed assets that customers business needs
(such as land, new premises, equipment and machinery). It may be a greenfield project or an
expansion of an existing plant, that may be financed at competitive floating rate of interest.
v. Guarantees and Bonds:
HSBC in Bangladesh issues a full range of Performance Guarantees, Advance Payment
Guarantees, Financial Guarantees and Bid bonds for supporting the underlying business of their
customers. The availability of credit facilities is subject to HSBC's Internal Credit guidelines and
approval process.
With over 7,000 offices in 81 countries and territories, customers can be rest assured that an
HSBC office is close to them, wherever they are exporting to. HSBC is available to provide the
customer with advice on any aspect of trade document preparation and can also provide them
with working capital finance to assist them to source their raw materials
To benefit from HSBC's export services, people do not need to have special facilities, or even an
account with them. Simply request the buyers to advise the documentary credits through HSBC
and benefit immediately their international network.
26

vi. Pre from o -shipment Finance:

To assist customers cash-flow when they are manufacturing or packing their goods, HSBC can
arrange pre-shipment finance facilities for them. Customers have to simply contact their local
HSBC branch for more information and we will arrange them an appointment with one of
HSBCs corporate relationship managers. A Packing Credit (PC) can be offered to the customers,
which will enable them to purchase raw materials or other related expenses that they may require
to process and export.
vii. Post-shipment Finance:
If customers documents, after checking, are found to contain no discrepancies, HSBC can
consider negotiating and paying customers the discounted value of the invoice. No facilities are
required, and funds will typically be advanced to the customers on the same day if documents are
presented before noon. If documents are found to be discrepant, it may be possible to negotiate
under reserve. This depends on a number of factors and will be at the discretion of the customers
corporate relationship managers. In all such instances, a Letter of Indemnity will need to be
completed. Alternatives to the above include cabling the DC issuing bank for authorization to
negotiate despite the listed discrepancies and sending the documents to the issuing bank for
approval and payment.
Viii. DC Advising:
Customers should always insist that their documentary credits are advised through HSBC. With
their network of 7,000 offices in 81 countries and territories, they are assured that The
Customers DCs will always reach them on time. Electronic export DC Advising is a new and
alternative way for the customers to receive a full copy of their Export Documentary Credits
(DCs), amendments and export transaction advices via email. The service brings direct benefits
to the customers business at no extra cost.
In this increasingly competitive environment, our Electronic DC advising services will help by
offering:
a. Enhanced Accuracy in the Preparation of Documents: The customers can 'cut and paste' the
relevant text from the copy of the DC emailed to them, to prepare documents under this DC.
b. Convenience: The customers can easily forward their online copy of the DC to their shipping,
insurance and other trade partners.

27

c. Reduced Courier Expenses: By signing up for HSBCs DC Safe Custody Service, customers
can reduce the expenses incurred otherwise for collecting the DC from HSBCs counters.
Customers should always insist that their documentary credits are advised through HSBC. With
HSBCs network of 7,000 offices in 81 countries and territories, customers are assured that their
DCs will always reach them on time.
ix. Import Services:
With over 130 years of experience supporting importers globally, HSBC is well positioned to
fulfill customers trading needs. A full range of import services handled by experienced staff is
available, ensuring that customers import documents are processed without delay. Simply apply
HSBC for import facilities, and they will begin handling customers imports immediately.
HSBCs range of services include:

Documentary Credits

Import Collections

Import Finance

Shipping Guarantee

x. Documentary Credits:
For importers who are looking for new suppliers, one of the primary considerations when
deciding on the payment terms is to ensure that the goods supplied are the goods ordered. The
two main instruments to ensure this are documentary collections, whereby the importer only
makes payment in exchange for documents of title for the goods shipped, and documentary
credits, where the importer requests his bank to guarantee payment for the goods, given certain
conditions being met.
HSBC offers the following types of Documentary Credits.
a. Documentary Credit (DC)
When buying goods from overseas suppliers, customer will wish to receive the goods as ordered
in the right quantity, on time and at the designated place. They will also wish to make payments
only after receipt of the required documents including the title of goods.
HSBC can solve The Customers needs by issuing a documentary credit on The Customers
behalf. A documentary credit is our Bank's guarantee of payment for a shipment of goods against
specific documents as stipulated on it. By using a documentary credit, the bank will only make
28

payment after receipt of titles and other documents that should fully comply with the terms of the
credit. Customers can enjoy a safer and cheaper alternative to making advance payment or
deposits.
b. Back-to-back Credit (BBC)
If clients are intermediaries and their supplier wants to sell on documentary credit term only, they
(clients) may apply for the issuance of a Back-to-Back Documentary Credit from us against the
export documentary credit.
A Back-to-Back Documentary Credit is issued against the export credit (the master credit), but
the terms and conditions may not the same as the export credit. The clients must submit their
own draft and invoice, together with the other shipping documents presented by their supplier to
secure payment under the export credit. After processing, they will have the export proceeds to
pay their supplier and the balance credited to clients account.
c. Deferred Payment Credit (DPC)
A DC, which allows the nomination of, a bank, or the issuing bank to effect payment against
stipulated documents at a maturity date as specified or determinable from the wording of the
credit. With this customers are able to receive the goods now and pay later.
xi. Import Collections:
Collections offer a cost-effective but secure means of trading internationally. Using these
instruments, the importer only effects payment in exchange for the documents of title for the
goods shipped. If these are found to be unacceptable, payment can be refused, giving the buyer
peace of mind. However, the above is subject to Central Bank rules, therefore please consult with
the bank before considering import collections.
xii. Shipping Guarantee:
In certain situations customers goods may arrive in port before the shipping documents have
been processed through the banking system. In these circumstances, HSBC can issue a shipping
guarantee, allowing the customer to take control of the goods from the shipping company
without the bill of lading. The advantages of using HSBC for this are as follows:
a. Rapid Issuance:
Shipping guarantees are only of value if they are issued immediately. HSBC can issue shipping
guarantees as soon as the application is made, meaning clients can release thier goods from the
carrier immediately.
29

b. Financial Strength:
HSBC issued shipping guarantees are universally accepted by shipping companies. This means
clients can always be assured that they will get The Customers goods on time.
Trade Express:
Trade features as an integral part of the Bangladesh economy and this trend is set to continue.
Competition in trade, however, continues to grow stiffer for the banks local customers (both
domestically and internationally). In order to facilitate their competitiveness, HSBC can provide
their priority customers the ability to handle their transactions more quickly, easily, and
efficiently.
Benefits
With this product The Customer can now execute all The Customers trade transactions faster,
cheaper, and with more accuracy than ever before and most importantly, from the convenience of
The Customers own office.
The benefits delivered by Trade Express are

Real-time intimation of Export Documentary Credit (DC) delivered to The Customers

email account or fax number, along with a copy of the documentary credit enabling faster and
more accurate handling of exports.

Export transaction advices delivered to The Customers desk through email or fax and

import transaction advices through Hexagon.

Online issuance and amendment of Import DCs from The Customers office, reducing

cost and process time for The Customer.

Online access to The Customers Import and Export facility positions.

Real-time correspondence with the bank through Hexagon enabling The Customer to

electronically present The Customers requests and instructions in a secure and fast manner.

Extended counter hours and our commitment to quicker turnaround of transactions.

Document pick up and delivery services.

Minimal documentation / sign up formality

xiv. Electronic DC Advising:

Customer should always insist that their documentary credits are advised through HSBC. With
HSBCs network of 7,000 offices in 81 countries and territories, customers are assured that their
30

DCs will always reach them on time. Electronic Export DC Advising is a new and alternative
way for them to receive a full copy of their Export Documentary Credits (DCs), amendments and
export transaction advices via email. The service brings direct benefits to customers business at
no extra cost. In this increasingly competitive environment, HSBCs Electronic DC advising
services will help by offering:
a. Better Logistics Management
Quicker freight bookings and collation of other necessary documentation required under DC.
b. Enhanced Accuracy in the Preparation of Documents
Clients can 'cut and paste' the relevant text from the copy of the DC emailed to them, to prepare
documents under this DC.
c. Convenience
Clients can easily forward their online copy of the DC to their shipping, insurance and other
trade partners.
d. Reduced Courier Expenses
By signing up for HSBCs DC Safe Custody Service, customers will be able to reduce the
expenses incurred otherwise for collecting the DC from HSBCs counters. The availability of
credit facilities is subject to HSBC's Internal Credit guidelines and approval process.
xv. Treasury Services:
HSBC is the leading market maker globally, quoting competitive prices in all tradable
currencies, and acting as a primary provider of liquidity to the market 24 hours a day.
Its dynamic Corporate and Institutional marketing teams provide up-to-date market intelligence,
advice and timely execution of deals to its customers throughout the trading day, including the
following:
a. Spot Foreign Exchange
A spot contract is a binding obligation to buy or sell a certain amount of foreign currency at the
current market rate, for settlement in two-business days time.
b. Forward Foreign Exchange
A forward exchange contract (or forward contract) is a binding obligation to buy or sell a certain
amount of foreign currency at a pre-agreed rate of exchange, on or before a certain date.
c. Competitive Forex Rates for Remittances, Export and Import
HSBC in Dhaka offers competitive FX rates to our corporate and retail customers.
31

xvi. Weekly Currency Newsletter:

HSBC in Dhaka provides comprehensive commentaries on recent market movements. Which can
help its customers to decide on important Foreign Exchange and Money Market issues.

xvii. Market Outlook from HSBCs Global Desks:

HSBC also offers Market Outlooks and information from our Global Currency Strategists of
leading liquidity centers like London, Hong Kong and USA.

3.5 HSBC General Products at a Glance:

i. Savings Account:
The savings account is a depository account, which is designed for small-scale savers. This is an
interest bearing account. The principal benefit of having an savings account in HSBC is that it
gives a chance to earn interest on daily closing balance irrespective of the number of transactions
and the amount of each transaction.
The other benefits of this account are:

No ledger fee.

Free ATM card.

Free 24-hour phonebanking.

Free personalized chequebook.

Free countrywide access to The Customers account from any branch of ATM.

No restriction number of transactions.

The main features of this account are as follows:

Opening balance Tk. 50,000.

Average balance should be maintained about Tk.50,000.

Interest bearing system is (from 4.75%-6.00%).

Only can be opened by Bangladesh and dual citizens in single or joint names.

Requirements to open savings account:

Documentation required to open the account is one pp-size photograph, filled account opening
form, passport copy, introduction of an existing customer and check/cash of Tk. 50,000.
32

ii.Current Account:
The current account is also a depository account basically designed for various customers. This is
an non-interest bearing account and the features are as following:

Opening balance Tk.50,000.

Average balance should be maintained Tk.50,000

Non-interest bearing.

Opened by only:

Individuals (joint or single)

Proprietorship, partnership & Limited companies.

Liaison offices.

NGOs.

The benefits offered by current account:

No yearly ledger fee.

No restrictions on number of transactions.

Free ATM card and phone banking service.

Requirements to open current account:

The various kinds of documentations are needed for the companies such as memorandum of
association, board resolution etc. The requirements for individual are same as the savings
account.
iii. Short Term Deposit (STD):
The short term deposit accounts are opened mostly by the organizations that are normally
maintain current accounts in the banks. They need to transact bulk amount regularly which is
fulfilled by current account and thats why it is mostly preferred by them. As current accounts do
not provide any interests and the organizations cannot have any savings account, they are
deprived of earning any interest despite having huge amount of money/deposits in their accounts.
So the short-term account enables them to earn an interest on the accounts. These kinds of
accounts share some properties of both current and saving accounts and the holder can withdraw
any amount of money at any time they needed to which is a property of the current account.
Individuals such as, business people maintain this type of accounts.
33

iv. Fixed Deposit:

This account is also known as term deposits. These deposits are made in the bank for a fixed
period of time and the time should be specified in advance. The bank needs not to maintain cash
reserves against these deposits and therefore, it offers interest rates that are higher than the
saving accounts.

v. Residents Foreign Currency Deposit Accounts (RFCD):

Bangladeshi nationals residing abroad can open this account, foreign nationals residing abroad or
in Bangladesh, Foreign firms registered abroad, Bangladeshis working in Multinationals at
Bangladesh and receiving salary in FC, local and joint venture contract firms etc. These accounts
follow various kinds of restrictions for withdrawals and deposits and can be maintained in Pound
Starling (GBP), US Dollar (USD) and Euro (EUR). Balances of this account can easily
transferable abroad without any restriction from Bangladesh Bank and resident of Bangladesh
who are returning from abroad can also open RFCD account within one month of his or her
return. The balance in the account is freely remittable, but no inward remittance is allowed into
this type of account the deposit account is interest bearing with maturities of one, three, six or
twelve months. In this account the personal secured credit get an overdraft facility and personal
secured loan get a loan facility of up to 80% of the value of the foreign currency time deposit.
vi. Non-resident Foreign Currency Accounts:
These are time deposit interest bearing accounts. All non-resident Bangladeshi nationals, persons
having dual citizenship, shipping staff etc can open the account and maintained through GBP,
USD & EUR currencies. These accounts are strictly monitored by the central bank and certain
restrictions exist for these accounts.
vii. Convertible Taka Account:
The convertible accounts are for diplomatic missions, UN organizations, non-profit international
companies, foreign contractors & consultants, expatriate resident employees of UN missions can
open these accounts. This account is maintained in Tk. and also convertible non-interest bearing.
viii. Exporters Retention Quota Accounts:

34

Exporters earn foreign currency but due to some legal restriction that is posed by Bangladesh
Bank , they cannot keep the foreign currency more than $5,000. As the exporters earn huge
amount of foreign exchange and are deprived of the benefits of foreign currency accounts, a
special kind of account is created to benefit them. In this special account they can keep up to 7%
of their total amount of foreign currency exports and earn interests according to dollar interest
rates. Other benefits such as free endorsements, withdrawals that are higher than the maximum
limits, discounted rates for TCs etc. They use those accounts for remittance and other business
purposes.
ix. Other Accounts:
There are other kinds of accounts that created or designed to meet customer demands and
requirement. Such accounts are customized and have some restrictions on these accounts that are
subject to change. There are wide ranges of services offered to the customers who hold these
accounts and they are as below:

Free ATM card, checque book and phone banking services.

Cheques/cash deposits.

Standing instruction ( Sewing Facility)

Quarterly/monthly/statement of account.

Foreign currency endorsement against travel quota and sale of Travelers cheques (Thomas

Cook).

Issue of Solvency/ bank certificate.

Payment orders, demand drafts, Telegraphic transfers.

Inward and outward funds transfer and receiving.

Interest on daily Balance:

HSBCs interest rate structure encourages customers to save. Interest is calculated daily and
credited to any customers account every 6 months.
Free Personalised chequebook:
Customers also receive a free personalised chequebook when they open a savings account with
HSBC.

Minimum Balance:
35

Customers should maintain a balance of BDT50,000 to receive daily interest.

ATM Cards:

Customers ATM Card is simple to use, convenient, versatile and totally reliable. Using ATM
Card customers can:
-Withdraw cash
-Deposit cash
-Transfer funds between The Customers accounts
-Check The Customers account balance
-Order statements / new chequebooks
-Change The Customers PIN number
-View details of The Customers last eight transactions
-Make payments to other HSBC customers

Corporate Employees Privilege Scheme:

The Corporate Employees Privilege Scheme (CEPS) is a unique and exclusive package of
personal banking products and services offered to the employees of selected companies. CEPS
provides employees with easy and quick access to our wide range of personal loan products at
specially discounted rates.CEPS offers preferential terms and pricing on the following products
and services:
Savings Account, Personal Installment Loans, Car Loans, Power Vantage Account, Home Loans

36

PART-4

4.1 Overview of Standard Chartered Bank

The Standard Chartered Bank PLC is an international banking group that is incorporated in the
LJK, with its headquarters in London. The group focuses its activities in Asia, Africa and the
Middle East and its operation is segmented under six regions: LTK & Europe, Middle East and
South Asia (MESA), South East Asia, and the Americas.
Globally, the key resources of SCB include:

A network of over 600 offices in 48 countries

A staff of about 25,000 people managing assets of around 47 billion pounds

Standard Chartered Bank's international businesses in Personal Banking, Corporate Banking

and Standard Chartered Markets are its special strengths

Standard Chartered Bank also maintains correspondent relationship with over 600 banks in

157 countries around the world

The global strategies of Standard Chartered Bank are:

To build and grow strong businesses in East and South East Asia - the Asia Pacific Region

To enhance historical position in the Middle East and South Asia region

To concentrate operations in the OECD in those activities that support Standard Chartered

Bank's remarkable franchise in newly industrialized and emerging markets

4.2 Business Activities of Global Standard Chartered Bank:

Standard Chartered operates in every Asia Pacific market with the exception of North Korea and
some 60 per cent of the Group's profits come from the Asia Pacific region. Hong Kong continues
to be of major importance to the Group and contributes 30 per cent of total profit. With around
80 branches in Hong Kong and strong representation in China, Standard Chartered - a note
37

issuing bank in Hong Kong - is well placed to continue playing an important part in Greater
China's development. A resident Group Executive Director manages the Groups business there.

Consumer Banking - which has some 5 million customers - has grown significantly in

recent years and contributes about 50 per cent of total profits. Major initiatives support the rapid
development of the credit card business in the exciting markets of India, Indonesia and Taiwan.
There are seventy-six branches and finance centers under this division in about ten countries with
a workforce of 1615 employees.

Personal Banking - There are 410 offices/ branches with a workforce of 12,000

employees working under this division in 28 countries. Some of the services provided by this
division are various kinds of insurance and loans, various types of accounts, travelers' cheques,
card money, etc

Corporate and Institutional Bank - its principal strengths are in supporting regional

and international cross-border trade and investments. Products and services are focused primarily
on these areas, notably trade banking, cash management and custody. Institutional Banking
manages the Group's relationships with banks, investment companies and other financial
institutions. It aims to be the 'banker's bank' operating in customers' time zones and providing
network linkage between international markets. This business has continued to expand rapidly in
Asia, the Middle East and Africa and, increasingly in Latin America. It was strengthened in
March 1999 by the acquisition of the trade finance operation of UBS.

Treasury operations are a particular Group strength with a network of over 20 dealing

rooms worldwide, offering customers a 24-hour service. The bank is particularly well known for
its expertise in exotic currencies and has reinforced its position as a leader in many Asian and
African markets.

Global Custodial Service - There are 17 offices under this division and about 900 staff

members in this division, operates in fourteen countries and is headquartered in Singapore.

Standard Chartered Equitor fulfils Standard Chartered Bank's strategic commitment to providing
custody and clearing services in greater Asia. Standard Chartered Bank has one Asia's leading
custodians for over 40 years. Equitor's main focus is on the following:
o

Commitment to quality

Dedication to customer needs

38

Sustained investment in people and systems

International Trade Management - This division is operational throughout the group

and Standard Chartered Bank's core strength is trade finance and services. With an experience of
over 150 years, Standard Chartered Bank has developed knowledge of trade finance, which is
world class. Principle services to importers are Import Letters of Credit; import Bills for
Collection and Back-to-Back Letters of Credit facilities. Principle services to exporters include
Export Letters of Credit, Direct Export Bills for Collection, Bulk Letter of Credit Collection,
Bonds and Guarantees.

Global Cash Management - This division is operational in all branches where the Group

has a Corporate Banking and Institutional Banking division. There are 100 employees working
in this division. Standard Chartered Bank recognizes the importance of Cash Management to
Corporate and Financial Institutional customers, and offers a comprehensive range of services
and liquidity management. Services by this division are provided worldwide with stress on Asian
delivery.

Global Institutional Banking - Through Standard Chartered Banks network of more

than 600 offices in over 40 countries, it is very well positioned to provide a wide range of
services to institutional clients: commercial, merchant and central banks; brokers and dealers;
insurance companies; funds and fund managers, and others. Offices in emerging markets of Asia,
sub-Saharan Africa, the Middle East, and Latin America are complemented by branches in the
developed countries such as USA, UK and Japan and the banks membership of the clearing
systems in those countries. The institutional banking group has network of offices in 25 countries
throughout Asia, North America, Europe, Africa and the Middle East. It provides Relationship
managers who are close to their customers and speak the local language. This wide network of
Institutional Banking facilitates transactions, introductions, problem solving and renders advice
and guidance on local trading conditions.

Global Electronic Banking - Electronic Banking provides various types of support

through a wide range of operating systems, sweeping transaction accessories with the provision
of reporting features or other special functions. There are 10 offices and 50 employees under this
division, which operates in 26 countries.

4.3 Standard Chartered Bank In Bangladesh

39

The Chartered Bank started operating in Bangladesh in 1948, opening a branch in Chittagong.
The branch was opened mainly to facilitate the post-war reestablishment and expansion of South
and Southeast Asia. The Chartered Bank opened another branch in Dhaka in 1966, where it is
still headquartered. After the merger of the Chartered Bank with the Standard Bank in 1969, the
Standard Chartered Bank took up a program of expansion. It increasingly invested in people;
technology and premises as its business grew in relation to the country's economy. In 1993, there
was an organizational re-structuring, which led to a substantial expansion of the Bank's business.
Today the bank has in total four branches in Dhaka apart from the Chittagong branch, including
an offshore branch at the Savar Export Processing Zone. Bangladesh is under the Middle East
and South Asia (MESA) region, with the controlling office in Dubai.

Its correspondent

relationship with Sonali Bank, the largest bank in Bangladesh, gives its customers access to all
major centers in the country.

Standard Chartered Bank's worldwide network facilitates

convenient connections with foreign trade and remittance business. Standard Chartered Bank's
branch banking license in Bangladesh allows it to offer a full range of banking services.
Since the organizational restructuring in 1993, the amount of deposits and loans in 1997 has
increased by more than five times. There is an overall increasing trend of Standard Chartered
Bank's market share in terms of deposits and advances. In 1995, the market share in terms of
advances was 200/o, which peaked to 290/o in 1996 and fell by 3% in 1997. In the case of
deposits, the market share of Standard Chartered Bank increase 16% in 1995 to 18% in 1996,
and increased by another 2% in1997.
In terms of profit before taxes, there is a rise from eight million BDT in 1990 to its highest
amount of 750 million BDT in 1998. The largest increase of 438% took place in 1991. Although
the growth rate began to decline gradually from 1993 (from a 170% to 5% in 1998) the overall
increase reflects a substantial positive trend. Standard Chartered Bank's growth in terms of profit
and market share depicts an overall positive trend. This acquisition has made Standard
Chartered/Standard Chartered Grindlays bank the largest foreign bank in this country with ANZ
Grindlays Banks vast experience on Bangladeshi economy.

40

The Organization Structure:

The Standard Chartered Bank in Bangladesh has its headquarters and three branches in Dhaka
and one branch in Chittagong, while they are going to open one in Sylhet very soon. While the
full range of services is available at the headquarters, other branches offer specific services
appropriate for the location. At the headquarters, the bank mainly consists of two divisions:

Business

Support

The business division has the following departments:

Corporate Banking Group (CBG)

Treasury (TSY)

Institutional Banking Group (IBG)

Consumer Banking (CB)

Custodial Services (CUS)

Standard Chartered Bank is primarily corporate driven. More than the corporate banking

generates 40% of its revenue group while Treasury contributes more than 20% to the overall
revenue. The rest is generated from Personal Banking, Custodial services and Institutional
Banking.

Corporate Banking Group:

Standard Chartered Bank offers its local customers a wide variety of financial services. All the
accounts of corporate clients, which mainly comprise the top local and multinational companies
operating in Bangladesh, are assigned a Relationship manager who maintains regular and close
contact to cater to their needs. The objective of this department is to maintain a thorough
knowledge of the client's business and to develop positive relationships with them. This is
maintained through interactions to offer timely advice in an increasingly competitive business
environment. The expertise of the Institutional Banking and Treasury groups is also available
whenever required. The unique Offshore Banking Unit (OBU) in Savar a full range of facilities
to overseas investors. The Corporate Banking Group in Bangladesh has displayed a spirit of
community involvement by working with NGOs to underwrite soft loans. Standard Chartered
Bank offers its corporate customers:
41

The wide variety of lending needs are catered to with skilled and responsive attention

Project finance and investment consultancy

Syndicated loans

Bonds and Guarantees

Local and International Treasury products

The trade finance of Standard Chartered Bank takes care of the commercial activity related
issues, particularly those related to import and export finance services. Some of the services are:

Trade finance facilities including counseling, confirming export L/Cs and issuing of import

L/Cs, backed by its international branch and correspondent loan network

Bond and Guarantees

Project finance opportunities for import substitution and export oriented project

Treasury

The foreign exchange and money market operation of the Standard Chartered Bank in the world
is extensive. Exotic currencies happen to be one of its specials areas of strength. A 24 hourservice is provided to customers in Bangladesh through the Bank's network of dealing centers
placed in the principal of the world. The Bank's treasury specializes in offering solutions to
those who wish to manage interest rate and currency exposures that result from trade, investment
and financing activities of other dynamic economies of the region. Treasury operations are
developed in line with changing market conditions to provide the best services to its customers.
According to BAFEDA (Bangladesh Exchange Dealers Association), Standard Chartered Bank
presently controls 42% of the local foreign exchange market's traded volume.

Institutional Banking Group:

The IBG of Standard Chartered Bank offers a wide variety of products and services to the banks
and financial institutions. It has global links with leading banking institutions and agency
arrangements through its network of offices in 40 countries. The Bank offers a full range of
clearing, payment collection and import-export handling services. The bank offers foreign
missions, voluntary organizations, consultants, airlines, shipping lines, and their personnel the
following financial services:

42

Current accounts in both Taka and other major foreign currencies

Convertible Taka accounts (these funds are freely convertible to major international

currencies)

Local and foreign currency remittances etc.

Consumer Banking:

Superior retail banking services comprising a wide range of deposit and loan products are offered
by the Standard Chartered Bank to its individual customers. The Consumer Banking division
constantly faces challenges and meets them by developing new products and services to fulfill
the specific requirements of local TU Bank offers a 24-hour service in Bangladesh through its
Moneylink ATM network and Phone-link Phone Banking services.

Custodial Services: The Equitor:

Headquartered in Singapore, Standard Chartered Equitor fulfils the group's strategic intent to the
provision of custodial service in Asia.

Equitor's customers are primarily foreign global

custodians and broker/dealers requiring cross border information as well as sub-custodian

services. Standard Chartered Bank, Bangladesh is responsible for the planning in Bangladesh,
but the overall management of the custody business is based on Equitor's international business
strategy.

Operations:

Operations is the part of the support division which helps to run the businesses of the bank in a
smooth and controlled manner. Since it helps mainly in processing the works of the business
units, any mistakes made can be easily detected and on time. Following are the main functions
of the operations department:
Central operations deals with the closing and opening of accounts and other payment and
account related processing of the Personal Banking division
Treasury operations help to deal with the processing works of the treasury division.
Loan Administration Unit (LAU) deals with the processing of the Corporate Banking
division.
Operations also have a department that deals with internal projects that arises from the need
to deal with certain problems or to make certain changes. Following are some examples of
43

projects being dealt with presently:

Finance, Administration and Risk Management

The support department performs the following activities:

Administration, audit and back office operation

Taking care of taxation and financial control of the Bank

Keeping track of overall credit operation.

Credit:

The credit department approves the loans of Corporate Banking division. The approval is mainly
based on the risk analysis of the corporate clients done by the Corporate Banking division.

Product and Services of Standard Chartered Bank:

Standard Chartered Bank has highly qualified professional staff members who have the
capability to manage and meet all the requirements of the bank. Every account is assigned to an
Account Manager who personally takes care of it and is available for discussion and inquiries,
whether one writes, telephones or calls. The services of the Bank are personalized and backed
by advanced computerization.
The following paragraphs illustrate the essential products and services of the Bank:

The Corporate Banking Group

i. Cash management:
Standard Chartered is highly recognized as a leading cash management supplier across the
emerging markets. Our Cash Management Services cover local and cross border payments,
collections, information management, account services and liquidity management for both
corporate and institutional customers.
Features:

Manage the availability of clients funds efficiently

Monitor and control the movement of funds

Settle payments to clients suppliers in a timely and cost-effective manner.

44

Capture every investment opportunity to increase The Customers income

ii. Trade finance:

Standard Chartered possesses 140 years of experience in Trade Finance. The bank has presence
in over 40 countries, in addition to our extensive network of overseas banking partners and
correspondents. The bank obtained ISO9002 accreditation for its quality service. Dedicated trade
and payment systems are in place to make sure that The Customers every transaction, even
across different currencies, will be professionally executed.
iii. Structured finance:
Standard Chartered provides Commodity, Structured Trade and Export Finance global group
("Structured Finance") service. Many financial institutions have been retreating from these
markets. Standard Chartered stands out as the only bank which is committed to financing
Commodity and Export Credit Agency supported trade flows while being focussed entirely on
emerging markets oriented business. More and more clients are taking advantage of Standard
Chartered's unique combination of Structured Finance expertise and presence on the ground in
Asia, India, Middle East, Africa and Latin America through its network of branches.
As a result, Standard Chartered has gained a reputation as a market leader in Structured Finance.
It fields 70 professionals globally operating out of New York, London, Zurich, Singapore, Tokyo,
South Korea, Hong Kong and Singapore. This team results from significant acquisitions of
Structured Finance businesses from UBS and CIBC over the last 2 years which is further
testimony to Standard Chartereds commitment to this core business.
Features:

Access to long established expertise in Commodity Finance and willingness to accept the

credit risks associated with approved counterparties.

Access to structuring skills for emerging markets medium term financing and to country limit

availability for many countries in Asia, India, Middle East, Africa and Latin America.

Presence on the ground in many emerging markets which facilitates transactions through

local knowledge and the provision of local commercial banking infrastructure.

Track record and capability for global arranging, underwriting and syndication in the whole
45

area of Structured Finance.

iv. Custody and clearing services:
Standard Chartered Custody and Clearing Services' combination of local market expertise, with
the security offered by being an integral part of one of the world's leading international banks has
garnered an impressive client base which includes leading North American, European and Asian
institutions. Standard Chartered keeps its custody and clearing clients regularly informed of
developments relating to securities market infrastructure and custody in Asia through a market
information website. Market information includes daily newsflashes on news affecting the
workings of Asia's stock markets, insight papers highlighting major stock market infrastructure
issues, and up-to-date securities market reports providing a complete overview for foreign
investment institutions of the securities markets in Asia
v. Electronic banking:
Standard Chartered offers the client a comprehensive range of Cash Management services.
Whether it is a financial institution, a multi-national corporation or a domestic company,
Electronic Banking application has the capability to support full range of Cash Management
reporting and transaction initiation needs. It provides the secure, reliable and effective link
between the client and clients accounts anywhere across the Standard Chartered network.
vi. Lending:
Two types of lending facility is provided to client at present:

Loan Structure and Syndication: this facility helps borrowers to meet substantial financing

needs by enabling them to reach the banks most interested in lending to their particular industry,
geographic location and structure through syndicated debt offerings.

Working Capital/Term Loan. To help the client meet their financial obligations and operate

effectively, the bank offers assistance in the form of working capital loans, overdrafts, term loans
(including real estate loans and other secured debt), backstops and revolvers.

Treasury:

According to the latest 'Activities of Bank and Financial Institutions' published by the Banking
Division of the Ministry of Finance of Bangladesh, Treasury Bangladesh is, in terms of foreign

46

exchange transactions, first amongst the multinational banks and 4th amongst all the banks in
Bangladesh.
The department offers the following Client Solutions and Risk Management services:

Hedging solutions against adverse market movements

Advice on efficient hedging policy

Access to onshore markets through our global network

Offshore banking unit: a unique system in the local market

Structured products to match customers' needs

The Treasury division of the Standard Chartered Bank has a centralized dealing room in Dhaka
and consists of the following two areas:
i. Foreign Exchange
The Reuters monitors placed in the Treasury Division give continuous updates on exchange rate
movements as well as ready access to market information. Experienced dealers provide advisory
services from 8:00 am to late evening 6 days a week (except Saturday) on hedging techniques
and risk management so that the customers can obtain better value for their foreign exchange
transactions. The Foreign Exchange service includes:
a. Ready Contracts-. Foreign exchange contracts for the same day value, next day value or spot
transactions
b. Forward Contracts: Foreign exchange contracts to hedge exchange risks.
c. Cross Currency Contracts: The customers can trade a wide range of currencies.
d. Information analysis: The Treasury division publishes daily and weekly currency
newsletters, which provide analyses of currency trends and related issues.

Seminars and

workshops are conducted for customers from time to time on foreign exchange related topics.
Customers can also have access to the bank's information database round the clock through
Phone banking.
ii. Money Markets and Investment
Standard Chartered Bank's Treasury division is the local market leader in debt instruments
including both short and long-term fund mismatches through the money market and takes front

47

line position in inter-bank and market developments. The money market is managed through
tools like inter-bank call money rate, government T-bills of various maturities and inter-bank
SWAPS. In future, new instruments like repo and reverse repo will be introduced which will add
to the depth of the money market.
Equipments like telephone, voice recorder, money 2000, telex, sealing system, time keeper,
swipe doors, computers, fax internet are used to ease and fasten operations of the dealers to
conduct deals.

Institutional Banking Group (IBG):

It assists the local banks by taking care of their cross-border business through the worldwide
Standard Chartered Bank network. Following are the variety of financial products offered by
this department:
i. Vostro Accounts
IBG, Bangladesh maintains Vostro Accounts of banking and financial institutions worldwide.
Customers maintaining such accounts can remit funds throughout the country through the
Standard Chartered Bank branch network as well as through - Chartered Bank's local
correspondent relationships.
ii. Nostro Accounts
In order to increase and promote the correspondent banking business worldwide, I]BG aWs
Nostro accounts to Bangladeshi banks and financial institutions in almost all es spanning the
Standard Chartered Bank global network. Group branches and sidies provide full clearing and
payment services in the UK, USA, Hong Kong, Malaysia, Singapore and many African
countries. Worldwide payments services are facilitated by a network of branches supported by
electronic cash management (available in select locations), fund transfer system and membership
of SWIFT.
iii. Handling of Trade Finance Business
IBG offers the full range of services available under Trade Finance to its customers. The
Standard Chartered Bank network in China, the Far East, the Middle East, the Indian sub-

48

continent, Africa, UK and USA makes SCB the natural choice of correspondents for advising,
confirming, and negotiating their letters of credit in these territories.

PART-5

5. Literature Review
5.1 e-banking
For this booklet, e-banking is defined as the automated delivery of new and traditional banking
products and services directly to customers through electronic, interactive communication
channels. E-banking includes the systems that enable financial institution customers, individuals
or businesses, to access accounts, transact business, or obtain information on financial products
and services through a public or private network, including the Internet. Customers access ebanking services using an intelligent electronic device, such as a personal computer (PC),
personal digital assistant (PDA), automated teller machine (ATM), kiosk, or Touch Tone
telephone. While the risks and controls are similar for the various e-banking access channels, this
booklet focuses specifically on Internet-based services due to the Internets widely accessible
public network. Accordingly, this booklet begins with a discussion of the two primary types of
Internet websites: informational and transactional.

Informational websites
Informational websites provide customers access to general information about the financial
institution and its products or services. Risk issues examiners should consider when reviewing
informational websites include:

Potential liability and consumer violations for inaccurate or incomplete information about
products, services, and pricing presented on the website;

49

Potential access to confidential financial institution or customer information if the

website is not properly isolated from the financial institutions internal network;

Potential liability for spreading viruses and other malicious code to computers
communicating with the institutions website; and

Negative public perception if the institutions on-line services are disrupted or if its
website is defaced or otherwise presents inappropriate or offensive material

Transactional websites
Transactional websites provide customers with the ability to conduct transactions through the
financial institutions website by initiating banking transactions or buying products and services.
Banking transactions can range from something as basic as a retail account balance inquiry to a
large business-to-business funds transfer. E-banking services, like those delivered through other
delivery channels, are typically classified based on the type of customer they support. The
following table lists some of the common retail and wholesale e-banking services offered by
financial institutions.
Common E-Banking Services

Retail Services

Wholesale Services

Account management

Account management

Bill payment and

presentment
New account opening

Cash management
Small business loan applications,

Consumer wire transfers approvals, or advances

Investment/Brokerage
services
Loan application and
approval
Account aggregation

Commercial wire transfers

Business-to-business payments
Employee benefits/pension
administration

50

Since transactional websites typically enable the electronic exchange of confidential customer
information and the transfer of funds, services provided through these websites expose a
financial institution to higher risk than basic informational websites. Wholesale e-banking
systems typically expose financial institutions to the highest risk per transaction, since
commercial transactions usually involve larger dollar amounts. In addition to the risk issues
associated with informational websites, examiners reviewing transactional e-banking services
should consider the following issues:

Security controls for safeguarding customer information

Authentication processes necessary to initially verify the identity of new customers and
authenticate existing customers who access e-banking services;

Liability for unauthorized transactions

Possible violations of laws or regulations pertaining to consumer privacy, anti-money

laundering, anti-terrorism, or the content, timing, or delivery of required consumer
disclosures; and

Negative public perception, customer dissatisfaction, and potential liability resulting from
failure to process third-party payments as directed or within specified time frames, lack
of availability of on-line services, or unauthorized access to confidential customer
information during transmission or storage.

5.2 e-banking components

E-banking systems can vary significantly in their configuration depending on a number of
factors. Financial institutions should choose their e-banking system configuration, including
outsourcing relationships, based on four factors:

Strategic objectives for e-banking;

Scope, scale, and complexity of equipment, systems, and activities;

Technology expertise; and

Security and internal control requirements.

Financial institutions may choose to support their e-banking services internally. Alternatively,
financial institutions can outsource any aspect of their e-banking systems to third parties. The
51

following entities could provide or host (i.e., allow applications to reside on their servers) ebanking-related services for financial institutions:

Another financial institution,

Internet service provider,

Internet banking software vendor or processor,

Core banking vendor or processor,

Managed security service provider,

Bill payment provider,

Credit bureau, and

Credit scoring company.

E-banking systems rely on a number of common components or processes. The following list
includes many of the potential components and processes seen in a typical institution:

Website design and hosting,

Firewall configuration and management,

Intrusion detection system or IDS (network and host-based),

Network administration,

Security management,

Internet banking server,

E-commerce applications (e.g., bill payment, lending, brokerage),

Internal network servers,

Core processing system,

Programming support, and

Automated decision support systems.

These components work together to deliver e-banking services. Each component represents a
control point to consider.
Through a combination of internal and outsourced solutions, management has many alternatives
when determining the overall system configuration for the various components of an e-banking
52

system. However, for the sake of simplicity, this booklet presents only two basic variations. First,
one or more technology service providers can host the e-banking application and numerous
network components as illustrated in the following diagram. In this configuration, the
institutions service provider hosts the institutions website, Internet banking server, firewall, and
intrusion detection system. While the institution does not have to manage the daily
administration of these component systems, its management and board remain responsible for
the content, performance, and security of the e-banking system.
Second, the institution can host all or a large portion of its e-banking systems internally. A typical
configuration for in-house hosted, e-banking services is illustrated below. In this case, a provider
is not between the Internet access and the financial institutions core processing system. Thus,
the institution has day-to-day responsibility for system administration.

5.3 e-banking support services

In addition to traditional banking products and services, financial institutions can provide a
variety of services that have been designed or adapted to support e-commerce. Management
should understand these services and the risks they pose to the institution. This section discusses
some of the most common support services: weblinking, account aggregation, electronic
authentication, website hosting, payments for e-commerce, and wireless banking activities.
Weblinking
A large number of financial institutions maintain sites on the World Wide Web. Some websites
are strictly informational, while others also offer customers the ability to perform financial
transactions, such as paying bills or transferring funds between accounts.
Virtually every website contains weblinks. A weblink is a word, phrase, or image on a
webpage that contains coding that will transport the viewer to a different part of the website or a
completely different website by just clicking the mouse. While weblinks are a convenient and
accepted tool in website design, their use can present certain risks. Generally, the primary risk
posed by weblinking is that viewers can become confused about whose website they are viewing
and who is responsible for the information, products, and services available through that website.
There are a variety of risk management techniques institutions should consider using to mitigate
these risks. These risk management techniques are for those institutions that develop and
53

maintain their own websites, as well as institutions that use third-party service providers for this
function. The agencies have issued guidance on weblinking that provides details on risks and risk
management techniques financial institutions should consider.

Account aggregation
Account aggregation is a service that gathers information from many websites, presents that
information to the customer in a consolidated format, and, in some cases, may allow the
customer to initiate activity on the aggregated accounts. The information gathered or aggregated
can range from publicly available information to personal account information (e.g., credit card,
brokerage, and banking data). Aggregation services can improve customer convenience by
avoiding multiple log-ins and providing access to tools that help customers analyze and manage
their various account portfolios. Some aggregators use the customer-provided user IDs and
passwords to sign in as the customer. Once the customers account is accessed, the aggregator
copies the personal account information from the website for representation on the aggregators
site (i.e., screen scraping). Other aggregators use direct data-feed arrangements with website
operators or other firms to obtain the customers information. Generally, direct data feeds are
thought to provide greater legal protection to the aggregator than does screen scraping.
Financial institutions are involved in account aggregation both as aggregators and as aggregation
targets. Risk management issues examiners should consider when reviewing aggregation services
include:

Protection of customer passwords and user IDs both those used to access the
institutions aggregation services and those the aggregator uses to retrieve customer
information from aggregated third parties to assure the confidentiality of customer
information and to prevent unauthorized activity,

Disclosure of potential customer liability if customers share their authentication

information (i.e., IDs and passwords) with third parties, and

Assurance of the accuracy and completeness of information retrieved from the

aggregated parties sites, including required disclosures

Electronic authentication
Verifying the identities of customers and authorizing e-banking activities are integral parts of e54

banking financial services. Since traditional paper-based and in-person identity authentication
methods reduce the speed and efficiency of electronic transactions, financial institutions have
adopted alternative authentication methods, including:

Passwords and personal identification numbers (PINs),

Digital certificates using a public key infrastructure (PKI),

Microchip-based devices such as smart cards or other types of tokens,

Database comparisons (e.g., fraud-screening applications), and

Biometric identifiers.

The authentication methods listed above vary in the level of security and reliability they provide
and in the cost and complexity of their underlying infrastructures. As such, the choice of which
technique(s) to use should be commensurate with the risks in the products and services for which
they control access. Additional information on customer authentication techniques can be found
in this booklet under the heading Authenticating E-Banking Customers.
The Electronic Signatures in Global and National Commerce (E-Sign) Act establishes some
uniform federal rules concerning the legal status of electronic signatures and records in
commercial and consumer transactions so as to provide more legal certainty and promote the
growth of electronic commerce. The development of secure digital signatures continues to evolve
with some financial institutions either acting as the certification authority for digital signatures or
providing repository services for digital certificates.

5.4 Website hosting

Some financial institutions host websites for both themselves as well as for other businesses.
Financial institutions that host a business customers website usually store, or arrange for the
storage of, the electronic files that make up the website. These files are stored on one or more
servers that may be located on the hosting financial institutions premises. Website hosting
services require strong skills in networking, security, and programming. The technology and
software change rapidly. Institutions developing websites should monitor the need to adopt new

55

interoperability standards and protocols such as Extensible Mark-Up Language (XML) to

facilitate data exchange among the diverse population of Internet users.
Risk issues examiners should consider when reviewing website hosting services include damage
to reputation, loss of customers, or potential liability resulting from:

Downtime (i.e., times when website is not available) or inability to meet service levels
specified in the contract,

Inaccurate website content (e.g., products, pricing) resulting from actions of the
institutions staff or unauthorized changes by third parties (e.g., hackers),

Unauthorized disclosure of confidential information stemming from security breaches,

and

Damage to computer systems of website visitors due to malicious code (e.g., virus, worm,
active content) spread through institution-hosted sites.

5.5 Payments for e-commerce

Many businesses accept various forms of electronic payments for their products and services.
Financial institutions play an important role in electronic payment systems by creating and
distributing a variety of electronic payment instruments, accepting a similar variety of
instruments, processing those payments, and participating in clearing and settlement systems.
However, increasingly, financial institutions are competing with third parties to provide support
services for e-commerce payment systems. Among the electronic payments mechanisms that
financial institutions provide for e-commerce are automated clearing house (ACH) debits and
credits through the Internet, electronic bill payment and presentment, electronic checks, e-mail
money, and electronic credit card payments. Additional information on payments systems can be
found in other sections of the IT Handbook.
Most financial institutions permit intrabank transfers between a customers accounts as part of
their basic transactional e-banking services. However, third-party transfers with their
heightened risk for fraud often require additional security safeguards in the form of additional
authentication and payment confirmation.

5.6 Bill Payment and Presentment

56

Bill payment services permit customers to electronically instruct their financial institution to
transfer funds to a businesss account at some future specified date. Customers can make
payments on a one-time or recurring basis, with fees typically assessed as a per item or
monthly charge. In response to the customers electronic payment instructions, the financial
institution (or its bill payment provider) generates an electronic transaction usually an
automated clearinghouse (ACH) credit or mails a paper check to the business on the customers
behalf. To allow for the possibility of a paper-based transfer, financial institutions typically
advise customers to make payments effective 37 days before the bills due date.
Internet-based cash management is the commercial version of retail bill payment. Business
customers use the system to initiate third-party payments or to transfer money between company
accounts. Cash management services also include minimum balance maintenance, recurring
transfers between accounts and on-line account reconciliation. Businesses typically require
stronger controls, including the ability to administer security and transaction controls among
several users within the business.
This booklet discusses the front-end controls related to the initiation, storage, and transmission of
bill payment transactions prior to their entry into the industrys retail payment systems (e.g.,
ACH, check processing, etc.). The IT Handbooks Retail Payments Systems Booklet provides
additional information regarding the various electronic transactions that comprise the back end
for bill payment processing. The extent of front-end operating controls directly under the
financial institutions control varies with the system configuration. Some examples of typical
configurations are listed below in order of increasing complexity, along with potential control
considerations.

Financial institutions that do not provide bill payment services, but may direct customers
to select from several unaffiliated bill payment providers.

Caution customers regarding security and privacy issues through the use of on-line
disclosures or, more conservatively, e-banking agreements.

Financial institutions that rely on a third-party bill payment provider including Internet
banking providers that subcontract to third parties.

Set dollar and volume thresholds and review bill payment transactions for suspicious
activity.

Gain independent audit assurance over the bill payment providers processing controls.
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Restrict employees administrative access to ensure that the internal controls limiting
their capabilities to originate, modify, or delete bill payment transactions are at least as
strong as those applicable to the underlying retail payment system ultimately transmitting
the transaction.

Restrict by vendor contract and identify the use of any subcontractors associated with the
bill payment application to ensure adequate oversight of underlying bill payment system
performance and availability.

Evaluate the adequacy of authentication methods given the higher risk associated with
funds transfer capabilities rather than with basic account access.

Consider the additional guidance contained in the IT Handbooks Information Security,

Retail Payment Systems, and Outsourcing Technology Services booklets.

Financial institutions that use third-party software to host a bill payment application
internally.

Determine the extent of any independent assessments or certification of the security of

application source code.

Ensure software is adequately tested prior to installation on the live system.

Ensure vendor access for software maintenance is controlled and monitored.

Financial institutions that develop, maintain, and host their own bill payment system.

Consider additional guidance in the IT Handbooks Development and Acquisition

Booklet.

Financial institutions can offer bill payment as a stand-alone service or in combination with bill
presentment. Bill presentment arrangements permit a business to submit a customers bill in
electronic form to the customers financial institution. Customers can view their bills by clicking
on links on their accounts e-banking screen or menu. After viewing a bill, the customer can
initiate bill payment instructions or elect to pay the bill through a different payment channel.
In addition, some businesses have begun offering electronic bill presentment directly from their
own websites rather than through links on the e-banking screens of a financial institution. Under
such arrangements, customers can log on to the businesss website to view their periodic bills.
Then, if so desired, they can electronically authorize the business to take the payment from
their account. The payment then occurs as an ACH debit originated by the businesss financial
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institution as compared to the ACH credit originated by the customers financial institution in the
bill payment scenario described above. Institutions should ensure proper approval of businesses
allowed to use ACH payment technology to initiate payments from customer accounts.
Cash management applications would include the same control considerations described above,
but the institution should consider additional controls because of the higher risk associated with
commercial transactions. The adequacy of authentication methods becomes a higher priority and
requires greater assurance due to the larger average dollar size of transactions. Institutions should
also establish additional controls to ensure binding agreements consistent with any existing
ACH or wire transfer agreements exist with commercial customers. Additionally, cash
management systems should provide adequate security administration capabilities to enable the
business owners to restrict access rights and dollar limits associated with multiple-user access to
their accounts.

5.7 Person-to-Person Payments

Electronic person-to-person payments, also known as e-mail money, permit consumers to send
money to any person or business with an e-mail address. Under this scenario, a consumer
electronically instructs the person-to-person payment service to transfer funds to another
individual. The payment service then sends an e-mail notifying the individual that the funds are
available and informs him or her of the methods available to access the funds including
requesting a check, transferring the funds to an account at an insured financial institution, or
retransmitting the funds to someone else. Person-to-person payments are typically funded by
credit card charges or by an ACH transfer from the consumers account at a financial institution.
Since neither the payee nor the payer in the transaction has to have an account with the payment
service, such services may be offered by an insured financial institution, but are frequently
offered by other businesses as well.
Some of the risk issues examiners should consider when reviewing bill payment, presentment,
and e-mail money services include:

Potential liability for late payments due to service disruptions,

Liability for bill payment instructions originating from someone other than the deposit
account holder,

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Losses from person-to-person payments funded by transfers from credit cards or deposit
accounts over which the payee does not have signature authority,

Losses from employee misappropriation of funds held pending access instructions from
the payer, and

Potential liability directing payment availability information to the wrong e-mail or for
releasing funds in response to e-mail from someone other than the intended payee.

5.8 Wireless e-banking

Wireless banking is a delivery channel that can extend the reach and enhance the convenience of
Internet banking products and services. Wireless banking occurs when customers access a
financial institution's network(s) using cellular phones, pagers, and personal digital assistants (or
similar devices) through telecommunication companies wireless networks. Wireless banking
services in the United States typically supplement a financial institution's e-banking products and
services.
Wireless devices have limitations that increase the security risks of wireless-based transactions
and that may adversely affect customer acceptance rates. Device limitations include reduced
processing speeds, limited battery life, smaller screen sizes, different data entry formats, and
limited capabilities to transfer stored records. These limitations combine to make the most
recognized Internet language, Hypertext Markup Language (HTML), ineffective for delivering
content to wireless devices. Wireless Markup Language (WML) has emerged as one of a few
common language standards for developing wireless device content. Wireless Application
Protocol (WAP) has emerged as a data transmission standard to deliver WML content.
Manufacturers of wireless devices are working to improve device usability and to take advantage
of enhanced third-generation (3G) services. Device improvements are anticipated to include
bigger screens, color displays, voice recognition applications, location identification technology
(e.g., Federal Communications Commission (FCC) Enhanced 911), and increased battery
capacity. These improvements are geared towards increasing customer acceptance and usage.
Increased communication speeds and improvements in devices during the next few years should
lead to continued increases in wireless subscriptions.

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As institutions begin to offer wireless banking services to customers, they should consider the
risks and necessary risk management controls to address security, authentication, and compliance
issues.

PART-6

We have selected Hexagon & HSBCnet of HSBC and Web Bank of Standard chartered in the
report as these are considered to be the prime electronic banking product in the market.

6. Electronic banking of HSBC:

HSBC has been a pioneer in Electronic banking in Bangladesh. At HSBC electronic banking
comes in two modes Hexagon and HSBCnet. Both of them are developed by HSBC. Hexagon is
access through a dial-up mode by the customers. HSBCnet on the other hand is internet based. At
the moment HSBC has more than hundred corporate customers using the electronic banking
facility.
Following are the detail feature and benefits of the E- banking:

6.1 Hexagon HSBCs Electronic Banking Solution

6.1.1 Introduction
The HSBC Group handles over 200 transactions every second, 24 hours a day, 365 days a year.
In 1999/00, we spent more than USD2.2 billion on developing and running computer systems
and a further USD400 million on hardware and software purchases. Globally, the HSBC Group
employs over 6,000 I.T. professionals and is one of the largest originators of SWIFT traffic in the

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world. Technology is vital to our future success and our overriding aim is to deliver faster, userfriendlier and more attractive services with enhanced functionality.
HSBC maintains one of the worlds largest private data communications networks and one of our
most successful customer service driven technological innovations is Hexagon. Hexagon
provides corporate and institutional customers with PC access to cash management services,
trade services, securities services and other information through a single-platform using a fully
integrated proprietary system. There are about 60,000 Hexagon users worldwide, with more than
130 corporate users in Bangladesh.
The systems principal features are discussed in the following paragraphs.

6.1.2 Operating Environment and Hardware Specification

Hexagon operates under Microsoft Windows 3.1, Windows 3.11 for Workgroup,
Windows 95, Windows 98, windows 2000 or Microsoft Windows NT Workstation
4.0 and Windows NT Server 4.0.

Multi-site access is possible, for stand-alone, WAN or LAN access by all entities.

It requires an IBM-compatible 486DX66 PC and operates on all standard modem

baud rates (Hayes compatible).

The Hexagon system is continually undergoing enhancements to keep pace with

advances in technology and to meet our customers ongoing requirements. As and
when these enhancements are made and packaged, free upgrades are provided to
all users.

30 megabytes of free drive space.

Hayes-compatible modem baud rate 4800/9600/14400/28800/33600/56000.

6.1.3 Data Security Features

Customers finanacial information is kept completely confidential with the advanced security
features of Hexagon.
Data Encryption
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All data traveling between The Customers personal computer and the HSBC Group computer is
srambled using the latest encryption technology.
Online audit trail
A number of level of security safe guard all the information transmitted over our private data
network. An online audit trail can also be activated to track all activities performed on the system
over the preceding 30 days.
Customized delegation control
The system supervisor can customize the manner in which each member of staff can use the
system. The management control function allows senior executives to delegate routine activities
while retaining control over the authorization process:

The system automatically controls what activities each manager of The Customers staff
can perform through Hexagon.

Control can be exercised at individual staff levels, by service, account or signing

authority.

All user must identify themselves to the system by inputting two passwords before
access is allowed.

Authorization
The system can hold transaction in the queue to await appropriate authorizations once the staffs
have entered them. Manager then can call back these transaction for authorization at their own
convenience, and from anywhere in the world where they have access to and a telephone line.

6.1.4 Information Services

Information is essential if The Customer want to remain competitive in todays fast moving
markets. Hexagon provides a wide rang of market information prepared by experts around the
world, enhancing The Customers opportunity for profit.
The Customer can access stock market and forex information and , through the viewtex a texture
opinion comprising an in-depth economic and investment management report.
Spot rates

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Intra-day spot rates are provided from centres around the world for all the major currencies and
more than 40 exotic currencies.
Forex commentary
This is provided by experienced dealers and analysis in trading centers around the world,
including London, Tokyo and New The Customers.
Precious metal prices
Closing gold price for the New York and London exchange are indicated, along with prices of
different localised gold products supplied by HSBC Group.
Stock price and Index values
The Customer can have access to official closing prices and daily closing index values on major
securities traded, from stock exchanges around the globe.

6.1.5 Cash Management Services

Hexagon offers a complete cash management services in a simple-to-use and highly secure
system, providing timely and accurate portfolio information, thereby giving The Customeru total
control over The Customers finances.
Easy monitoring of The Customers global cash position
Hexagon provides an end-of-day balance position, including ledger balance, available balance,
credit facility, fund held and clearing items. In some locations intra-day balances and real time
balance are available. Balance can be viewed and reported in a variety of ways- by account bank,
currency and location.
Hexagon provides powerful tools to monitor The Customers accounts from anywhere, at any
time of the day or night:

Hexagon provides consolidated reporting of The Customers account portfolio

held with the HSBC Group. This allows The Customer to centralise The
Customers account administration anywhere in the world.

Account balances are regularly updated, and information includes ledger balances,
available balances, credit facilities, funds held and clearing items.

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Information on credits for cheques deposited would be available through

Hexagon.

Detailed information on return cheques would also be available through Hexagon.

Account transaction information is available for up to 999 calendar days to enable

effective reviewing and forecasting of cash flows and transaction data. An in-built
database function also allows account data to be interrogated and analysed.

Hexagon offers Unattended Operation - the flexibility to specify in advance a

time at which The Customers PC will automatically link to HSBCs host
computer and generate pre-defined reports.

Integral Report Writer functionality offers a wide range of pre-formatted reports

and the ability to customise reports to meet The Customers specific requirements.

Where required, we are able to provide balance information to third party banks,
via SWIFT.

Balance and transaction information is available 24 hours day, 365 days a year. Balances can be
reviewed and reported in a variety of ways by account, bank, currency and location.
Efficient reconciliation
Reconciliation and monitoring of the accounts in simplified by instant access tp The Customers
credit and debit transaction details as far back as 30 days.
Flexible reporting
If The Customer require information regularly, Hexagon provides The Customer with the ability
to download information periodically to The Customers personal computer. Each morning, for
example The Customer may require the balance of all The Customers accounts, the opening spot
rates and the closing indices of a given stock market. With a few key strokes, Hexagon will make
the information available for The Customer to print, review on the screen or integrate into The
Customers spreadsheets.
Dynamic fund allocation
An instant review of the time deposit and savings account detail including interest accrued and
paid and the maturity dates, allow The Customer to maximize the use of short-term cash. Up-todate deposit rate from HSBC Group are also available fro review.

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6.1.6 Transaction Capabilities

The Customer can transfer funds to third parties, and move money between The Customers own
accounts. Payments and transfers can be made individually or in bulk and repetitive instructions
can be stored within the system and called back as required.
Payments

Full payment capabilities (third party/inter-company) in over 40 currencies

globally.

Paper-based and electronic payments may be generated.

Automatic routing via the most effective means using HSBCs links to all its
branches.

Repetitive payment/transfer instructions can be stored in secure templates.

Payments can be initiated in offline mode and stored for later amendment and/or
authorisation.

Payment instructions can be imported from The Customers back office system.

Hexagon can support future value dated transactions up to 45 days.

Cheque writing capability

In summary, Hexagon can meet all of The Customers payment needs, streamlining
administration, improving productivity and offering a single platform from which to initiate all
payment types, including payroll, local operating expenses and third party invoices.
Payment templates can be created for ease of processing repetitive transactions and stored.
Hexagon also supports large volume bulk payment processing.

6.1.7 Security Services

Hexagon provides round-the-clock, on-line, real-time access to The Customers securities
portfolio, allowing The Customer to monitor transactions continuously and benefit from strong
administrative controls. The Hexagon for Windows* Securities module allows customers more

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off-line facilities, providing users with a streamlined, flexible and cost effective way of
managing their business.
Instruction Placement
Purchase, delivery, receipt and sales instructions can be placed in over 20 countries. Instructions
can be input directly into The Customers PC and uploaded to Hexagon as required for
immediate processing.
Information
Information is updated on-line and real time-. Hexagon gives customers status information on:

Transactions, e.g. trades settled, trades pending

Corporate announcements and corporate action receivables and receipts'

Portfolio holdings, e.g. amount of stock held registration and availability status

Stock prices and holding values

Account statements

Customized Search Criteria

Hexagon has the flexibility to allow The Customer to easily customise The Customers search
criteria, extract only the information required and sort it into designated categories; e.g. by
country, by trades over a certain limit etc. The information can then be produced in the most
convenient format - on paper, on screen or as a PC file for use in The Customers own system.
Customised Reports
Hexagon for Windows Securities Service enables The Customer to prepare instructions,
messages and customised reports on The Customers PC and then upload them to
HongkongBank's host computer. The service also includes a template facility, allowing The
Customer to store skeleton instructions for future reference. Information can be imported from
The Customers own back office system directly into a document, report or template and
up-to-date information on brokers and stocks can be easily downloaded to The Customers PC as
required. Report Writer software is also incorporated which enables The Customer to create
reports in The Customers own format or to select a standard securities report format for holding
enquiries, instruction enquiries, statements, conversions etc.
Treasury

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On-line foreign exchange rates are available through Hexagon as well as inter-bank lending and
benchmark rates. Additional updates on world-wide stock indices and company trading prices
are available and refreshed on-line.

6.1.8 Time Deposits

Through Hexagon customers can instruct the bank to open time deposits at their convenience
sitting from their office.

Hexagon may also be used to make Time Deposits in a variety of currencies and
maturities.

Deposit details may be sorted in different categories to simplify portfolio

management.

Instructions may also be given for the settlement of deposits on maturity.

6.1.9 Trade Services

The paper documentation and physical delivery required for trade finance application are
significantly reduced, resulting in both faster and more accurate processing and administration.
Hexagon significantly reduces the paper documentation and physical delivery required for trade
finance applications, resulting in faster and more accurate processing and administration.

Hexagon allows The Customer to send documentary credit (DC/LC) applications

to the bank

Purchase orders can be imported from The Customers back office-system to

quickly create DC application.

The system enables The Customer to ascertain The Customers outstanding trade
position, bills, import/ export loans or shipping guarantees on The Customers
designated accounts.

The Customer also have the option to settle/ accept/ reject import bills presented
on a documentary credit or collection basis.
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The Customer can store frequently used DCs as templates and call them back as
needed for amendments prior to re-issuance.

The Customer can also create and store beneficiaries names and addresses,
additional conditions, and goods descriptions relating to The Customers own
trade practices, for use in future DCs.

Therefore Hexagon provides the following benefit to the trade customers:

Simple opening and amending of documentary credits.

Easy monitoring of the trade position.

Reduce data entry and related error.

Monitoring of forex and deposit rate information.

6.1.10 EDI (electronic data interchange) services

Hexagon Electronic Trade Related Services (ETRS), the EDI services offered under the Hexagon
umbrella, allows The Customer to automate completely the exchange of documents and data in
The Customers company's trading cycle by electronic communication with suppliers, clients and
relevant government bodies. Electronic Data Interchange improves trading efficiency.
Open connectivity
Through interconnection with third-party network providers, ETRS users can exchange EDI
messages with trading partners using popular EDI services. These include British Telecom, MCI,
GE, IBM, AT&T and many others.
Data processed through the system is protected on three levels.

One unique, pre-programmed contact number for each participating party

Exclusive management operation

Data encryption (within the Hexagon network only)

Hexagon Electronic Trade Related Services (ETRS) allows The Customer to automate the
exchange of documents and data for The Customers companys entire trade cycle via electronic
communication with suppliers and clients.

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ETRS enables The Customer to send purchase order data, letter of credit
(documentary credit) and invoices

Hexagon can be fully integrated with The Customers back office computer
system so that different documents can be sent to all The Customers trading
partners automatically.

International message standards

ETRS takes on the role of tfanslatoi and messenger. All electronic documentation is
automatically translated into the international message standard (UN/EDIFACT) developed by
the United Nations. ANSI X.12 standards are also supported. For customers who have purchased
translation software, ETRS will accept EDI standard files for transmission.
Greater flexibility and control with the combined benefits of Hexagon and ETRS
As a Hexagon user with ETRS, The Customer can issue electronically letters of credit
(documentary credits) as well as transfer funds and make payments. Therefore, by integrating
ETRS with The Customers back-office system, The Customer can automate the entire trade
cycle from initial purchase order to final payment and delivery of goods.
Furthermore, Hexagon offers The Customer a range of other banking and financial services. The
Customer can easily check forex positions which means The Customer can quickly monitor and
review trading contracts, positions and the relevant profit and loss of each of The Customers
contracts.
Comprehensive support from the HSBC Group
HSBC staff will install the system, train all The Customers staff and set up all mapping tables
for the automation of trade documentation. Consultancy and advice on back office integration
will also be provided if required.

6.1.11 Interfacing
Compatible with the vast majority of ERP systems and certified by
SAP as being fully compatible with its R/3 system. Interfaces have
also been successfully set-up with other leading back-office systems
like BAAN, J.D. Edwards and Oracle Financials. We shall be pleased
to work with Aventis in setting up an interface with The Customers back office software.

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As a result, Hexagon is able to both accept SAPs SWIFT MT100 format files and
to produce a statement extract file in MT940 format.

IT support in generating required file formats.

6.1.12 Report Writer Services

Hexagon's Report Writer is a powerful and easy-to-use tool for accessing and manipulating The
Customers account, import/export and securities information. Report Writer offers a wide range
of pre-formatted reports as well as the ability to customise reports to meet The Customers own
requirements. The comprehensive expor facility allows The Customer to integrate The
Customers reports with many other software packages.
Accurate and up-to-date report writing
Report Writer allows The Customer to format The Customers account, import/export and
securities information in a wide variety of ways, providing The Customer with a fast and
convenient method for preparing customized reports.
Control and flexibility
Report Writer offers various sorting and processing options, which are easy to select and amend,
offering The Customer complete control and flexibility. The Customer can prepare The
Customers reports so they fit The Customers company's standard format, projecting a
professional image with minimal administrative effort.
Easy integration with The Customers current software packages
Report Writer can automatically convert data into a number of industry standard formats for
exporting to The Customers accounting package, or to other back-office systems, saving The
Customer time spent re-keying transactional details and eliminating errors. The Customer can
also merge imported data with information originating on Hexagon, for the ultimate in
report-writing convenience and flexibility.

6.1.13 Offline Services

Hexagon minimizes The Customers time spent online along with, in many countries, the
associated cost by providing a comprehensive offline service in the Windows environment. The
offline service include field help and user-friendly screens that enable The Customer to review
account balance/statement information easily and prepare secure and accurate payment/transfer
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instructions before going online to the bank. Hexagon offline in the Windows environment
provides The Customer with:
Instant account information:
With Hexagon account information enquiry service, The Customer can instantly review The
Customers account balance and transaction for The Customers worldwide portfolio,
minimizing costs by easily sorting and customizing the reporting and printing of The Customers
account portfolio to simplify The Customers cash management procedure.
Customized payment instruction screen:
The Customer can transfer fund worldwide in many currencies. Customize payment and transfer
screen simplify payment instructions and minimize data-entry errors. Repetitive instruction can
be stored for future use to reduce data-entry time.
File sending / receiving
The file transfer service enables The Customer to prepare instruction and receive reports with
minimal time spent online.
Security
A security module is available to control access to the offline system, supplementing the online
security system. This feature password control and enables The Customer to set up customized
delegate profiles defining access rights.
Flexible reporting
The unattended operation services enable The Customer to specify in advance in when The
Customers PC will automatically link up with the bank system to download pre=specified report
in The Customers absence.

6.1.14 Control and Security Features

Internal Control
Customers can control precisely which delegates have access to account information and
transaction initiation and authorisation, at multiple levels:
-

By account (e.g. access limited to subsidiary and not central treasury accounts).

By functions (e.g. access to view account balances but not transact on them).

By pre-defined transaction limit (e.g. payments up to a certain transaction limit).

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By transaction authorisation level (e.g. limiting a delegate to payments under an agreed

limit).

Up to daily limits per product (e.g. payment, transfer, etc).

Restricted Beneficiary List enables The Customer to limit payments to pre-defined

beneficiaries.

Single/Dual Transaction Authorisation allows single or dual authorisation for fund

movement.

Hexagon maintains an on-line audit trail to track all activities performed by

delegates.

System Security

Latest dual-key encryption technology to scramble data flowing between Bank

and customer.

Dual password system - all users must identify themselves by inputting 2

passwords (one static and the other dynamic that changes with each login).

Automatic time-out when the system is left unattended.

HSBC has full contingency arrangements for all operating systems and maintains a mirror
computer site in Hong Kong, which will provide back up in the rare event of a central system
failure. This site mirrors every aspect of our live site, including SWIFT interfaces, payments
processing systems and telephone lines. This site supports the entire Asia Pacific. Specific
recovery plans are also in place in Bangladesh.

6.1.15 Hexagon cheque writer

Our latest addition in the Payments and Cash Management is our HexCheq product. It is a
cheque-writer product built-in module of Hexagon to facilitate our corporate customers for
preparation printing and updating the PC ledger (ledger maintained in Cheque Writer). The
cheques printed through HexCheq will continue to update the PC Ledger and thus help the
reconciliation of the cheque presented with the account statement.
Benefits of HexCheq

Customers would be able to print cheque at their own location/office.

Recurrent (pre-schedule date) payments can be stored & printed.

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Hexagon cheque ledger maintenance.

Reconciliation of cheques at the Hexagon ledger.

Advice along with cheque leaves.

Customer to posses A4 size cheques supplied by HSBC.

No further installation required since it is built in our Hexagon module.

Additional security - authorize person to be designated to print cheque leaves.

PART-7

HSBCnet
7. HSBCnet- the Internet banking of HSBC
HSBCnet is and Internet platform that provides a single point of entry to the online solutions
offered by our Corporate, Investment Banking and Markets business. These solutions include
HSBC's award-winning research, plus a range of cash management and treasury and capital
markets products and services, presented in a format that can be personalised to meet the
individual needs of our customers. Core features and benefits are as follows.

Core HSBCnet Benefits

The core benefits to be offered to HSBC clients, via HSBCnet are as follows:
o Access The Customers account from ANYWHERE with Internet PC
o Improved security and audit controls
o Multiple user access levels for different functions (balance inquiry, payment preparation,
payment authorization etc.)
o SmartCards and SmartCard readers for extra security for payment authorizers

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Core HSBCnet Features

-

Balance and transactions reporting:

Account Statements viewing, in REAL TIME!

Account and transaction inquiries by date, amount, and other criteria

Daily statement download and printing capability for long term record/reconciliation

Variety of reports in a wide variety of formats in ONE platform, for every banking
service we provide (collections and payments of all types)

Upcountry collections and payments reports

Payments:
-

Prepare Pay orders, Demand Drafts, INSTANT account-to-account transfers (within

HSBC customer base) and other forms of payment, sitting at The Customers office,
using the Internet

Prepare bulk payments, including salary transfers, using our file upload tool

Create payment templates

Robust advising engine at The Customers disposal, to send advice of ANY payment
to ANY appropriate party.

Research:
-

Valuable HSBC research from the world-view to local markets, covering daily,
weekly and monthly publications, as well as specific reports.

Snapshots of forthcoming events and breaking news through the calendar tool.

Market commentary and other thought-leading content.

Security
We recognize and share the need for robust security. Some core security features include:
o

Secured Socket Layer

128-bit encryption

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User name and password for information access

SmartCard security for appropriate transactional services

7.1 How HSBC can help The Customer over the Internet
HSBCnet is a range of products and services that encompass our Corporate, Investment Banking
and Markets business, delivering tailored financial solutions to The Customer via the Internet.
These solutions include cash management and treasury and capital markets and are expanding to
include more products and services. The solutions are accessed online through an Internet page
that is customisable for each individual user. It provides access to HSBC sourced information
and, when appropriate, will provide the ability to execute certain tasks such as manage The
Customers liquidity across the world. It provides a single point of entry to our Internet solutions
and complements our other channels.

The personal page

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We understand that different roles in The Customers organization have different needs, so we
enable each user to personalise their Internet page to show content that is relevant to them. For
example The Customers treasurer may wish to see content ranging from cash management to
research, through to securities, whereas one of The Customers payment initiators may just need
to focus purely on cash management. A user is set up with a personal page and accesses a
range of content known as tools based on relevant levels of entitlement. These tools provide
information in summary initially and can be expanded to provide further detail, for example, to
drill deeper into an account balance or to open a piece of research.

Cash management@hsbc
We strive to help The Customers organisation to make the best use of The Customers financial
assets through effective cash management. Our cash management@hsbc solutions available
through the personal page are:
Global balance and transaction reporting that empowers users to:
View balance summaries with sub-totals and projections
Drill into balance details including account selection details
Investigate statements
Work with real time data
Choose between several local languages
Access accounts around the world
Report third party (non HSBC Group) banks via SWIFT
Download reports and files
Additional functionality includes the ability to:
Make domestic and international high value payments and low value payments
Make inter-account transfers
Create payment templates
Upload files for direct transmission of data
Scope to inform beneficiaries that payment instructions have been sent.

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markets@hsbc
There is also access to:
Valuable HSBC research from the world-view to local markets, covering daily, weekly and
monthly publications, as well as specific reports.
Snapshots of forthcoming events and breaking news through the calendar tool.
Market commentary and other thought-leading content.
And where appropriate, access to our FX trading platform, which provides secure online access
with all the power of the HSBC dealing room.

securities services@hsbc
For our institutional custody clients, we have begun roll out in Asia of the following:
Our securities solutions available through personal page give users the opportunity to:
View portfolio details
Drill into holdings details including where stock is held and its delivery availability
Further drill into the transactions that cause the stock movements
Search transactions with great flexibility
Enquire on aged transactions by matched, unmatched, and failed status
Search for Information for securities and broker/counter-party information
Download files
We are adding new features including file upload, bulk file download, cash projections and
corporate event enquiries. All supported by online help, the personalisation tools and
sophisticated user management controls.

7.2 What are the benefits of using HSBCnet

More Control
Of The Customers accounts, including access to real-time information
Over whom in The Customers organisation can access what information and the actions they
can take online
To improve workflows and drive approvals move swiftly through The Customers organization
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Personalisation
By each user of their personal page, thereby ensuring that only The Customer and The
Customers colleagues see content that is relevant

Breadth
Of accounts and The Customers relationship with HSBC
Access to content and ideas from across our Corporate, Investment Banking and Markets
business through one integrated personal page
The Customer will be using the same Internet platform as The Customers colleagues in other
countries, thereby adding to the consistency of work tools The Customer use.

Depth
By understanding account balances and other information at a summary level and then drilling
deeper
Through having access to the wealth of HSBC research with a few simple clicks

Freedom
The Customer and The Customers colleagues can use the personal page whenever it suits The
Customer and from wherever The Customer can access the Internet, within security parameters

Security
We recognise and share the need for robust security. Therefore, we have a range of security
features that strengthen depending on the users use of their personal page. In addition to
providing SSL 128-bit encryption, we enforce the use of user name and password for information
access and smart card security for appropriate transactional services.

7.3 Security Brief of HSBCnet

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HSBCnet Security features

Robust authentication processes.
Protection against key-logging and denial-of-service attacks.
Two-factor authentication including smart cards for administrative and business transactions.
Encrypted sessions between customer and HSBC (SSL v.3 128 bit)
Protection of sensitive information in transit and storage to ensure confidentiality of customer
data.
Industry-standard security mechanisms to protect the infrastructure.
Regular independent review of systems security.
Robust and regularly reviewed information security policies covering systems and installation
development and management.
Comprehensive contingency and back-up arrangements.
24/7 Security monitoring and centralised incident management team.
Audit trail for administrative and transactional activities.

7.3.1 HSBCs approach to Internet security

Ensuring robust security is essential to delivering products via the Internet. As technology
develops, so do the arious threats that businesses face in this environment, and maintaining a
suitably secure service requires a sound holistic approach to combating these risks.
HSBC aims to provide our customers with a robust, reliable and secure online environment in
which to do business. We seek to achieve this through the adoption of best of breed
technologies, the formulation of proven best practice IT policies and procedures, and the
dedication of expert resources to their implementation and monitoring. We employ industrystandard technical solutions to authenticate our customers identities when they log on, to ensure
that their data is transmitted securely and reliably, and that the customer data. We hold is
protected We have back-up and contingency plans to ensure interruptions to the service, for
whatever reason, are minimised. Drawing on our considerable experience as providers of secure
electronic banking systems, we also operate a control and support structure designed to ensure
that we address all aspects of the risks faced in providing transactional banking online.
This brief is designed to describe the technical and operational control features of HSBCnet. This
introduction describes the overall control and governance infrastructure within which all our
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Internet applications are developed and managed. Later sections of the document outline the
main features of our security infrastructure.

HSBC Group Policy and Standards

The establishment, monitoring and periodic review of policies and procedures is a cornerstone of
HSBCs approach to the control of operating risks. We have a comprehensive set of IT standards
covering all material areas of Internet application development, launch, support and
maintenance, architecture and the management of IT installations. In particular, security
standards and principles are laid down in the Groups IT Security Policy and Standards. These
standards, for which, the Group Chief Operating Officer has overall executive responsibility, are
consistent with best industry practices (including ISO 17799, an international IT security
management standard), and relevant regulatory requirements in the markets in which we operate.
Responsibility on a day-to-day basis for this policy and, in particular, for ensuring it continues to
provide a suitable framework for the management of security risks, rests with the Group Head of
IT Security. Reflecting the rapid changes that occur in Internet technology (and therefore the
nature of security risks faced), the policy is under continual review. In addition, formal periodic
reviews and revision of policy are scheduled, based upon the input of business and IT Security
professionals from around the Group. In this way, we can benefit from the experience of our staff
in all the major markets in which we operate to ensure that policy addresses not only global but
also local issues.

IT security management
IT Security professionals are located in the principal regions in which the Group operates. Their
primary role is to advise management on IT security issues, but they also have a mandate to
perform independent security reviews of Internet applications. Each major release of HSBCnet
functionality is preceded by an independent review by IT Security, including a benchmarking
against the Groups IT Security Policy and Standards and platform and application-level
vulnerability testing. All major issues are resolved to the satisfaction of IT Security before launch
occurs. These staff monitors all aspects of IT Security relevant to our Internet applications on an
ongoing basis, and carry out periodical reviews of the principal Group IT security risks within
the major operating subsidiaries.

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e-Risk management
To ensure that a balanced and holistic approach to Internet security is maintained, we have
established a number of specialist Internet risk functions. These functions work closely with IT
Security and provide a critical interface to the business and those responsible for overall
operating risks. This ensures that our approach to Internet risks is not isolated from the overall
control and governance of our business. These functions include a Head of e-Risk Management,
dedicated to promoting operational risk management standards for our Internet systems
(including HSBCnet), and a multifunction e-Risk Steering Group that advises senior
management on best practice and aids in formulating operating policies.

Internal and external audit

HSBC has a strong and independent Internal Audit function, including a specialist team of IT
auditors. Internal audit work closely with the business to ensure that appropriate levels of
technical, project and operational controls are built into all our processes but retain
independence. Internal Audit are required to review significant systems launches prior to
implementation, and have a mandate to review any other product / systems developments based
on their risk assessment of the development in question. In addition to assurances from internal
audit, Group executive management and boards of directors are provided with regular briefings
regarding the management of security risks in the Group by KPMG, the HSBC Groups external
auditors.

Liaison with regulators

HSBC maintains regular contact with regulators and benefits from discussions on relevant
technical, management and market topics. We have dedicated compliance officers in all major
sites responsible for ensuring that our Internet systems satisfy the requirements of regulators in
all the markets we operate, and we seek to actively participate in relevant industry bodies and on
regulatory forums to help develop industry best practices.

7.3.2 The HSBCnet environment

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Staff training and awareness

HSBC places a strong emphasis on training to ensure that our staff are aware of the importance
of security to our business and the nature of the constantly evolving risks we face. Every member
of our staff must comply with a comprehensive set of security disciplines to ensure that they
operate HSBCs systems securely.

Continual reassessment
Vigilance is crucial in combating the security threats faced in the Internet environment. We
continually examine the adequacy of our security measures to ensure we stay ahead of the game,
and act swiftly if we identify vulnerabilities. The remainder of this brochure describes the salient
features of HSBCnet security. These features will continue to evolve, however, and those
described in forthcoming sections will be supplemented and enhanced. If there are any aspects of
security that do not appear to be covered by this brochure that The Customer would like to
discuss, please contact The Customers local HSBC representative. If it is information that we
are comfortable sharing with The Customer, we can hopefully provide the assurance The
Customer require. However, we hope The Customer will understand that for The Customers
security, there are aspects of our security arrangements that must remain confidential. The
security, reliability and resilience of Internet systems should be founded on ensuring that the
underlying infrastructure of the service is secured and appropriate contingency arrangements are
in place. This section describes some of the key features of control HSBC employs to meet these
requirements. Please note that for security reasons we cannot describe here all the security
measures we operate, or elaborate in detail on those we do describe. In addition, in most cases
we will not disclose the third party security products we use.

Security
A critical goal for ensuring that a robust and secure Internet service is provided is to secure the
underlying infrastructure hosting and supporting the System. There are two key aspects to doing
this: securing the perimeter to prevent and detect unauthorised external attempts to gain access to
our systems, and controlling the Internet services infrastructure resident behind that perimeter.

Securing the perimeter

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Denying access to the environment in which our Internet service operates by unauthorised
external parties is a key target for ensuring the overall security of the System. Some of the
measures in place to achieve this include:
Industry standard firewalls
Firewalls regulate and monitor traffic between our systems and the Internet, assessing the
authenticity and integrity of data transmissions and aiming to deny access to our systems by
unauthorised parties. HSBC has implemented industry-standard firewalls to protect the perimeter
and key infrastructure of our systems. Security engineers manage the firewalls centrally 24/7,
and the actions of firewall administrators are reviewed daily. All firewalls are hardened and
minimised.
Industry standard network IDS (NIDS)
Intrusion detection software maintains a constant watch on our systems. It aims to identify
unusual network traffic that may contain harmful material and issues alerts or quarantines data
files as necessary for subsequent analysis. HSBC has implemented an industry-standard network
intrusion detection system (NIDS), which is monitored 24/7 by a centralized security-monitoring
group.
Penetration testing
Independent third party penetration testing is performed on our systems on a regular basis,
simulating attacks against them in a controlled environment to see how they cope.
Access control
To control necessary access to our systems, all HSBC technical personnel require two-factor
authentication to gain access to devices within the secured perimeter and the Internet services
infrastructure. Although we cannot detail the nature of this access methodology, twofactor
authentication works on the principle that staff are required not only to know something (e.g.
password) but also to possess something (e.g. a Smart card) to enable them to obtain access. This
represents a significant strengthening of security over traditional singlefactor authentication.
Internet services infrastructure:
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Equally important a goal as denying unauthorised access to our systems is ensuring that those
systems are strictly controlled. Measures to achieve this include:
Server builds
All servers are loaded and configured according to standard build requirements, including
standard security toolkit. All servers are hardened and minimised according to functional
requirements, and tested for security vulnerabilities prior to deployment (with all deficiencies
resolved). Once deployed, all services are tested for security vulnerabilities on a regular basis.
Security patches are implemented in line with a formal risk-based approach.
Access control
We use access management software to manage access to all infrastructure devices on a 24/7
basis. Non privileged access is only provided to those HSBC support personnel who require it
and can provide the relevant HSBC specified approvals. Support personnel do not have standing
privileged access. Once provided, privileged access is only granted for a period of time approved
by HSBC; once that time has elapsed, access is revoked.
Host-based intrusion detection (HIDS):
HSBC has implemented an industry-standard hostbased intrusion detection system (HIDS).
HIDS is implemented on all servers within the Internet services infrastructure and, similar to
NIDS, monitors server activity to identify harmful code or unusual activity. It is monitored 24/7
by a centralised securitymonitoring group.
Change management
We monitor and approve any changes to infrastructure using our Change Management Workflow
application.
Infrastructure security testing
In addition to testing of the secured perimeter, regular independent vulnerability testing is also
performed on resident Internet services.
Web-applications security testing
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Vulnerability testing of web-based applications is performed prior to the implementation of new

code in the Internet service environment. This means that any new functionality introduced to the
HSBCnet Service will have been checked to assess its integrity before it is offered to The
Customer.
Other measures
New vulnerability notification and response
A prominent nature of the Internet security risk is how quickly it evolves and changes. We aim to
ensure that when new vulnerabilities are discovered or new methods of attacking systems are
developed we are aware of them and can take prompt action. To this end, HSBC has
implemented a centrally managed alert system that receives newly published security
vulnerability notices (for all products used) and sends them to the responsible party based on
pre-defined profiles.
Virus protection
The increasing proliferation of malicious code, viruses, worms and hybrids is an unfortunate fact
of the Internet environment. Such code has the potential to be highly destructive. HSBC employs
industry-standard virus protection.
Security incident response program
Despite all precautions, it is a fact of Internet security that intrusions can occur. Our aim in
dealing with intrusions is to have the ability to identify and respond rapidly in the event that an
incident does arise. HSBC has a centralised dedicated Incident Response team providing 24/7
coverage which manages all aspects of any incident in conjunction with The Customers
HSBCnet support centre. Major security incidents are managed and investigated according to a
formal set
of procedures. When considering the security of an Internet product (as opposed to the
underlying infrastructure dealt with in the preceding section), HSBC has identified three key
areas of interest:
How does the product authenticate my identity to ensure that only an authorised user can obtain
access and, therefore, ensure that transactions I perform can be uniquely identified (nonrepudiation)?
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 How secure is the data transmission between me and HSBC?

How secure is my confidential business data?
This section details the security features of the HSBCnet application that aim to address each of
these areas, and discusses other security and control features of the System. Please note that,
once again, for security reasons this
section does not describe the features of the System and controls we operate in full.

7.3.3 Authentication
Security credentials and two-factor authentication
HSBCnet aims to authenticate users logging onto the system based on a set of the credentials,
each designed to combat various aspects of the risks faced when authenticating identity over the
Internet. The System operates a standard customer authentication model (CAM), which dictates
what credentials must be provided by the user prior to gaining access to a given Service within
the application. For HSBCnet, the minimum credentials required to log on and access the System
are the username and a memorable answer and password that are set by the user his/herself and
are known only to them. For administrative activities and financial transactions, additional
credentials may be required. For example, to use transactional Services a user requires a smart
card issued by HSBC that contains a unique personal digital certificate in association with a PIN.
This adheres to the proven technique of two-factor authentication to enter the System a user is
required to provide something they know (i.e. password and PIN) and something they possess
(i.e. the smart card). This aims to mitigate the risk of an account being compromised as the
second authentication factor (smart card) physically exists separate to the System with which it is
used. Therefore, even if a users username, password, memorable question and PIN were
compromised, any potential attacker would also need to gain physical ownership of the users
smart card and PIN.
Unauthorised access attempts
If someone tries to access The Customers HSBCnet user account without the proper credentials,
the System will lock the account after a number of unsuccessful attempts. However, in order to
mitigate the risk of someone maliciously locking The Customers HSBCnet user account, HSBC
has implemented denial-of-service protection. This aims to ensure that someone who knows only
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a users username is unable to lock out that users account simply by entering incorrect values
for the password and memorable question.
Password security
When users register for HSBCnet, they set up their own credentials (this includes username,
memorable answer and password). These values are confidential to the user and are not generally
disclosed to HSBC staff that administer the System. Subsequently, there are three methods of
changing the user password and other security credentials.
Edit my profile: If the user is logged on (already authenticated) to the application, he has the
ability to change his password through the edit my profile feature.
Security information reset automatic: If the user is unable to log on (authenticate) to the
application, he has the ability to gain access to the System and reset his password or memorable
answer via the security information reset facility. When the user registers, he will be asked to
supply two security questions, in addition to his password and memorable answer. In order to
reset his password and access the System, he must successfully answer these questions.
Security information reset - manual: If the user has forgotten both his password and memorable
answer, and is unable to log on (authenticate) to the application, he can still use the security
information reset facility, but his reset request must be signed and submitted to his local
customer-based System Administrator for action. The customer-based System Administrator will
validate the identity of the requestor and reset the password and memorable answer. In none of
these methods is the users password or memorable answer disclosed to anyone (including HSBC
staff) other than the user himself/herself.
Transmission of security data
Security sensitive data (e.g. password) is masked on screen when input. When being transmitted
to HSBC from the customers browser, the transmission of data is encrypted (via SSL Secured
Socket Layer). On reaching HSBC, this data is encrypted within the databases. Even HSBCnet
administrators do not have access to this information. Additionally, to deter keystroke-logging
Trojans (malicious programs) and the unauthorised capture of customer passwords, HSBC has
implemented a virtual keyboard, which is an on-screen image of the computer keyboard. The
virtual keyboard requires the user to click on selected characters of their password (as opposed to
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typing in the whole password using the computer keyboard), therefore rendering keystrokelogging trojans ineffective.
There are facilities within the HSBCnet application that the Customer can use to review activities
performed by a specific username.
When The Customer log in, The Customers main landing page will indicate the last time this
account logged in.
Any business or administrative activities performed by the user account can be viewed by the
activity query facility.

Security of data transmissions

Both the transmission of security details and all online administrative or transactional activities
between the user and HSBCnet are encrypted using the SSL protocol. Basic encryption involves
the transmission of data from one party to another. The sender encodes the data by scrambling it,
then sends it on. The receiver must unscramble the data with the correct decoder in order to
read and use it. The effectiveness of encryption is measured in terms of how complex the key
used is. The more complex the key, the longer it would take for someone without the correct
decoder to break the code. SSL is an industry-standard protocol to secure Internet
communications between web browsers and HSBC. HSBC currently supports SSLv3 (128 bit
encryption).

Data confidentiality and integrity

HSBC employs security industry best practices to protect customer or personal data. Our data
privacy statement is presented to each user for agreement at the time of registration and details
the protection that users are afforded. In addition, no users information is written to disc or
stored on Internet-facing web servers. The web servers are separated physically from the back
office databases that hold the transaction data. Therefore, no transaction customer information is
kept on the web servers. Sensitive data such as customer passwords are stored in encrypted
databases using a hardware security module.

Functional features
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Described below are some of the functional features built into HSBCnet to enable the Customer
to more easily control the use of the System.
Access levels
HSBCnet provides two access levels for customer staff. Systems Administrators can perform
(under either dual or sole control) general administrative tasks such as the set up and entitlement
of users to HSBCnet tools, ordering of smart cards and the suspension or deletion of users. End
users have no access to administrative functions. Either type of user can be allocated
transactional functionality, but the System is flexible enough to allow for the complete
segregation of administrative and transactional functions.
User access control
The access control tool allows The Customers designated HSBCnet systems administrators to
determine individual user access rights and entitlements, down to account level viewing and
payment authorization limits. The number of users required to authorise a payment can be set, as
well as the combinations of user levels for differing values of payments. The Customer can
establish a system that requires authorisation for payments over a certain value from a separate
country or at head office. This enables complete control of access and authorisation while
allowing payments to
be processed efficiently.
Dual authorisation control
All critical administrative and business functions in HSBCnet can be controlled on a dual
authorization basis (one user submits a transaction/request, another is required to authorise it).
However, the application provides the flexibility for the customer to define whether they require
dual authorisation). In normal operating circumstances we would, however, strongly recommend
that the dual control option is selected.
Activity log tools (audit trail)
Key administrative and transactional events are logged by HSBCnet and available for viewing
online via the activity query log tools. An audit trail is provided allowing for retrospective
internal control and financial auditing of Systems activity.
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 Session time-outs
HSBCnet enforces idle (inactivity) session timeouts. If a session remains inactive for a set period
of time, the session will be terminated and the user will be required to log back into the
application. Moreover, the pages the user has viewed during his session expire to prevent him
from being stored in his browser, where they could be accessed later by another user.

7.3.4 Access Control Procedures

Introduction
This section (the ACP) sets out the Access Control Procedures referred to in the HSBCnet
Customer Agreement. The main aim of this section is to set out the security duties of Customers
(The Customer) and The Customers nominated Users. The ACP also aims to (1) outline the
processes and procedures with which Users must comply when accessing the System and the
Services, (2) to outline the different authorisations that the Users may be allocated and the
restriction that may be placed on their use of the System and the Services and (3) give The
Customer sufficient information about the security of the System so that The Customer can
assess and accept the risk in using the System. This version of the procedures (version 2) has
been updated to cover the additional security features that have been introduced to support
transactional services on HSBCnet. This section is not intended to provide a comprehensive
guide to the System and the Services and further information can be found in the Customer
Guide. All capitalised terms used in this ACP shall have the meanings set out in the HSBCnet
Customer Agreement. Additionally, please note that clause 6.1 of the HSBCnet Customer
Agreement requires customers to comply with this ACP.
1 The System
HSBCnet is HSBCs internet portal through which The Customer access The Customers
selected Services. To access HSBCnet The Customer will require browser software and an
internet connection either through a dial-up connection or through The Customers Local Area
Network (LAN).
2 The Services

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This edition of the procedures covers the following services, which are accessible upon use of
the appropriate identifiers (Identifiers) detailed as follows:
The Customer may amend accounts in relation to which Services will be made available, by
completing an additional account schedule and authorising it in accordance with the terms of the
HSBCnet Customer Agreement.
Users
Users are all representatives authorised by The Customer to use the System. Users are set up by
The Customers nominated Systems Administrators. Beyond the initial Systems Administrators
who are set up by the Bank, all subsequent Users are set up and controlled by Systems
Administrators directly.
Systems Administrators
Systems Administrators are responsible for the set up, authorisation and administration of Users
(including other Systems Administrators). Systems Administrators set up Users (including other
Systems Administrators) to use the System. They define which Services the Users have access to
and, where permitted on the System, set levels of entitlements within the context of each Service.
For instance, a Systems Administrator would be able to entitle a User to the crossborder Account
Reporting Service and then define within that Service what accounts the User could actually
view. Systems Administrators administer the use of the System by all Users. They are
responsible for ensuring that User profiles are suspended when Users are on leave, for instance,
and that they are deleted when appropriate. Systems Administrators are authorised to reset a
Users passwords and maintain their profiles when required. Additional information on how
Systems Administrators set up and entitle Users to Services can be found in the customer guides
to HSBCnet.
User Identification
The Customer are responsible for verifying the identity of The Customers Users, particularly
those Users that are entitled to make transactions on The Customers behalf. Systems
Administrators will normally need to be formally identified and have their addresses verified by
the Bank for money laundering compliance purposes. The Customers local HSBC contact will
advise which documents are required to be presented or whether any exemptions are available
for certain types of companies.

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7.3.5 Registration to System

Registration for HSBCnet is straightforward and consists of the following simple steps:
Completion of customer agreement
This is the standard HSBCnet Customer Agreement that needs to be signed in accordance with
company authorisation. It captures the following information:
Company details
Accounts to be reported through HSBCnet
Initial Systems Administrator details
If The Customer wish for one of The Customers subsidiaries to report accounts to The Customer
through HSBCnet, The Customer will also need to ensure that it completes and signs the
Customer Associate section of the Customer Agreement which authorises The Customers
subsidiarys HSBC group office or other bank to report accounts through HSBCnet.
Initial Systems Administrator Registration
To set up The Customers initial Systems Administrators they need to complete an online request
for registration form by clicking register at www.cibm.hsbc.com. This form is submitted to the
Bank for processing. The following details are captured:
Personal Details
E-mail address
Company Details
Desired username
Password
Memorable Question and Answer
Security Questions and Answers (for online password reset)
The benefit of this online registration process is that the password, Memorable Answer and
answers to the Security Questions remain the sole knowledge of the User and are never disclosed
to HSBC staff or other third parties. Additionally, it avoids the need for HSBC to send individual
Users passwords by post or e-mail, thus reducing the risk of interception. Once the details are
captured, HSBC will process the application and, if approved, will send a confirmation e-mail to

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the Systems Administrator advising them that their profile has been set up and that they should
now log in to HSBCnet.
Additional User Registration
While the initial Systems Administrators are set up by the Bank, additional Users (including
additional Systems Administrators) are set up by Systems Administrators. The registration
process for additional Users is similar to the online Systems Administrator registration process
described above with Users completing an online form, which is subsequently approved by their
Systems Administrator. Please note that additional Systems Administrators identities will need to
be verified by the Bank as described in the above section entitled User Identification. When
processing a new registration request, Systems Administrators are advised, in all cases, to crosscheck the legitimacy of its source using a channel other than the Internet. By their very nature,
new registration requests are not submitted over a secure channel. As is the case with initial
Systems Administrator registration, the password and security questions chosen by the User will
not be disclosed to the Systems Administrator or to the Bank. Failure to follow the procedures set
out in this ACP may result in Users being unable to access fully or in part the Services.
Password
The password is a minimum 8-character alphanumeric string chosen by the User at registration.
The User will be required to enter this password or designated characters from it to access the
relevant services. Passwords will be entered using an on-screen virtual keyboard :
Memorable Answer
On registration for HSBCnet, Users will be prompted to select a Memorable Question and
Answer. The Memorable Answer may be requested at logon, as an additional security measure.
In addition, Users are prompted to enter two further Security Questions and Answers at
registration. These Security Questions are used to assist the user to reset their password or
Memorable Answer if they forget it.
PIN Protected Smart Card

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This is a smart card that contains a pre-loaded digital certificate. To access certain tools as
specified in section 2 above, Users must insert their smart card into the provided smart card
reader and enter an additional PIN.
Digital certificate management
The digital certificate stored on the smart card allows HSBC to identify The Customer. The
Customers digital certificate must only be sent by The Customer to entities within the HSBC
Group and used in connection with transactions between The Customer and such entities. The
Customer must not send the certificate to any party or use it for any other purpose and agree that
no HSBC Group member will have any liability if The Customer do so.
System Compatibility
The Customer must ensure that The Customer have compatible hardware and software in order
to access the System. Minimum technical requirements are detailed in the customer guides to
HSBCnet. Additionally, The Customer must promptly adopt all patches, updates and all other
measures relating to operation or security issued or recommended by the Bank or suppliers of
hardware and software components.
Security standards
The Customer must review The Customers internal security procedures as necessary to ensure
protection remains up to date. In particular, The Customer must ensure that:
the encryption technology used or required to be used by the Bank in relation to the System is
compliant with the local law where the System is being accessed;
The Customer establish and maintain operational performance and security standards of
Components and other facilities required to access the System; and
implement and maintain appropriate firewalls and virus and denial of Services prevention
measures.
System Access
To prevent unauthorised access to the system The Customer must ensure that:
Users always log on to the System via the website address www.cibm.hsbc.com
Users log off the System after use and do not leave access terminals whilst logged on;
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 Users log off the System properly using the Logout button at the top right corner of the
screen instead of closing the browser window;
no-one can observe or copy the access to the System when using a computer which may be
observed or which is connected to local area network (LAN) or any public internet access
device;
The Customer notify the Bank immediately of any unauthorized or suspected access or use to
the System (including to
Identifiers) or any unauthorised, unknown or suspected transaction or instruction;
The Customer remove access rights and notify the Bank immediately of any actual or suspected
impropriety on the part of any User in connection with the Services or where a User is no longer
authorised to use the System (due to leaving employment or otherwise);
The Customer comply with all reasonable requests for assistance from the Bank, the police or
other regulatory authorities in identifying actual or potential breaches of security.
File Upload
In order to deliver the file containing Customer Instructions to the Bank The Customer must
complete the information required in the file upload tool covering the file type, format,
authorisation level required and country (where appropriate) before selecting the file from the
specified location. Once The Customer have selected 'Go' and the Bank has received the file, the
Bank will issue a simple on-screen acknowledgment confirming the file has been received by the
Bank. The Bank will then perform some initial validation before issuing a file acknowledgment
report, which should be accessed through the Report and File Download function. The Customer
are responsible for advising the Bank of the receipt of a file acknowledgment report for which no
file was sent, any inaccuracy in the file acknowledgment report or failure to receive a file
acknowledgment report within a reasonable period of time. The HSBCnet file upload tool will
take the file of Customer Instructions from the specified location at The Customers site and send
it to the Bank. It is therefore important that measures are taken to minimise the chance that the
file is tampered with before being sent. These include:
The file should be kept in a secure location with minimum access permitted to it;
It should only be capable of being created by an authorised process and read by the HSBCnet
System;

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 All access to the file is logged in a secure manner to enable investigations to be carried out
should this be necessary.
In all situations but particularly where pre-authorised files of Customer Instructions are sent to
the Bank, it is extremely important that the above measures are adopted. Nothing in this ACP
prejudices the terms of clause 3 of the HSBCnet Customer Agreement and in particular The
Customers obligation to ensure that Customer Instructions are correctly transmitted to the Bank.

7.4 HSBCnet Customer Guild

Before The Customers company can start using the HSBCnet service, the Initial System
Administrator (ISA) will need to set up additional users, entitle them to HSBCnet services and
assign signature limits for payments. Below is a work flow diagram detailing how the set-up
process works. For processes where we have put down an asterisk*, please refer to the following
sections for the Setup procedures.

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Welcome email
Initial System Administrator (ISA) receives welcome email from the Bank
ISA forwards welcome email to System Administrators (SA) and end users for their registration
SA and end users register via the link in email
The ISA should follow the steps below so that additional users can register and be set-up for
access to HSBCnet before they are entitled to use any tools and services.

Smart Card, smart card reader and PIN

Initial System Administrator (ISA) receives smart card, smart card reader and PIN
After HSBC has processed the documentation, ISA will receive the smart card, smart card reader
and PIN. The Customer need to install The Customers smart card reader by referring to the
installation instructions provided on the CD-ROM with The Customers reader. Regarding the
smart card management, please refer to the Gemplus User Guide which is sent together with the
smart card.
Smart card authentication
When an Initial System Administrator or an HSBCnet user accesses functions/tools such as the
User Management tool, Registration Status tool, Maintain Signature Limit, and Payment
Authorisation, HSBCnet will prompt for smart card authentication. Please have the smart card
and PIN readyfor use.

HSBC net Users entitlements and accounts setup

Initial System Administrator (ISA) logs in to confirm registration and perform entitlement for
self, other ISAs, System Administrators (SAs) or end users.

7.4.1 Introduction
To begin using HSBCnet, an ISA will have to entitle themselves to additional services (if they
require them) and complete the following steps before HSBCnet is ready for use by the company.
1 Set up other users (i.e. other SAs and end users)

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2. Entitle users to general HSBC net services

3. Entitle users to specific HSBC net services
4. Assign signature limits for payments
A step-by-step guide to the above steps will be provided in this section. Please note that if The
Customers company has chosen to operate under dual authority, a second SA will need to
authorise The Customers actions. When setting up HSBCnet, please keep in mind The
Customers answers to the following questions:
Who needs access to HSBCnet and what should they be allowed to do?
How should payments be authorised?
What contingency is required for user absences?
Do users have sufficient authority to perform their role efficiently?
Before an ISA begins the HSBCnet entitlement process, please ensure The Customer have the
following:
The Customer have received The Customers smart card reader, smart card and PIN.
The Customer have installed The Customers smart card reader.
The Customer have saved the welcome e-mail sent to The Customer by cibmsupport@hsbc.com.
All the other users (i.e. additional SAs and end users) have completed the registration.

7.4.2 Initial system administrator entitlement

The Customer as the Initial Systems Administrators (ISAs) are required to entitle The
Customersselves to the relevant HSBCnet services so that The Customer have access to the
appropriate tools and services.
Entitle users to general HSBC net services
Set-up user entitlement
It is the Initial System Administrators (ISA) responsibility to entitle other users to the reporting
and transaction tools available through HSBCnet The ISA will need to specify entitlements for
each service available by entering the entitlement for each tool the user is to have access to.
Some services only require macro entitlement at the tool level, while others allow a greater
detail of entitlement at the micro level.

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Modify user entitlement

The steps for changing the user access level of an existing user are very similar to setting up their
initial user entitlements. For Systems Administrators (SAs) operating under dual authority, please
ask another SA to perform the following steps to complete the modification of users
access rights. No changes will be effective until then.
Entitle users to specific HSBC net services
Under the Maintain User Access Level screen, The Customer can click on the User Profile and
Entitlement Management (this tool is only available to System Administrators) to set micro
entitlement for System Administrators on defining / changing users access rights and other user
management tools.
System Admin - Initiate Registration
Once The Customer select the category System Admin - Initiate Registration, the defaulted
rights will be as follows:
System Admin - Approve Registration
Once The Customer select the category System Admin - Approve Registration, the defaulted
rights will be as follows:
System Admin - Full Registration
Once The Customer select the category System Admin - Full Registration, the defaulted rights
will be as follows:
System Admin - All Initiate
Once The Customer select the category System Admin - All Initiate, the defaulted rights will be
as follows:
System Admin - All Approve
Once The Customer select the category System Admin - All Approve, the defaulted rights will
be as follows:

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System Admin - Full Access

Once The Customer select the category System Admin - Full Access, the defaulted rights will be
as follows:
Under the Maintain User Access Level screen, The Customer can further click on the relevant
Services available link to define the micro entitlement for specific HSBCnet service(s).
Activity log query
The following tools are available via Activity Log Query.
Activity log (for account services) - This tool provides a powerful integrated function to allow
the user to enquire on all activities of various account services (e.g. Access Control, Account
Maintenance, Payments/Transfers, Advising, Receivables, File Upload, Cheque Outsourcing,
etc.) for all users in the portfolio. To grant user access to this tool, follow the steps below:
Activity Log Query - This tool allows the user to enquire user status, profile and access as well
as session activity for all users in the portfolio. To grant a user access to this tool, follow the
steps below:

7.4.3 File upload

HSBCnet file upload service supports various authorisation levels, including Pre-Authorisation,
Instruction Level Authorisation, File Level Authorisation (Summary) and File Level
Authorisation (Details). The Customer should decide which authorisation level will be adopted
for The Customers company.

7.4.4 Priority payments/transfers

The following applies to both priority payments and transfers.

Receivables management

Report and file download

Time Deposits

7.4.5 Assign signature limits for payments

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The Customer will need to specify signature limits for each account that priority payments, ACH
transactions, inter-account transfers, cheque outsourcing transactions or time deposit transactions
are to be made from.

7.4.6 Account enquiry

The Balance and Transaction Reporting tool (i.e. account enquiry tool) enables The Customer to
view The Customers balance summary, balance details, and statement details. Realtime balances
and account statements will be shown. The Customer can view up to 35 days of transaction
history. In case no transactions are performed on a particular day, there will be no account
statement for that particular day. Click Accounts on the red navigation bar to access the tool.

View the balance details for an account

View todays statement details for an account

7.5 Integrated Payments Solutions (IPS)

Core payments The Customer can make three types of payments under core payments:
Priority payment (including ad hoc requisition of cashiers order and demand drafts)
ACH (automated clearing house) credit
Inter-account transfer
The Payments tool on the red navigation bar at the top of The Customers personal page
provides The Customer with a variety of integrated tools to manage The Customers payment
instructions.

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Note:
i. If the Payments tool is not displayed on the red navigation bar, click More. If The Customer
cannot find the required tool in the Payments screen, scroll down the page for more information.
ii. The drop-down list of debit/credit account shows a maximum of 30 authorised accounts. If
The Customer want to view an account that are is not listed in the drop-down list, click Maintain
favourite accounts to add it to The Customers favourites list.
iii. Authorisation for all types of instructions requires the use of a smart card. When a user
accesses the Authorisation tool, HSBCnet will prompt the user for the smart card authentication.
Please have the smart card and PIN ready for use.

Create payment instruction

A payment instruction can be created by either inputting the information directly on-screen or via
the HSBCnet file upload tool. When using the direct on-screen method, The Customer need to
complete all the necessary information and submit it to HSBC. If The Customer use the file
upload process, The Customers payment instruction will be generated from The Customers
enterprise resource planning (ERP) system and then uploaded to HSBC.
Using the HSBCnet file upload tool, The Customer can:

Upload a payment file

Repair a payment instruction

Authorise a payment instruction

Reject a payment instruction

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Notes: When creating a payment instruction, it is important to enter sufficient information to

enable straight-through processing of the payment.
Create a payment manually
There are two ways of creating payments manually:
Directly on-screen
Using a template
Input details on screen
To directly input the payment instructions on-screen, select the appropriate payment type, key-in
the required information and then submit the instruction for verification/authorisation.

Issuing of ad hoc cashier's order and demand draft

The Customer can also initiate ad hoc cashiers orders or demand drafts using the Create New
Payment screen, and completing the following fields:
Beneficiary bank identifier - Select the account debiting HSBC branch, e.g. HSBCHKHH.
Beneficiary details - Input the beneficiary name and address (for the mail to beneficiary
option). The beneficiary account number is not required.
Instruction to bank - Select the codeword /REC/ from the drop-down list. Insert one of the
following options in the field next to the codeword:
POST:Applicant - To initiate mail to applicant (The Customer)
POST:Beneficiary - To initiate mail to beneficiary
POST:Branch Pickup - To enable collection from a branch
POST:Special - For special arrangements
Instruction Code - Select the codeword /CHQB/'.

Create payment using templates

To create a payment using a template, first select a template of the appropriate payment type.
Complete the template by modifying and/or adding details for The Customers specific payment
and then, submit it for processing. A template must first be created before it can be used to create
a payment.

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Create Template .
The Customer can use the following tools to create payments using templates:
Template Summary (for details, please refer to section 4.1.5.2 Edit Template)

Create Payment Instruction

The instructions below show how to create a payment using templates with the Create Payment
Instruction tool. The process is similar to that for creating a payment through on-screen input.
Please refer to the following sections if The Customer require detailed guidelines for completing
the initial steps (step 1 to step 4) and/ or explanations about the input fields.

Priority payment

Inter-account transfer

ACH credit

Upload payment instructions

The Customer can choose to submit payment instructions by using the File Upload tool, please
refer to section 8.1 Upload Payments/ Receivable Files for details.
.

Payment enquiry
The Customer can perform online enquiries on details and status of payment instructions using the
Payment Summary tool. The various stages of payment instructions that The Customer can perform
enquiry on are:
Received/Processed
Forward dated
Rejected
Pending authorisation

Authorise payment instruction

This section describes how to authorise a core payment instruction. The process of authorising a
payment instruction is the same for all three types of payment instructions (ie. priority payments,
inter-account transfers and ACH credits). An authoriser can choose to authorise a transaction, to
send it back for repair or to reject it during the authorisation process. If an instruction is sent
back for repair, it can be further modified and resubmitted for authorisation. If it is rejected, it

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will not be sent to the Bank for processing. If a payment instruction needs to be authorised by
more than one authoriser, it will not be processed until all the required authorisations have been
given. When an authoriser attempts to authorise an instruction after the Banks cut-off time, an
error message will be displayed, and the authoriser can either send the instruction to repair or
reject the instruction.

Template maintenance
The Customer can use templates to create payment instructions. Templates are useful if The
Customer need to create similar payment instructions on a regular basis (e.g. a weekly payment
to a supplier). The Customer can create templates for each payment type. It is important that The
Customer use the correct type of template to create The Customers payment instruction. For
example, The Customer must use a priority payment template to create a priority payment
instruction. Templates can be:
General templates - These can be created, modified and used by anyone.
Restricted templates - These must be authorised when they are first created and after they are
modified.
Stop payment instruction request
Please contact The Customers local customer service hotline to stop a payment
instruction

Cancel forward dated instructions

Forward dated instructions can be cancelled before their instrument dates become due. To
maintain control, any request made by a user to cancel a forward dated instruction must be
authorised by another user with the appropriate authority.

Cheque Outsourcing Service

Using the Cheque Outsourcing Service (COS), The Customer can issue the following payments:
In-country cashiers order
Demand draft
Cross-border cashiers order

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The Customer can issue an individual payment or group payments in a batch. The Payments tool
on the red navigation bar at the top of The Customers personal page provides The Customer
with a variety of integrated tools to manage The Customers payment instructions.
Create payment instruction
A payment instruction can be created manually by either inputting the information directly onscreen or via the HSBCnet file upload tool. When using the direct on-screen method, The
Customer need to complete all the necessary information and submit it to HSBC. If The
Customer use the file upload process, The Customers payment instruction will be generated
from The Customers enterprise resource planning (ERP) system and then uploaded to HSBC.
Using the HSBCnet file upload tool, The Customer can:
Upload a payment file
Repair a payment instruction
Authorise a payment instruction
Reject a payment instruction
Create payment manually

There are two ways of creating payments manually:

Directly on-screen
Using a template
Input details on-screen
To directly input the payment instructions on-screen, select the appropriate payment type, key-in
the required information and then submit the instruction for verification/authorisation.
Create Payment Using Template
To create payment using templates, select a template of the appropriate payment type, complete
it by modifying and/or adding details for The Customers specific payment type, then submit it
for processing. A template must first be created before it can be used in creating a payment
The Customer can use templates for payment creation via the following tools:
Template Summary
Create Payment Instruction
The following outlines how to create a payment using a template via the Create Payment
Instruction tool. The process is very similar to that of creating a payment via on-screen input.
The Customer are therefore suggested to refer to the following sections for details:
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 In-country cashiers order

Demand draft
Cross-border cashiers order
How to group individual payment into a Batch
Upload payment Instructions
The Customer can choose to submit payment instructions by using our File Upload tool.
Payment enquiry
The Customer can perform an online enquiry on the details and status of any Cheque
Outsourcing (COS) payment instruction using the Payment Summary tool.
Repair payment instruction
The following sections describe how to repair Cheque Outsourcing Service payment instructions
- both individual and batch payment instructions.
Authorise and release payment instructions
This section describes how to authorise and/or release Cheque Outsourcing Service payment
instructions - both individual and batch payment instructions. Release is an optional step that
enables The Customer to hold instructions after authorisation. The Customer can consider
holding a payment until The Customer have received confirmation of sufficient funds in the
account.
Note:
i. When an authoriser attempts to authorise and/or release an instruction but the banks cut-off
time for that instruction has already passed, an error message will be shown on the screen. The
authoriser can either send the instruction to repair or reject the instruction.
ii. For batch payments, authorisation will be based on the largest transaction amount in the batch
rather than the total amount of the batch.
iii. For company cheques, authorisation must be in accordance with the signing arrangement
provided for in the bank mandate.
iv. Where a user has authority to both prepare and authorise instructions, prepared instructions
must first be approved by another authoriser before the user performs a final authorisation.
v. Click on Status to view the activity log summary of the selected instruction.
Payment details maintenance

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When creating COS payment instructions, The Customer have an option to include payment
details to be sent to the beneficiary along with the COS instrument. The payment details can
either be in free text and/or table format. This section describes how to fill in the payment details
and attach payment details to a COS payment instruction.
Beneficiary list maintenance
A beneficiary list is a database where The Customer can save The Customers beneficiary details.
It is helpful to use a beneficiary list when The Customer need to issue payment instructions to the
same beneficiaries on a regular basis. Using a beneficiary list means that The Customer do not
have to input beneficiary details every time The Customer issue a payment instruction as all the
beneficiary details will appear automatically on the screen.
How to create a beneficiary list
How to authorise and/or reject a beneficiary list
How to change or delete a beneficiary list
How to enquire a beneficiary summary
Beneficiary maintenance
Once a beneficiary record has been created, The Customer can use it to create a payment
instruction or a new beneficiary record. The Customer can also make changes to the beneficiary
record or delete the record entirely.
Template maintenance
The Customer can use templates to create Cheque Outsourcing (COS) payment instructions.
Templates are useful when The Customer need to create similar payment instructions on a
regular basis, e.g. making a weekly payment to a supplier. Two types of templates are available:
payment instruction templates and payment details templates.
Payment instruction templates - These are used to prepare a template for each COS payment
type and are saved for future use. There are two types:
General templates - These can be created, modified and used by anyone.
Restricted templates - These must be authorised when they are first created and after they are
modified.

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Payment details template - These templates include payment details, which are sent with the
instrument. Payment details templates come in the form of general templates, which can be
created, modified and used by anyone.
Report lost instruction
Once The Customer have issued a cashiers order or demand draft via our Cheque Outsourcing
Service, the instrument cannot be stopped. The Customer can either report lost of the instrument
or request the Bank to cancel the instrument. Please contact The Customers local customer
service hotlines for details.
This section will cover the following:
How to create Report lost instruction request
How to authorise / reject Report lost instruction request
How to enquire Report lost instruction request
Report request
The Report Request tool enables The Customer to submit The Customers requests to generate a
variety of ad hoc COS reports based on the format and data of the underlying canned COS
reports made available by the bank.
Advising
The advising tools enable The Customer to create and send an advice for the following types of
payments:
Core payments - priority payment, inter-account transfer and automated clearing house (ACH)
Cheque outsourcing payment
The following advising tools are accessible through the Payment tool on The Customers
personal page.
Advising maintenance
To streamline the process of sending a payment advice, The Customer can use the Advice
Recipient List and Advice Details Template tools to create templates to store recipient and advice
details that are frequently used.
Advice recipient list maintenance
The Advice Recipient List tool enables The Customer to create, store and maintain recipient
details and related delivery channel information.

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7.6 Integrated Receivables Solution

Introduction
Welcome to HSBCs Integrated Receivables Solutions (IRS) for managing The Customers
accounts receivable (AR) via HSBCnet, our global Internet banking platform. We will explain
the features and functions of the following IRS services:
Receivables management system
Wholesale lockbox service
National network collections service
Certain product and service offerings are subject to local availability and/or regulations.
Receivables management system
As the cornerstone for IRS, Receivables Management System (RMS) consolidates receivables
information and allows effective monitoring, reconciliation, and reporting of receivables
collected from multiple channels. The following modules are integrated to support The
Customers receivables management requirements including database warehousing, collection
reporting and AR reconciliation, at both domestic and multi-country levels.
Centralised database
AR reconciliation
Consolidated reporting
Wholesale lockbox service
The wholesale lockbox service is designed to help companies achieve cost savings by taking
over the most tedious and time-consuming tasks of cheque collection, handling and processing.
The service sorts cheque receivable items, captures receivables details, matches receivables
against invoices, and allocates payment amounts to the appropriate invoices. The activities of
HSBCs wholesale lockbox centre and lockbox system are outlined below.
National network collections service
The national network collections service is designed to help companies collect cash and paper
receivables efficiently from both in-country and cross-border locations. This service accelerates
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The Customers funds availability by providing multiple collection points through our extensive
collection and alliance bank network. The service is executed via HSBCs extensive collection
network which includes our branches, alliance banks and other designated collection points.
Managing receivables with HSBC net
Overview
In this section, we will guide The Customer through the use of the tools for managing receivables
on HSBCnet. To start using these tools, The Customer need to log on to HSBCnet. After logging
on, The Customer will see The Customers personal page which displays buttons for various
tools on the red navigation bar. The relevant buttons are:
Receivables receivables management tools
Reports and Files report and file download tools
Administration user access tool
Create payor profile
After The Customer have acquired a new customer, The Customer can add the customer profile4
to our centralised database to facilitate future receivables matching and reconciliation. The
Customer can create the customer profile by using one of the following options:
1. Upload the payor file to the centralised database via HSBCnet5, HSBC Connect, or send us
the file by diskette, e-mail or CD-ROM.
2. Create payor records by using the receivables management tool on HSBCnet.
3. Request HSBC to create the payor profile on The Customers behalf where HSBC will capture
the payor ID/name of The Customers customer from the incoming transactions. The Customer
can provide the remaining details afterwards either through option 1 or 2 mentioned above.
Transaction enquiry
The Customer can perform online enquiries of transactions using the transaction enquiry tool on
the receivables management personal page. Historical information up to six months can be
enquired upon.
Instrument enquiry
The Customer may perform online enquiries of instruments using the instrument enquiry tool on
the personal page. Enquiries regarding historical information of up to six months can be made.
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Invoice enquiry
The Customer may perform online invoice enquiries on the receivables management personal
page. Enquiries regarding historical information of up to six months can be made.

7.7 File upload

The Customer may submit files to HSBC, either payor profiles or AR files if The Customer have
subscribed to the AR reconciliation module.
Report and file download
The report and file download tool enables The Customer to view, download and print transaction
reports.

7.8 Time deposits

The Time Deposits tool enables The Customer to place new time deposits, place or change
maturity instructions and enquire on deposit rates.
Click Time Deposits on the red navigation bar to access the tool.

New deposit placements

Maturity instruction maintenance (new / change)

Authorise new deposit placements

Authorise maturity instructions (new / change)

Time deposit interest rates enquiry

7.9 Report and file download

The report and file download tool enables The Customer to view, download and print a variety of
reports.
A comprehensive repository of reports is available for The Customer to access. Reports are
available at either account level or report level. Account level reports, which contain information
pertaining to a single account, will be generated on an account level basis. Report level reports,
which contain information pertaining to all accounts under the same customer ID, will be
generated on the customer ID level. Below is a summary of the different types of reports that are
available for access:
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 Account statements (available file formats: CSV, MT940 and BAI2)

Pooling and cash concentration reports
Collections - Consists of various kinds of collection and reconciliation reports, including incountry collection and regional summary reports
Disbursements - Consists of various payments reports, including autopay and cheque
outsourcing services
File upload acknowledge reports
File upload
HSBCnet file upload allows The Customer to submit multi-currency, multi-country instructions
to HSBC through a single file. This covers Payments, Advising, Cheque Outsourcing and
Receivables services. The Customer can perform file upload by selecting the most appropriate
file format based on The Customers requirements. Our file upload tool provides immediate
acknowledgement and initial validation reports to The Customer so that The Customer can
amend and resubmit instructions if necessary to avoid any instructions delay.
The Customer will need to carry out the following steps to perform file upload:
1. Upload Payments/Receivables files from the source directory
2. Check the status of file upload
3. Authorise successfully uploaded files (except for Pre-Authorisation)
There are three types of authorisation:
1. Pre-Authorisation -The file has already been authorised at The Customers back-office system
and no authorisation is required under HSBCnet.
2. Instruction Level Authorisation - The Customer can view the details of each instruction prior
to authorisation. The Customer can either authorise the instructions one by one
or use the select all function.
3. File Level Authorisation - There are two types of File Level Authorisation, namely File Level
Authorisation (Full Details) and File Level Authorisation (Summary). For File Level
Authorisation (Full Details), instructions will be authorised on a file level basis and The
Customer will be able to view the transaction details. For File Level Authorisation (Summary),
instructions will be authorised on a file level basis and The Customer will not be able to view
transaction details. Each file upload step and authorisation type are explained in the following
sections.
Upload payments/receivables files
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Check the status of file upload. There are six types of status. Please refer to the sections below
for detailed explanation of each status under different autroisation types.
Status Type
Received by bank
Rejected by bank
1st level checking
File contains error(s)
Pending authorisation
Authorised
Authorisation Type

Pre-authorised file upload (for Receivables Services)

Pre-authorised file upload (for Payments, Advising and Cheque Outsourcing Services)

Instruction level authorised file upload (for Payments, Advising and Cheque Outsourcing
Services)

File level authorised file upload (for Payments, Advising and Cheque Outsourcing
Services) see section.

Pre-authorised file upload (for Receivables Service)

Pre-authorised file upload (for Payments, Advising and Cheque Outsourcing Services)

7.10 Activity log

HSBCnet Activity Log enables The Customer to:
View the various Account Services activities.
Check the status of instructions sent to HSBC.
Make query on access control maintenance performed via the Administration tools (i.e.
Registration Status tool and User Management tool).
The Customer may carry out the above through the Activity Log (for Account Services) and
Activity Log Query tools:
Activity log query
Activity log query enables The Customer to make query on access control maintenance and
system access activities. With a series of filters, The Customer can build a set of query and audit
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reports according to The Customers preference. For each activity reported, activity log query
will tell The Customer who performed and authorised an activity, the date and time this was done
and the effect of any changes made to the system as a result.
Note:
Activity log query displays completed actions, not those in progress (e.g. changes pending
approval). Any action performed using the Admin tool that is currently in a pending state can be
queried directly from that tool.

7.11 Administration
The Customers password and memorable answer form an integral part of the authentication
process which protects The Customers organisation from unauthorised access to account
information. It is for this reason that the procedures explained in this section should be held
strictly confidential within The Customers organisations designated user groups. To reset or
change any or all of The Customers security information after signing on, The Customer can
click The Customers username and change The Customers security information section for
details. After changing The Customers security information, please enter The Customers
current password and click Submit and The Customers profile will be updated automatically in
The Customers next sign on.

PART-8

8. E-banking of Standard Chartered Bank

Web Bank

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Web Bank, the Internet Banking service for Standard Chartered's Wholesale Bank clients,
combines convenience and security in an easy to use system, making it one of the most
comprehensive Internet banking platforms available in the market today. Through Web Bank,
The Customer have access to Cash Management, Custody and Continuous Linked Settlement
solutions as well as Trade, Lending and FX information that leverages on Standard Chartered's
extensive international network.
Ease of Use

Quickly generate reports and initiate transactions

Automatic upgrades

Comprehensive help available to answer The Customers questions

Instant access to quick balances and information through Web Bank message centre

Comprehensive Reporting

Allows The Customer to accurately determine The Customers financial position

Easier reconciliation resulting from access to more comprehensive information

HTML, PDF or text format reports allow The Customer to select the format that best suits
The Customer

Secure Transaction Initiation

Reduced risk of fraud

Complete confidentiality and integrity of The Customers information

The Customer have the ability to restrict users to access specific functions, transaction
types or accounts

Access to Multiple Products and Solutions in One Interface

More convenient for The Customer to get the information The Customer need to do The
Customers job effectively

Reduce the amount of software that needs to be installed and maintained on The
Customers PC

Improved Mobility and Coverage

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Access Web Bank from anywhere at any time

Complete global or regional overview of all The Customers accounts

Easily provide and electronic banking solution to remote offices

Improve information sharing within The Customers company by granting access to more users.

PART-9

9.1 SWOT
In this part of the report we will develop a SWOT matrix for HSBC of Bangladesh on the basis
of the electronic banking system and the weaknesses. We will also develop the SWOT Matrix by
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relating the Opportunities and Threats HSBC is foreseeing at the present time. To develop the
SWOT Matrix, I have focused on primary and secondary information that I have gathered from
HSBC. The SWOT analysis was developed on the product feature of Hexagon and HSBCnet..
SWOT MATRIX: Hexagon
Strengths (S)
1.

Weaknesses (W)

Effective Electronic banking product 1.

Requirement

of

installation

of

for not Internet users.

software.

2.

Wide range of modules.

2.

Dependency on the telephone line.

3.

Low cost services for the customers.

3.

Not compatible with all the operating

4.

Global access.

system.

5.

Strong global brand image.

4.

Rick of abuse if the password is leaked

out.

Opportunities (O)

Threats (T)

1.

Easy acceptance for not web base user.

2.

Relatively

secure

due

to

dial-up 1.

Introduction of inter-net banking.

connection.

2.

3.

Scope for further enhancement.

market.

4.

Explore the introduction of other secure 3.

lines.

4.

Fear of losing market share of existing

Obsolete product.
High maintenance cost at the backend.

SWOT MATRIX: HSBCnet

Strengths (S)
1. Access The Customers account

Weaknesses (W)
1. Customers

are

yet

prepared

for

from ANYWHERE with Internet

accepting such web base banking

PC.

solution in Bangladesh.

2. Improved security and audit

2. Some customers still feel insecure

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controls

about it.

3. Multiple user access levels for

3. Delegation of functions to subordinate

different functions (balance inquiry,

is sometime risky.

payment preparation, payment

authorization etc.)
4. SmartCards and SmartCard readers

4. Need to carry Smartcard & reader.

for extra security for payment

authorizers.
5. Tailor to the customers need.

5. High cost in developing the product.

Opportunities (O)

Threats (T)

1. Use the product as a delivery channel

for other product.
2. Easier

to

keep

based products.
pace

with

the

enhancement of the Internet.

3. Unlimited access through website.
4. Using it as a delivery channel of other
products.

1. More banks are coming up with web2. The risk of security is increasing with
the development.
3. Substitute product developed by nonfinancial institution.
4. Price war.

Besides, the strengths, as every organization, HSBC also do have some weaknesses. Their basic
weakness in the local banking market of Bangladesh is their late entry in the market. Their
management system is also very centralized for which they are not being able take big decisions
informally. Moreover, because of Bangladesh Banks strict regulations for Multinational Banks
and the cost development convenient products and services are causing them to charge high price
of the services they provide.
There are also many threats in the banking industry and mostly in this sector. Other Banks are
coming up with more enhanced products these days and as such price war is on in the market.

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Moreover, there is a threat of developing products by the PCBs. The local banks, if they develop
products and services they will be market leaders as they have large network in the coutry, they
can grab big segment of corporate and can charge lower price.
If HSBC can fight with its threats existing in the market and can utilize the opportunities by its
strengths and with the reduction of weaknesses they can be able to have good
corporate portfolio in the banking sector with their wide range of products and
services.

9.2 Findings and Gap Analysis

In this particular chapter, we will be discussing about the findings we have ended up with after
being informed about the products and services of HSBC and On the basis of secondary data we
have gathered regarding Payment and Cash Management, products and services of HSBC and
Standard Chartered. The primary data were collected on the basis of in depth interview of the
responsible officials of the banks.

9.2.1 Delivery Channel:

There are various mediums of delivery services all around the world. In Bangladesh, HSBC and
SCB are serving the customers with delivery service by using two types of delivery services.
SCB is using Web Based Delivery Service, which in fact is known as Internet Banking. In the
Web Based Internet Banking Delivery Service, the customer get any count related data or even
input any data, as well as give instruction to the related Relationship Manager, by logging on to
the website of the SCB (www.standardchartered.com). The customers can do it at anytime and
from anywhere they want to provided, they have internet access. The service the customers will
get, will be through the ISP service provider. We can get the understanding of Internet
Banking by the diagram below:
The customers PC in Place-A

ISP
Network

Website of SCB
www.standardch
artered.com

Cutomers
account
number &
Password

Customers
instruction s
and data
121
receiving
mode

Figure Delivery Channel

Whereas, HSBC has just launched the web version of electronic banking in the name of
HSBCnet. But the existing electronic banking is through Dial Up system. In Dial Up system
delivery service, HSBC provides a modem to the customers it has in corporate cash management
department, which is linked only with the HSBCs server. No other ISP Network is over there as
third person link. The data the customers will get and also the data they will input as well as
instructions will be viewed as a communication chain with the customers and the bank itself. We
can get the picture of Dial Up delivery system with the diagram below as well:
The Customers PC

Connected with
the Modem in
customers
place

Customer
enters Account
Number and
Password

Connected with the

HSBCs Server and gets
data, recent transactions
and also can input data
and give instructions.

Figure# Delivery Channel

9.2.2 Security Advantage of Dial Up System:

The Dial Up delivery service HSBC is providing to the Cash Management customers has
better security protection than that of the SCBs Internet Banking. Because, in SCBs Internet
Banking Delivery Management service, the customer can log on to his/her account through
website. As a result, this option often might occur leakage of information that the customer is
getting or inputting, as a third party ISP network of the customer is there. On the other hand,
HSBC has direct link with the customers PC without a Third party ISP Network, as they have
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their own modem installed in the customers PC. As a result of it, no third party can leak the
information, being shared by the customer and HSBC.

9.2.3 Installation keeps the privacy in Hexagon:

In Delivery Management System of HSBC, it has HEXAGON, which is connected through
Dial Up Network System. As a matter of fact, as in Dial Up System, there has to a modem
installed to the customers PC. So, the customer has to install the software of Hexagon as well.
This installation keeps privacy of the customers account information, as the customer has access
only in his/her customer. Moreover, if he customer faces any problem regarding the Hexagon, it
can reinstalled or even fixed up. Whereas, in EBSW self-installation is there and any unique
problem, while using EBSW with Internet Banking facility cannot be fixed up immediately
unless and until the Internet is not fixed up.

9.2.4 Any trade can be operated by Hexagon:

HSBCs Hexagon has benefit that does not exist in the Delivery Management Service-EBSW.
Through Hexagon, a corporate client can undertake facility of all his Trade Services HSBC
offers. Customers can optimize and rationalize Trade Finance transactions through Hexagon.
This indicates to simplifying the Trade Operations by significantly reducing paper work through
its streamlined functionality for faster and more accurate processing and administration.

L/C applications, issue, amendments, funds withdrawals,

Import collections and

Reimbursement authorizations.

On the other hand, with SCB and HSBCnet have not yet introduced trade services through the
internet banking.

9.2.5 Real Time banking in HSBC:

HSBCnet provides real time statement viewing, which means it gets updated as soon as the
transaction takes place. There isnt any requirement of batch run.
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Hexagon provides such security service to the HSBC customer that enables them to enjoy the
real time banking service. This means statements in Hexagon gets updated 6 times a day that
allows the customers to monitor the transactions closely. As a result, if any customer could not
see the first time information can get the updated version from this retrieve information on any
kind of transaction.
On the other hand, Standard Chartered clients can see their transaction information but the
previous days one, as they dont do the real time banking. Standard Chartered provides other
securities such as user authorization, Password protection, Authentication & Encryption and
Tracking transactions but could not give the most updated information at the same day, which
might also help them to serve better.

9.2.6 Cheque writer:

Both HSBC and Standard Chartered Bank possess the product named Cheque Writer. The
HSBCs product is called Hex Cheque in short that is built-in module of Hexagon to facilitate
our corporate customers for preparation printing and updating the PC ledger (ledger maintained
in Cheque Writer). Standard Chartereds cheque writer is also a user-friendly product that is
offered to the corporate customers to facilitate the preparation, printing and recording of
Standard Chartered cheques.
One of the differences between these two cheque writers is in case of SCB they need separate
software to print the cheques or to do other jobs with the product. In case of HSBC, they do not
need any separate software, as a module of Hexagon is one of the same platforms. So there is no
reinstallation problem, no extra installation cost, no training required for how to operate the
software and also very easy to use.
Financial

Product

Institutions
HSBC
Hexagon
Cheque

Facility
It is a built-in module of Hexagon to facilitate our
corporate customers for preparation printing and
updating the PC ledger (ledger maintained in Cheque
Writer).
124

SCB

Cheque Writer

Cheque Writer is offered to the corporate customers to

facilitate the preparation, printing and recording of
Standard Chartered cheques.

HSBCs cheque writer has the facility of auto reconcile with the statement as it consist the same
module of Hexagon. So the customer does not need to go through the whole process, it can be
done by itself. In case of Standard Chartered, it has to be done manually as they need to install
separate software for cheque writer.

Financial

Product

Institutions
HSBC
Hexagon

Reconciliation
Auto Reconciliation

Cheque
SCB
Cheque Writer
Manual Reconciliation
Table# 10 Operating Chequewriter

In the image below we can even get know bout how it works:

Figure# 9 Chequewriter

9.2.7 Cheque Leaf:

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HSBC has two options in regard of cheque leaf. First one is the customer can get a cheque with
advice and another one is continuous cheque. Cheque with advice is for those customers who
want to keep an invoice with them so that they can have the evidence of documentation. The
continuous cheque leaf does not have any advice and can be used without any invoices. Standard
Chartered has only the cheque with advice. The problem is some customer wants the continuous
cheque leaf, in that case SCB is lagging behind to satisfy the customers.

9.2.8 Salary Payment Service (Low Value Payments):

Every financial institution has to maintain some kind of low value payments and collection for
the clients. HSBC does this through a service called Batch Payment Service in their delivery
management and Standard Chartered Bank does it through their OPSPAY service.
The Batch Payment Service is very easy to use, convenient and time-saving. The main difference
between OPSPAY and Batch Payment is- in Batch Payment, it no longer needs to do the
collection or payments instruction in the form of paper lists, floppy Diskette or tapes, while it can
be done through effective instructions given electronically if also required and directly from the
back-office, thereby, this will help to avoid the time consuming repetition and errors.
On the other hand, OPSPAY also user friendly and provide wide range of service but all
instructions are done through Floppy Diskette, e-mail. In this case there is a chance of damaging
the instruction that is downloaded into the Floppy Diskette or can be leaked somewhere else
from the diskette, which might create insecurity among the customers.
We can also understand the difference with the help of the table below:
Financial Institutions
HSBC

Product
Batch Payment

Facility
Instructions

are

electronically
SCB

OPSPAY

received

with HEXAGON.
Instructions are received
with

either

Floppy

Diskette or through e126

mail, and then processed

with OPSPAY sorftware.
Table# 12 Salary Payments Services

9.2.9 Trading Services through Electronic Banking:

Trade is an important part of corporate banking and huge amount of cash management is
required in trade service. In Delivery Management of HSBC the Hexagon provides Electronic
data Interchange (EDI) services by Electronic Trade Related Services (ETRS) that allows the
customers to automate the exchange of documents and data for companys and not only that they
also have the facility of communicating with their suppliers, clients and relevant government
bodies through electronic communication. This EDI improves the trading efficiency as all the
paper based documentations such as purchase order data, letter of credit or documentary credit,
invoices is being processed electronically between the parties. The electronic communication
makes the whole process faster and secure as not all information is given to everyone, different
documents can be sent to the trading partners according to the requirements. The most important
issue is this EDI service provides the opportunity to communicate directly with the party and no
third party is involved, so no risk of miscommunication or licking of information.
On the other hand, Standard Chartered Bank also provides full range of trade services to the
customers with details information by reporting in different trade reports. This separate trade
reports enables the customer to understand different information of trade services and reduces the
chance of the clients overloading information. The disadvantage is they do not provide any
electronic service in trade service so that sometime if required the client might not get the
information at hand on time.

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PART-10

10. Future of Electronic Banking

The future of Internet banking is enormous. Now banks are not just thinking it as a product but
as a delivery channel as well. This is not exception for HSBC.
HSBC is provides the best-of-breed integrated cash management solutions to The customer
consisting of Integrated Receivables Solutions (IRS), Integrated Payments Solutions (IPS),
Liquidity Management Solutions (LMS) delivered through our Integrated Delivery Channels
(IDC), also known as HSBCnet.
We understand how important accounts receivable (A/R) management is to The Customers
business. With the Integrated Receivables Solutions (IRS), we can help The customer to
streamline The Customers A/R processes to accelerate the conversion of receivables into cash,

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achieve better control of The Customers cash flow and thus enhance the management of The
Customers working capital.

Receivables
management
system
B2B and B2C
collections

ERP/
Treasury
Treasury Our
Management
Systems
Clients
A/P
Management

Back-office
Integration

Integrated
Account
Receivables
management
Solutions
Liquidity
Integrated
Investments
Management
Delivery
Solutions
Channels
Pooling
Integrated
Hexagon ABC
and cash
Payments
(host-to-host)
concentration
Solutions
HSBCnet
(internet)

A/R
Management

Customer

Receivables
Management
Solutions

Integrated Solutions

B2B and B2C

payments

Back-office
Integration

Beneficiary
advising

Receivables Management System (RMS) is the backbone of IRS, which provides powerful tools
to The customer to centralise and reconcile all the collection items received from various parties
among different regions with Bangladesh.

Features & Benefits

RMS contains three components Centralised database, A/R reconciliation and Consolidated
reporting.
Centralized database is the data repository of all the collection item details (e.g. invoice
number, payor ID etc.) extracted from various collection channels and internal systems. It is also
a warehouse of the A/R records, reconciliation parameters and payor profiles provided by The
customer for reconciliation.
A/R reconciliation function extracts The customers transaction details, A/R records, payor
profile to conduct payment allocation and reconciliation. The Customer upload the A/R and

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Payor File through HSBCnet, or we do it for The Customer. We transact against The Customers
Payor/invoice IDs. The system automatically reconciles The Customers invoices, and delivers
the reconciliation reports to The Customer through HSBCnet.
Consolidated reporting function extracts information from the centralised database to generate
consolidated reports for The customer to view via HSBCnet. Data file formats are available for
download for further integration into The customers back office system. Reports include daily,
weekly, monthly collections and invoice reconciliation reports (if The Customer wish to avail the
reconciliation service).

RMS Features

Benefits to The customer

Centralised database

Invoice pattern extraction from payment

A/R records and reconciliation parameters

Reduce The Customers operations

cost

Improve customer service

Automatic reconciliation

Automate A/R process

Support various reconciliation cycles

Shorten the overall A/R cycle

Allocate payment by invoice, payor or both

Improve accuracy

Improve costeffectiveness

Automate exception handling with pre

Enable strategic and timely business

warehousing

defined allocation rules

HSBCnet empowerment
-

online enquiry
-

decision making

Provide receivables management tool for

Provide file download for data files for

Reduce operations cost

Minimise human error

seamless integration into backend system

Consolidated reports and early report

Enable strategic and timely business

generation

decision making

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RMS Features

Benefits to The customer

Tailored made reconciliation handling

Improve the reconciliation successful rate

Manual exception handling

Additional information capturing

How it works

The
customer

Payor/Buy
er/Distrib
utor

AR
file

Report
generation

Collection from
various channels

RMS

During regular A/R cycle, The customer will generate the A/R records and issue invoices to end
customers
The customer sends A/R records to HSBC electronically
Payors will make payment via different channels, including:
Paper based instruments
Cheque (Through EasyPay,

Electronic instruments
Wire transfer (TT)

HSBC Counters and

Autopay direct debit

Correspondent Banks)

Bill payment

Cash payment via Correspondent

In-house transfers

Banks
On receipt of the payment, RMS will capture the payment or invoice details into the centralised
database and for reporting and further reconciliation.

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The customer can retrieve the collection, reconciliation report, or download data files via
HSBCnet.

PART-11

11. Conclusion:
In the last decade there has been a revolution in the communication media through the
introduction of Internet and other forms of secure dial up media. This had an immense impact
on all the sectors of the industry specially the banking sector. Traditionally in order to execute a
banking transaction a customer would require coming at the bank. But due to the introduction of
electronic banking, customers now can have access to their account 7days a week 24 hours a day
and execute the transaction from their office. In Bangladesh there has been no exception. Now
due to electronic Banking except for cash customers are no longer require coming at the bank. It
has not only benefited the customers but the bank as well. From Banks point of view this has
helped prevent customers queuing up at the bank counters thus helping to minimizing the cost as
well as the workload for the employees.

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In Bangladesh HSBC can focus on their strengths to materialize the opportunities hidden for
them in the banking industry and also they can work on their weaknesses to develop the product
effectively and grab more opportunity hidden in the banking industry. With their strengths HSBC
can also reduce the threats existing in the market. They have global strength with their solid
brand image and experience and skills as well, with which they are being able to satisfy the
customers with their wide range of products and services.
HSBC can overcome, these hurdles and utilize the strengths, as the Bangladeshi banking industry
has possessed some positive sides. Bangladesh is growing market where new businesses are
coming up and in this emerging market and HSBC can introduce its products and services
effectively to the upcoming corporate. Moreover, it is an emerging market, various
multinationals operating in the country will expand and new multinationals will come. These
multinationals have huge need of electronic banking products for Payment, Collection and
Delivery need to manage their expanding business. They also need liquidity management for
proper funding and by focusing on these opportunities; HSBC can create an effective corporate
portfolio in the country.

Bibliography
HSBC Group Standard Manual-Corporate, Investment Banking & Markets
Issued by HSBC
HSBC Group Standard Manual-Operational Control
Issued by HSBC
HSBC Group Standard Manual-Group Strategy and Structure
Issued by HSBC
HSBCs Guide to Cash & treasury Management in Asia Pacific
Issued by HSBC in 2004

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HSBCnet brochure
Issued by HSBC in 2005
Security brief HSBCnet
Issued by HSBC in 2005
HSBCnet User Guide
Issued by HSBC in 2005
Hexagon Global Electronic Banking Brochure
Issued by HSBC in 2000
Website address:
http:// www.hsbc.com
http:// www.hsbc.com.bd
http:// www.standardchartered.com/bd
http://www.ffiec.gov/ffiecinfobase/booklets/e_banking/ebanking_00_intro_def.html
http://www.ffiec.gov/ffiecinfobase/booklets/e_banking/e_banking.pdf
http://www.ffiec.gov/ffiecinfobase/html_pages/gl_01a.html
http://www.mtk.ut.ee/doc/febawb30.pdf
http://www.valuenotes.com/asps/IndustryArticles.asp?Id=132
http://www.forumforthefuture.org.uk/uploadstore/Barclays_case_study.pdf

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