Thefinancial market of Bangladesh is a booming one. The market itself is relatively young and is venturing into new territories of services that are deemed necessary.
The commerce ministry and Bangladesh Bank together have brought revolutionary
changes in the market to help it diversify its product portfolio in a controlled and safe manner.
History has shown us that runaway commerce can be devastating. Unfettered speculation can lead to inflated prices and absurd nominal portfolios with little real assets. In the end, it leads to dead investments that are poured into bloated stocks with high uncertainty. In 2006 Bangladesh faced a similar disaster where rampant speculation and failed DSE safeguards lead to thousands of investors losing value on their investments.
The currentfinancial industry is countering competition. Lots of new but similar products are being issued by differentfinancial institutions. In order to occupy the market, these companies try to attract investors by means of price reduction. We need to understand the structural problems and institutional deficiencies in this competitive state, andfind the corresponding treatment methods. If this problem is not solved, it is bound to affect the healthy development of Bangladesh’s economy.
In fact, reasons for this vicious competition in the Bangladesh financial sector are very simple.
Firstly, Bangladeshifinance is not only affected by the bad habits of the inter- nationalfinancial community, but also due to a structural imbalance. Bangladeshi financial products lack a more effective and safe product innovation. Secondly, the performance incentive mechanism is unique and irreplaceable.
Firms compete in a zero sum environment and fight to take control of the consumer base. Consumers also lack the technical and academic dispositions required to effectively appraise the value of similar competingfinancial services.
Institutions are used to robbing other agencies of clients on account of directivity and effectiveness. The“index economy”with Bangladeshi characteristics is also an important reason for Bangladesh’s GDP index to go up in last 10 years. To better protect the rights of thefinancial consumers, actions must be taken by thefinancial authorities.
First of all, if people here can change the“xenophile”habit of thinking, then we can reduce the pressure of private banks. Many domestic banks have one or two foreign banks as their strategic partners. In fact, the contribution of these private banks to Bangladesh is significant.
Investments made from foreign sources and funding for entrepreneurial and industrial ventures have seen an increasingly large share of private funds being mobilised. They also perform better in performance indexes, namely debt retrieval and other such performance metrics. Foreign banks make the use of Bangladesh banks to improve its fame and market share in Bangladesh. In view of this, the Bangladesh banks can learn more technical skills and management methods from foreign banks and benefit from each other. Instead of focusing attention on domestic market and competition, Bangladesh bank is supposed to put more emphasis on international market.
The Bank heist of nearly a 100 million BDT last year was especially reminiscent of how far the country lag behind the rest of the world in terms of banking security.
Technology is constantly evolving to make banking more secure and financial services more reliable all the time. Associating with foreign banks that use these technological revolutions in their operations can have a learning effect. Eventually, the aim is to have Bangladesh Bank use the same technology and achieve an unparalleled security in banking.
Next, instead of chasing high income by means of cutting price, financial institutions are advised to emphasize on risk management. It is common sense that high profit is always accompanied by high risks. Based on systematic risk man- agement, it would be obvious to discover that risk management could improve the quality of asset and consequently enhance competitive power. In the long term, giving up purely chasing turnover is a more rational transformation for most of the financial institutions in Bangladesh.
Plagiarism is another well-known problem over the Bangladeshfinancial mar- kets. It is important and effective if the government could stipulate specific laws with regards to plagiarizing. For example, to launch more regulations on new thriving products, as indicated in IDRA2010.
References
Bangladesh Bank Financial Stability Department, BBFSDa. (2014, March).Financial Stability Report.Retrieved from Bangladesh Bank, Central Bank of Bangladesh:www.bb.org.bd Bangladesh Bank Financial Stability Department, BBFSDb. (2014, March). Scheduled Bank
Statistics.Retrieved from Bangladesh Bank, Central Bank of Bangladesh:www.bb.org.bd Bangladesh Bureau of Statistics, BBS. (2014, March). Rural Credit Survey. Retrieved from
Bangladesh Bureau of Statistics, Government of the People’s Republic of Bangladesh:http://
www.bbs.gov.bd/
Bangladesh Bureau of Statistics, BBS. (2015, March). Bangladesh Vitality Reports.Retrieved from Bangladesh Bureau of Statistics, Government of the People’s Republic of Bangladesh:
http://www.bbs.gov.bd/
BSEC, (2017). Bangladesh Securities and Exchange Commission, Notice, Additional Supplement, Bangladesh Gazette, June 2017, Government of Bangladesh.
IDRA. (2010, March).Draft Regulations.Retrieved from Insurance Development & Regulatory Authority Bangladesh:http://www.idra.org.bd/
IDRA. (2015, March). IDRA Profile. Retrieved from Insurance Development & Regulatory Authority Bangladesh:http://www.idra.org.bd/
Greg Chen. (n.d.).The Growth of Mobile Financial Services in Bangladesh. Retrieved from CGAP:http://www.cgap.org/blog/growth-mobile-financial-services-bangladesh
Mutual Trust Bank, MTB. (2015, October). Mutual Trust Monthly Business Review.MTBiz.
The Financial Express. (2016, January 4). Ensuring consumer protection in banking.
Muhammad Ziaulhaq Mamunis a professor at the Institute of Business Administration (IBA), University of Dhaka, Bangladesh. He did his Bachelor in Civil Engineering, Master of Business Administration (MBA) in Management Science, MBA in general Management, and Ph.D. in Urban Development Management. He is a Post-doctoral Fellow of Urban Environmental Management Program of the Asian Institute of Technology, Bangkok. With more than 30 years teaching and research experience, he has specialization in the areas of risk, disaster, quality, and operations management. He has authored four books, edited one book and contributed in nine book sections. Dr. Mamun has over 145 publications (72 journal articles and 73 conference proceedings) in planning and management related areas. Dr. Mamun is awarded the most prestigious“UGC (University Grants Commission, Bangladesh) Award 2013”for his academic excellence in the area of Economics and Business Studies. He is two times winner of the most prestigious University of Dhaka Ibrahim Memorial Gold medal for his outstanding academic and research work.
Financial Consumer Protection
in Canada: Triumphs and Tribulations
Robert R. Kerton and Idris Ademuyiwa
The imbalance of power between consumers and providers is particularly marked infinancial markets. In part, this is due to the complex nature offinancial products and services which often have a deferred expected pay-off to the consumer and, in many cases, are purchased only rarely.
World Bank, 2012.
1 Financial Consumers in Canada
Financial consumers are individuals or economic agents who purchase or use financial products and services with the intention of improving their well-being.
Historically, services were supplied by trusted informal sources (e.g.: family, reli- gious group or informal co-operatives). Over the last centuryfinancial consumers have made most purchases from formal intermediaries in the Canadian financial services sector. More recently,financial consumers have engaged in opportunities not under state regulation including direct digital transactions like crowdsourcing and consumer-to-consumer exchanges.
Four factors are key to understandingfinancial consumers protection in Canada:
(i) Compared to most countries, Canada was relatively early in establishing a specific agency to protect financial consumers. The Financial Consumer Agency of Canada (FCAC) was created in 20011 in time to address the worldwide crisis of 2007–08. This type of agency is exceptionally important whenever consumers are not protected by the vigorous rivalry assumed by perfect competition. The FCAC, like most of Canada’sfinancial regulators has provided more triumph than tribulation.
R. R. Kerton (&)
University of Waterloo, Waterloo, Canada e-mail: kerton@uwaterloo.ca
I. Ademuyiwa
Centre for International Governance Innovation (CIGI), Waterloo, Canada
©Springer Nature Singapore Pte Ltd. 2018
T.-J. Chen (ed.),An International Comparison of Financial Consumer Protection, https://doi.org/10.1007/978-981-10-8441-6_4
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(ii) Secondly, the historical development of legislation to protect financial con- sumers is based on four financial sectors regulated under the Bank Act,2 Cooperative Credit Associations Act,3Insurance Companies Act,4Trust and Loan Companies Act,5The Investment Canada Act,6and under other rules providing incentives and boundaries for financial institutions in Canada.
These include accounting regulations, rules to limit self-dealing, to require diversification, to protect national security etc.
This legislative focus on suppliers was called the“four pillars”offinance in Canada. To consumers, the term “four pastures”seemed more apt because the firms, like cows in each fenced-off sector, chomped contentedly on the grass in its protected area without challenging any of the fences.7From the 1950s to the 1980s, the grass behind each fence looked especially green. By the 1990s, deregulation eliminated fences—a policy aimed at increasing competition. Instead, a wave of mergers and takeovers led to big banks dominating the trust pasture and the investmentfield. The result is now six giant bank-based financial conglomerates. Concentration also took place withinbanking: those six now handle more than 93% of transactions of the banking sector.
(iii) Thirdly, Canada has ten provinces and a financialfirm can be incorporated under federal laws or under alternative provincial legislation. As a result, Canada has at least fourteen agencies regulatingfinancial services. Efforts to harmonize financial regulations have long been underway, but progress has been made at a glacial pace. One result of this complex web of rules is high compliance costs for firms. Less noticed are equally devastating effects on (a) consumers, and (b) on market efficiency. For redress, disappointed
consumers need to know where to obtain justice—a very difficult task. This is illustrated nicely by the experience of Margaret Stanstead, a local volun- teer for the Consumer’s Association of Canada (Manitoba) in the city of Winnipeg in the 1970s—prime time of the consumer movement. She single-handedly answered 5,385 phone calls for consumer assistance before apologizing that she “never had the strength to be active.”She went on to handle more than 35,000 calls. The bulk of her work related to helping consumers overcome the complexity of Canada’s redress systems by directing them to the correct agency. Decades later, consumers still face a system assessed by the Competition Bureau in 2017 as “complex, pre- scriptive and fragmented”.8High search costs make it more difficult to assess choices, switch suppliers, and to seek redress.9Canada’s complicated and unevenfinancial regulation is unmistakably a source of tribulation.
(iv) Fourthly, the federal Competition Act10 contains Canada-wide regulations for truthful marketing (market conduct rules), plus measures to counter monopoly. Competition regulation is national in scope and applies to prac- tices of both traditional services and to digital offerings. The key issue for the financial services sector—and the basis for regulation—is quality.11There is a reason why market conduct rules provide the key to the success of FinTech:
quality is the vital component of innovation and fintech. If consumers can detect quality, they move to the sellers with the best offerings. When the financial market rewards the right innovations, it improves the lives of consumers at all income levels.