attention to the minute details. That is why the centralized model, in which
mega-banks acquire smaller banks and centralize different bank functions
(especially the lending activity) at the bank headquarters, has proven to be
ineffective, as was proven by the 2008 bank crisis and by subsequent tests
performed by regulators in the first quarter of 2009. The large size of the
system reduces the human dimension of this personal business called bank-
ing. Banking is a business that handles peoples’ needs and trust; it cannot be
done by reducing the customer to an account or loan number, sent to a cen-
tral location to be processed and evaluated. This approach has transformed
the bank branches of many of the mega-banks and the investment banking
institutions in small communities into ‘‘asset gathering’’ outlets, without
paying attention to the most important asset for a bank: the customer and
the community.
For example, at the Bank of Whittier, every morning at 9:00A.M.the
bank president (branch manager) convenes a 15- to 20-minute meeting.
Meeting participants include the CFO, the chief credit officer, the head of
private banking and operations, the head of the credit (loan) department,
and the operations manager. The group goes through the bank ledger line-
by-line to make sure that not a single penny or data entry is missed or recog-
nized, and to decide what to do regarding the checks that were returned to
the bank because of insufficient funds. The chairman of the bank starts early
in the morning—around 6:30–7:00A.M.—and pores over the ledger and
sends his questions to the 9:00A.M. meeting; in some cases, he attends the
meeting.
In addition to the 9:00A.M. meeting, the operations of the bank must be
scrutinized in great detail. This is done in the 11:00A.M. meeting. This meet-
ing is convened by the senior vice president in charge of operations and is
attended by the CFO, the operations manager, and the treasury department
supervisors to ensure that all of the bank’s financial activities have been
accounted for, that all nonsufficient funds accounts have been called by
their RF private bankers, and that the customers with NSF warnings came
to cover the deficit (or, if not, it is decided that the NSF check must be
returned).
Restructuring a Riba-Based Bank to Operate as an RF Bank
As has been stressed throughout the book, RF banking is not about form; it
is about substance and operations that fulfill the requirements of Shari’aa,
which reflect the fundamental values of the Judeo-Christian-Islamic system.
This makes the transformation of the bank to an RF operating bank much
342 THE ART OF ISLAMIC BANKING AND FINANCE