Page 185 - A Banker Down the Rabbit Hole

approved. Almost 80% clients either had their own representative office
in name of a local company in overseas Centre or had partnership firms
with one name sake local partner as per local laws. The approval or
sanction was obviously for purchase /discount of bills drawn on ''unrelated"
third parties.

Great Dilemma
Now the question was, "Should we continue to purchase or not, such bills
called "House Bills" as these were drawn on parties "related" to the seller
(our exporter borrower)''. In such cases, the credit lines could be
approved but lines approved would be for much lower amount than those
drawn on unrelated parties. The reason was that the credit risk was not
dispersed to a different party as the importer buyer was a related party
or deemed same party overseas. This fact had to be disclosed by the client
which in all cases at this Centre had not been done.

We pointed out the lapse on the part of customers and they were quick
to defend. They pleaded, "This is rather a better and more secure position
for the bank because there is no risk of third party default. Our own
partnership or representative office receives and retains the goods
covered under export bills submitted by us, sells them and remits the
amount to the bank in Hong Kong for payment towards the export bills."

There was a point in this argument but we could not be violating terms
of sanction by Head office. As we could not continue with the status quo
for long, we had to report the matter to our higher authorities seeking
their guidance in the matter. They only verbally advised us to request the
clients to disclose these facts to the bank in their request for renewal of
the credit lines in the next yearly cycle to rectify the position in records.

I attracted a lot of personal criticism from clients having rocked the boat
by challenging the status quo and more particularly for debiting charges
for getting the credit reports. But I was satisfied that I did my duty well
and discovered some faulty practices that remained undetected for long
and was a big risk situation for the bank.
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182 | A Banker down the Rabbit Hole