14th ABA Conference in Moscow

1997

Challenges and Opportunities for International Bankers

31 August-2 September, 1997

SUMMARY OF THE PROCEEDINGS

1. The 14th General Meeting and Seminar of the Asian Bankers Association (ABA) was held on 31 August – 2 September 1997 in Moscow, Russia. Attending the event were some 150 representatives from member and non-member banks, about 100 of whom came from the Asia-Pacific region and the rest from Russia. Held for the first time in Russia, this year’s annual meeting was hosted by the International Industrial Bank (118), and co-­sponsored by the Association of Russian Banks and the Republican Investment and Credit Bank of Bashkortostan (BashCreditBank).

2. The ABA Board of Directors also held its 24th Meeting in Moscow.

 

The Seminar

 

3. The 1997 Seminar carried the theme “Challenges arid Opportunities for International Bankers,” with focus on Russia. With the country’s newly-opened economy eager to attract foreign investment and given the ongoing market reforms, the ABA recognized the enormous opportunities for financial institutions and their clients in Russia. The theme for this year’s meeting was therefore chosen to provide participants with an update on the rapid changes taking place in one of the world’s largest emerging markets.

ABA 14th 0074. Top Russian officials and banking personalities attended the Opening Ceremony. Leading the line-up of special guests and speakers was H.E. Victor Chernomyrdin, Prime Minister of the Russian Federation. In his Welcome Remarks, Prime Minister Chernomyrdin said that the holding of the ABA meeting and seminar in Russia testifies to the increasing confidence of foreign businessmen in the country’s ongoing reform process and shows the expanding mutual relations between Russia and the outside world. He spoke about the “breakthroughs” in Russia’s economy, such as lower inflation, progress in the financial markets, more rationale financial policy, well-balanced budget, simpler tax system, and more entrepreneurial activity. He cited efforts to improve the investment environment of Russia and stressed that by the year 2000, the country expects to attract US$10-15 billion in investments annually.

5. In a message read for him by Sergei Dubinin, Chairman, Central Bank of Russia, President Boris Yeltsin said that the Moscow Meeting of ABA provided a good opportunity for its members to take a closer look at the economic status of Russia and to get acquainted with the Russian people. He explained that the basic structural changes in the Russian market have largely brought inflation, government spending and the ruble exchange rate under control. He noted that the liberalization of the financial system has led to a rapid consolidation of the banking sector and with these developments, exciting prospects have opened up for both domestic and foreign banks in Russia Banks now have more freedom to expand into new activities, including those promising higher returns. President Yeltsin expressed hope that the ABA meeting would set the ground for greater business interaction between Russian bankers and their counterparts in the Asia-Pacific region. The full text of President Yeltsin’s Message appears as ANNEX 1.

6. Sergei Egorov, President of the Association of Russian Banks, welcomed the delegates on behalf of the more than 1,000 members of his Association. The Moscow meeting of ABA, he pointed out, represented a landmark in the development of relationships between Russian and Asian banks. He said that efforts have been made to create new structures, institutions and organizations in transforming the socialist system that prevailed for the past over seven decades. In this transition process, the banks play a crucial role in financial intermediation to build an economy on market principles, Mr. Egorov stressed. He urged the ABA members to position themselves for the new opportunities that Russia’s emergence as an investment and financial market has opened up for the banking industry.

7. ABA Chairman Peter B. Favila, in his Welcome Address, said that the timing of the ABA meeting couldn’t have been more historically significant as it was being held less than a week from the 850th year celebration of the founding of the city of Moscow. The theme of this year’s ABA General Meeting, he said. will always be a current and a recurring one “as globalization and liberalization trends are expected to flourish in the advent of borderless capital flows and continuing initiatives to open up closed economies.” The full text of Mr. Favila’s Welcome Address appears as ANNEX 2.

8. On his part, ABA Founder Dr. Jeffrey L. S. Koo considered the Moscow ABA meeting as doubly eventful, “for not only does it mark a milestone in the development of a stronger bond between Russian bankers and their counterparts from the Asian region, but also reflects the Asian bankers’ recognition of the growing importance of Russia both as a major market and as a place for long-term investment.” Dr. Koo expressed hope that the networking that would result from the meeting would help Russia achieve its objective of integrating into the world financial markets. The full text of Dr. Koo’s Remarks appears as ANNEX 3.

9. The two-day seminar was divided into seven sessions, each focusing on specific aspects of the chosen theme. Every session featured speakers and commentators who discussed current developments in, and exchanged views on, the given topic.

10. Session 1 focused on “Report on the Russian Economy ” and featured three speakers:

a. Sergei Dubinin, Chairman of Russian’s Central Bank, talked about recent developments in the Russian economy and, in particular, in the country’s financial markets. He said that Russia is capable of adhering to the Basie principles of banking supervision and “to work in a more dependable way. “He cited Russia’s more liberal policy towards foreign investments in the banking system, noting that most of the leading banks in the country have foreign equity.

b. Alexei Kudrin, Deputy Finance Minister of Russia, noted the growing interest of Asian bankers in Russia. While he admitted that there are still some political instabilities in the country, there are also some positive developments. These include, among others: (a) a quickening in the pace of structural reforms; (b) the setting in place of a number of measures to eliminate imbalances in the economy; (c) reduction in the budget expenditures; (d) abolition of the old system of social safety nets; (e) improvements in the tax and budget codes to help stabilize the budgetary system; (f) simplification of the tax collection system and creation of a more efficient taxation system; and (g) the acceptance of Russia into the Paris Club as a creditor. Mr. Kudrin expressed hope that these changes are accepted by foreign investors and would serve as impetus for Asian bankers to invest in Russia.

c. Igor lwanov, First Deputy Minister of Foreign Affairs of Russia, focused on the political component of the Russian environment. He underscored the efforts of the government to bring about political stability in the whole Federation. He also cited Russia’s readiness to intensify relations with neighboring countries such as China and Japan, and to enhance interaction with the Asian region as a whole. As a supporter of the principle of open regionalism, Russia is closely monitoring developments in APEC, Mr. lwanov said. He also informed the meeting of Russia’s application for membership with APEC and the Asian Development Bank.

11. Session 2 dwelt on the topic “Regulatory and Operating Environment” and featured two speakers:

a. Yacob Urinson, Russian Economic Minister, told the audience that improving the country ‘s investment climate was one of the key priorities of the government. A number of incentives are being granted to foreign investors, including tax and duty privileges and the authority to undertake investment activities in designated economic zones, he said. The government is also implementing reforms focusing on the introduction of internationally accepted accounting procedures and standards in Russia to improve compatibility and comparability of Russian business practices with those abroad. Mr. lwanov informed the audience that Russia is now moving into the second phase of its membership application with the World Trade Organization (WTO). The government has also submitted its formal application for membership with the OEC D and is preparing multilateral agreements on investments with OECD countries. Moreover, Russia has concluded agreement on the promotion and mutual protection of investments with 32 countries. In conclusion, Mr. lwanov said that while foreign investments in Russia is still small, perceived economic conditions and perceived profitability of foreign investments are improving He expects 1998 as a breakthrough year for Russia as far as foreign investments are concerned.

b. lozif Ordzonikidze, Deputy Mayor of Moscow, talked about the rapid changes taking place in the Russian capital. He said that the city government no longer wants Moscow to be a center for industrial development but is now focusing its investment policy on programs that will transform the city into an international center for tourism, commerce and high-tech industries. He enumerated the various projects under implementation which include the development of commercial complex, housing projects, spiritual centers (e.g., cathedrals), business areas, transportation systems, and entertainment centers. He also noted efforts of the city government to promote small businesses.

12. Session 3 was moderated by Gloria Noeline M. Alles, Senior Deputy General Manager of Bank of Ceylon, and featured three speakers who spoke on “The Banking System in Russia”.

a. Sergei Egorov, President of the Association of Russian Banks, said that with the beginning of economic reforms in the country, the newly organized commercial banks have become locomotives of the reforms. Today, Russian commercial banking system comprises about 1,800 banks with almost 40,000 branches and with 26.0 trillion rubles of aggregate charter capital, he said. He also noted that Russian banks have already entered the international financial markets. Many Russian banks have launched their representative offices abroad, extended their correspondent relations and now enjoy recognition of the world banking community. As of today, 10 Russian banks are on the list of 1,000 world largest banks. Some of them, he pointed out, have started to operate on the Asian financial markets. Mr. Egorov said that there are wide opportunities for foreign investors in Russia, now that the country ‘s financial markets are becoming more stable, the financial situation becoming more predictable, and there is a favorable environment for shifting of capital into the production sector.

b. Sergei Veremeenko, President of the International Industrial Bank (IIB), talked about the growth of IIB as well as on the bank’s investment strategy. He said that IIB is active in the interbank borrowings market, governmental and corporate securities market. It finances companies engaged in trade, industry and transportation services. The main strategic tasks of the bank for 1977, he pointed out, are: (a) to participate actively in various federal and regional budget programs; (b) to finance and provide settlements for defence industry enterprises; (c) to participate in reconstruction of the central part of the city of Moscow; (d) to finance the Russian gold-mining companies; and (e) to develop the aviation business on the basis of Rossiya aircraft unit. He concluded by calling on his colleagues in ABA to jointly implement various investment programs.

c. Azat Kourmanaev, President of Republican Investment and Credit Bank of Bashkortostan (BashCreditBank), identified his region – Bashkortostan – as one region that should be of interest to foreign investors, where funds could be placed and, more importantly, which is able to offer viable projects that would ensure repayment of loans. He said that oil refining, energy complex, and oil production are sectors which, together with machine-building and communication enterprises, could utilize the bulk of investments into the region and guarantee proper debt service, “where necessary through delivery of counter-trade goods.” Mr. Kourmanaev also talked about the services offered by BashCreditBank to foreign investors who may be interested to explore investment opportunities in Bashkortostan. He noted that presence of Asian financial institutions or exporters is not yet pronounced at the republic, and expressed hoped that through his bank’s membership in ABA. BashCreditBank will be able to find new business partners.

d. Commenting on the presentations of the three speakers, Thomas Chen, Senior Executive Vice President of Chinatrust Commercial Bank, said that only in Russia has a seen a banking industry that is so young and so full of energy and vitality. He observed, however, that while the number of Russian commercial banks is “staggering,” there is a certain degree of concentration: with 8°/o of the banks owning 51°/o of the total assets, and with the large majority based in Moscow, leaving the other regions “underbanked.” He further noted that a large number of banks have substantial affiliations in non-banking industries. Mr. Chen also cautioned that the continued budget deficit of the government could inevitably lead to a crowding-out effect, creating a situation where money is not properly channeled to the productive sector. He concluded by calling for a further opening of Russia’s financial markets to foreign banks.

13. Session 4 focused on “Doing Business In Russia” and was moderated by John Brennan of Lippo Bank. Two Russian speakers made presentations on the topic:

ABA 14th 003a. Sergei Bednov, Vice President of the Chamber of Commerce and Industry of the Russian Federation (CCIRF), said that the main role of government in encouraging investments in Russia is to provide legal protection to investors and contribute to the building up of confidence. He called on the government to (a) improve the country’s taxation system; (b) provide a well-developed financial mechanism aimed at supporting small and medium enterprises; (c) create an environment conducive to technological and scientific development; (d) enact tough measures to protect copy rights; and (e) provide investment incentives (e.g., tax privileges, risk insurance). He also noted that most investments (some 70-80°/o of total) are concentrated in Moscow. He informed the meeting that CCIRF actively takes part in the investment process, e.g., through participation in drafting laws, and rendering consulting services. In conclusion, Mr. Bednov said that despite certain problems in attracting foreign investments, a lot has been done to improve the economy, the most important of which is the approval of the civil code.

b. Alexander Gnousarev, Senior Vice President of International Industrial Bank, noted the good prospects in the country’s securities and investment markets due mainly to the more solid legal foundation. He referred to Russia as one of the most dynamically developing investment markets, for a number of reasons: its law and order system meets international standards, the country has obtained an international credit rating, and it can now settle its debts through the Paris Club. The recent boom in the stock and investment markets can also be attributed to the industrial privatization in Russia. Shares of privatized enterprises, he said, have recently become the most dynamic in the Russian financial market. Mr. Gnousarev concluded by inviting ABA member to be partners of IIB in joint project financing.

c. In his comments on the two speakers’ presentation, Kazuhide Koshiishi, Managing Director of Long-Term Credit Bank of Japan, noted that trade and investments between Russia and the Asia-Pacific countries are still relatively small. This is partly because in the past, information about Russian investment climate had been “intimidating,” he said. His personal experience through his attendance in the ABA meeting, however, proved to be “a pleasant surprise”. He said that investment activity between Japan and Russia is progressing well, noting that in Japan, there have been two joint projects with Russia in oil and gas development. Some Japanese member banks are also promoting joint ventures with Russian companies, he said. In conclusion, Mr. Koshiishi observed that any investment project is bound to succeed if the following four elements are present: trusted partners, thorough knowledge of local rules and laws, knowledge of market, and support of government.

14. Session 5 on “Retail Banking” was moderated by Jayantha Perera, Deputy General Manager (International), Hatton National Bank Ltd., and featured one speaker and two commentators:

a. Michael Lafferty, Chief Executive of Lafferty Group of Companies, spoke on the comparative performances of banks in different countries and regions. He also presented his forecasts on the prospects for retail banking and the credit card business. His main message: The consumer banking industry of 2010 is likely to be dominated by up to 20 global players, almost all of whom, on current evidence, will be American. Advising banks to pay far more attention to retail banking and consumer financial services, Lafferty said there are extraordinary opportunities in retail financial service across the Asia-Pacific region. Those banks which build larger consumer franchises over the next decade will be the most consistently profitable in the 21st century – and by far the most valued by investor, he added. Other Lafferty predictions include: (a) Asian industrial multinationals (such as Sony and Goldstar) with strong global brands are more likely to become global players in consumer financial services than Asian banks;(b) Many of today’s giant Japanese and French banks will have cased to exist within 10 years; (c) A series of mergers and alliances between banks in the Anglo-American countries is imminent; and (d) Credit cards will be as common in continental Europe and Asia as they are in the Anglo-American countries today.

b. In his comments, Peter Seah Lim Huat, President and CEO of Overseas Union Bank Ltd., said that while he agreed on the global dominance of American banks by the year 2010 as predicted by Mr. Lafferty, he believed that Asian banks will continue to be the more important players in the region due to their in-depth knowledge of the local markets and the people’s cultures. He also noted that the future of consumer banking has reached a crossroads because of the advent of the Internet.

c. On his part, commentator Jose F. Santos, Executive Vice President of Rizal Commercial Banking Corporation, said that he agreed with the observations of both Mr. Lafferty and Mr. Seah. In light of the predictions made, Mr. Santos posed the following queries of his own, in the context of the situation in his own country, the Philippines: (a) How should local banks respond to the expansion and domination of American banks? (b) Aren’t banks expanding too much beyond prudent norms? (c) How do we deal with competition from non-banks? (d) What is the role of brick-and-mortar branches in the current market environment? Are they still relevant?

15. Session 6 focused on the topic “Experience of Foreign Banks” With Aris Marsanich, Chief Representative of the Moscow Office of Banca Commerciale ltaliana serving as moderator, the session featured two speakers and one commentator:

a. P. S. Mehrotra, Chief General Manager of State Bank of India, talked about his bank’s experience in handling business operations with Russia. Mr. Mehrotra observed that as a .result of rapid growth of banking in Russia, deficiencies have crept into the banking system, including the following: (a) most of the banks are located in a few regions only; (b) banks are mostly undercapitalized; (c) most of the banks undertake corporate banking and are reluctant to entertain small customer’s or non-customer’s needs; (d) many banks are promoted by specific industry groups (e.g., aviation, energy, petrochemical), hence, if such industries are in trouble, their patronized banks also suffer; (e) absence of adequate laws/regulations affect the efficient functioning of the banks; and (f) accounting procedures and inspection/audit systems of many banks do not follow international standards. Due to these deficiencies, Mr. Mehrotra said, the banks in Russia today, with few exceptions, are yet to achieve international acceptance, particularly for trade related transactions. However, with the country’s ongoing market reforms and its desire to integrate fully into the international economic system, there is immense scope for collaborations in area like power, energy equipment, electronics, defence production, fertilizers, steel, metal wares, petroleum and gas refineries, science and technology, automotive, and consumer products.

b. Theodoor Joseph Bark, Regional Manager for Central and Eastern Europe of ABN-AMRO, talked about market opportunities and how to build up market share in Russia. He said that his bank’s business in Russia is booming, as it benefits from the size of the economy and the increasing flow of foreign direct investments. The situation is further boosted by the fact that the bank’s global clients are already operating in the country, lured by the promising prospects of local companies. He shared his experience in setting up operations in Russia, particularly with respect to the legal requirements, dealing with authorities, and human resources issues. He said that while competition among foreign and local banks is growing, there is definitely enormous market potential in Russia, particularly in project financing, syndicated loans, corporate finance, and investment banking, and substantial reward awaits those who enter the market.

c. Alejandro Eduardoff, President, Bank of Austria, Moscow, agreed with the assessments made by Mr. Bark, saying that a lot of opportunities are indeed unfolding from Russia’s very young market. Although he cautioned anyone who wish to enter the Russian market to “expect the unexpected”, the overall prospects are upbeat. What one needs is to be flexible and to be ready for some fine-tuning, he said. With its growing markets, improved productivity, an increasingly stable political situation, and an economy that is being largely guided by the market rules, Russia is bound to become a most important place for business.

16. Session 7 focused on “Capital Markets” and was moderated by Peter Favila, ABA Chairman and President of the Philippine National Bank. It featured two speakers and one commentator:

a. In a paper read for him by Jose F. Santos, Theodoro Montecillo, Member of the Monetary Board of the Bangko Sentral ng Pilipinas (Central Bank of the Philippines), talked about the capital market situation in the Philippines, and the country ‘s experience in opening up its financial market to keep in step with global developments. He talked about the financial reforms undertaken by the government in the 1980s and the current policies of the monetary authorities. He underscored the importance of pacing deregulation and liberalization, as well as the need for a proper balance in the use of resources generated, especially those from externa l origins. Referring to the foreign exchange crisis currently experienced by many Southeast Asian countries, Mr. Montecillo said that strong economic fundamentals allow the gains obtained from market opening to be preserved in times of difficulties. They are also the best defence against speculators and opportunists.

b. Alexander Sarchev, Deputy Chairman of Moscow Interbank Currency Exchange (MICEX), noted the growing foreign investors, confidence in Russia. However, he said, the total volume of foreign investments in Russia still remains moderate – foreign investments for the last six years were estimated at US$45 per head, as compared with China’s US$137 and Poland’s US$360. He observed that up to now the government bonds (GKO) were the preferred financial instruments in the Russian absolute security and exclusive yield. The situation is changing, however, following the government’s move at the beginning of 1997 to lower the GKO market profitability in line with the decline in inflation, and the growing transfer of investments to the “more promising” corporate stock market. A new and important feature of the Russian stock market, Mr. Sarchev said, is an increasing number of Russian participants. He also cited President Yeltsin’s launching of a decree establishing a Special Committee to protect the investors’ rights on the financial and stock markets. Moreover, he discussed the role and position of MICEX in the Russian stock market. Summing up, Mr. Sarchev said that the Russian market in general and the corporate securities market in particular, are developing at high speed. “This is the last market that provides immense opportunities for investors,” he concluded.

c. The commentator for the session, Sergei Generalov, Vice Chairman of Bank Menatep, agreed that Russia’s emerging capital market offers tremendous opportunities. He encouraged ABA member banks to explore the possibility of entering the very promising capital market of Russia, and offered them an advice on a good way for doing it – he told them to establish long-term relationship with Russian companies, especially banks, who are already in the market as they are the ones who would have good know ledge of the law and are ready to assist potential investors.

 

The 14th A BA General Meeting

 

17. The 14th ABA General Meeting was held on 1 September 1997. Presiding the Meeting was ABA Chairman Peter B. Favila.

18. Mr. Favila presented the Chairman’s Report summarizing the activities of the ABA since the 13th General Meeting held on 5 November 1997 in Kuala Lumpur, Malaysia. Highlights of the Report are as follows (the full text of the Chairman’ s Report appears as ANNEX 4):

a. Summary of Decisions of the 13th General Meeting. Mr. Favila summarized the major decisions made during the 13th General Meeting, which included the following: (I) amendment of the ABA charter to reflect new provisions on membership; (ii) adoption of new policy with regard to recruitment of new members; (iii) the – hiring of a banking expert to conduct research and prepare position papers for the Association; and (iv) awarding to medallions to qualified Board members in recognition of their contribution and consistent attendance in Board meetings.

b. Membership. Five new banks have joined ABA – two from Hong Kong, two from the Philippines and one from Russia – bringing the total membership to 177.

c. Professional Development Program. The Institute of Banking and Finance conducted for ABA a seminar on ” Private Banking” in Singapore on 13-15 August 1997. A total of 27 participants from 12 member banks attended the seminar. The 5th Bank Management Course focusing on “Retail Banking”, is being jointly organized by ABA with the Asian Institute of Management to be held on 1-12 December 1997 in Manila.

d. Information Exchange Program. Activities under this program included the following: (1) The monthly ABA Newsletter was re-formatted to allow flexibility and accommodate more news articles; (ii) An agreement was signed with the Association of Development Financing Institutions in Asia and the Pacific (ADFIAP) to adopt the “Asian Banking Digest” as a joint publication; and (iii) The first edition (1997) of a comprehensive ABA Directory was completed and published.

e. Decision of the 14th Board Meeting. Mr. Favila reported on· the Board’s decision to include in the agenda of every Board Meeting a discussion on policy issues relating to the banking and finance industry. This new policy, he said, seeks to provide member banks with a springboard to ventilate concerns arising from new policy and program initiatives with a regionwide impact. It would also serve to reinforce overall the general direction of the Association. For its 14th Meeting, the Board discussed issues concerning liberalization of trade in financial services. Eventually, with inputs from the general membership, a position paper would be formulated and submitted to the appropriate governing body.

f. Financial Report. Mr. Favila reported that the finances of the Association remained healthy, with the books reflecting a fund balance of US$485,820.26 as of June 30, 1997. He expressed his appreciation to Secretary Treasurer Johnson C. Yen for his excellent management of ABA funds.

19. At the end of his Report, Mr. Favila called on members for their continued support towards the fulfillment of the ABA objectives, and asked for their suggestions on how to further strengthen the Association.

ABA 14th 00620. The Meeting witnessed the official signing of the Agreement on Cooperation Between Asian Bankers Association (ASA) and the Association of Russian Banks. Under the Agreement, the two Associations agree to cooperate with each other on a number of activities, including the exchange of information on matters of common interest; arranging conferences, seminars and symposia; and providing mutual assistance in setting up of representative offices of members in Asia Pacific countries. The Agreement was signed by Peter Favila, Dr. Jeffrey L. S. Koo, and Amirsham Aziz on behalf of ABA, and Sergei Egorov on behalf of the Association of Russian Banks. The full text of the signed Agreement appears as ANNEX 5.

21. The 14th ABA General Meeting and Seminar closed with the participants expressing their hope that this year’s event would help not only in establishing a stronger cooperation between bankers from Russia and the Asia-Pacific region, but also in paving the way for Russia to achieve its objective of integrating into the world financial markets.

22. In his Closing Remarks, Chairman Favila said that the Meeting allowed participants to observe first-hand the tremendous changes taking place in support of Russia’s economic development. “Asian bankers who are here today must now have learned that Russia is putting all these initiatives into place at a pace that we know matches the commitment and desire of the government to improve the economy as a whole.” The full text of Mr. Favila’s Closing Remarks appears as ANNEX 6.

23. The Meeting presented plaques of appreciation to the host bank, the International Industrial Bank (118), and the co-organizers, the Association of Russian Banks (ARB) and the Republican Investment and Credit Bank of Bashkortostan (BashCreditBank), for the warm hospitality extended to the participants and the excellent arrangements made for the meeting. The plaques were received by Sergei Veremeenko (on behalf of 118), Sergei Egorov (ARB), and Azat Kourmanaev (BashCreditBank).

 

The 24th Board of Directors’ Meeting

 

24. The 24th Board of Directors’ Meeting was convened in the evening of 31 August 1997. The Meeting was presided by ABA Chairman Peter B. Favila. Among the major items taken up during the Meeting were the following:

a. Report of the Secretary-Treasurer – The Board noted the activities of ABA since the last Board Meeting in Kuala Lumpur including, among others: (I) the successful conduct by the Institute of Banking & Finance of the seminar  on “Private Banking” in Singapore; (ii) the agreement to hold the 5th ABA-AIM Bank Management on 1-12 December 1997 in Manila; (iii) the adoption of the Asian Banking · Digest as a joint publication of ABA and the Association  of Development Financing Institutions of Asia and the  Pacific  (ADFIAP);  and  (iv) the re-formatting of the ABA Newsletter to allow greater flexibility in topic coverage; and (v) the publication of the first ABA Directory of Members.

b. Financial Report and Budget – The Board noted the ABA Financial Statements for the years ended 1996 and 1995, as well as the ABA Financial Statements for the period January 1 to June 30, 1997, and commended the Secretariat for its prudent handling of the Association’s finances during the period. The Board also considered, and approved, the proposed Budget for 1998.

c. Membership – The Board ratified the application of five new members and accepted the withdrawal of 20 members, and noted that total membership has dropped to 177 from the 194 reported in Kuala Lumpur the previous year. On the matter of delinquent members, the Board decided that as a matter of policy, members who have not been paying their membership dues for at least three years will be asked to withdraw from the Association.

d. Recommendations of the Advisory Council – The Board endorsed the following recommendation s of the Advisory Council:

i. That the 1998 ABA Meeting be held in Taipei, with the date to be decided later, and that henceforth, the General Meeting and Seminar be simply referred to as an Annual Meeting;

ii. On the matter of awarding medallions, that the medallion be awarded to the individual representing the bank, not the bank itself, and that it be given to those who have attended at least 10 board meetings, as well as to those who have made outstanding ·contribution to the Association based on a set of criteria to be formulated by the Secretariat and approved by the Advisory Council;

iii. That, henceforth, policy advocacy issues be taken up in Board Meetings, and that the issues to be discussed should not be limited only to those considered sensitive but should also cover those that are of utmost importance to the banking sector;

iv. That the draft position paper prepared by the ABA Secretariat on liberalization of trade in financial services be agreed to in principle, and that developments in this sector be monitored (A summary of the position paper appears as ANNEX 7);

v. That Ministers of Finance or Central Bank Governors be invited to future Annual Meetings of ABA to allow a more substantive discussion of issues;

vi. That the Director-General of the World Trade Organization (WTO) be invited to attend the Annual Meeting in Taipei; and

vii. That international experts and eminent authorities on financial issues be invited to attend subsequent Annual Meetings.

e. The Board approved the proposal for ABA to sign an Agreement of Cooperation with the Association of Russian Banks to formalize the relationship between the two organizations.

25. The Board adopted the resolution for a vote of thanks to the International Industrial Bank, the Association of Russian Banks, and the Republican Investment and Credit Bank of Bashkortostan (BashCreditBank) in recognition of their contribution to the success of the 14th General Meeting and Seminar, and in appreciation of their warm hospitality to the participants and the excellent arrangements made for the meeting.

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