Blame game: With insurance companies by their side, do banks really care about being robbed?

Private security companies say local banks don’t deploy enough guards.

Salman Siddiqui December 31, 2011


Nazar Hayat Khan is still reeling from the psychological stress of the daylight robbery that took place at his bank two months ago.  On that day, more than Rs2 million were looted in front of his eyes.   

Khan is the operations manager at Habib Bank Limited’s Rashid Minhas Road branch that was robbed on October 19. “I can’t help but stare at the entrance door each time someone walks in,” Khan said as he recalled the incident, while suspiciously looking at the customers gathered around the cash counter. Even though it lasted a mere four-and-a-half minutes, each second seemed like an hour to employees like Khan, who were held hostage by at least five heavily-armed men, who made no effort to conceal their faces. with no veils on their faces.

However, despite the incident, there is still no security guard or policeman posted outside the branch. “But there’s another guard inside and hidden from view,” claimed Khan.

But when five armed men rob a branch, is one guard enough for defence?

The All Pakistan Security Agencies Association (Apsaa) General Secretary Col (r) Tauqirul Islam said the crux of the problem is that banks never lose an opportunity to put the blame on private security companies. “The bank management themselves are not serious in a comprehensive security plan since they know they will get compensated by insurance companies,” he alleged.

All 17 bank robberies that have taken place in Karachi this year have been at local banks. “This is because foreign banks have better security arrangements and usually employ more than four guards and at times even six guards at their branches,” says Islam. He further alleged that banks encourage security guards not to open fire even when under threat since their client base would be affected if someone died.

A senior Pakistan Bankers Association (PBA) member, who did not want to be named, said it is ‘illogical’ to assume that banks do not care about being robbed. “Even if everything in your house is insured you would not want it to be robbed,” he said. The PBA puts the blame of robberies on security companies and inefficiency of authorities concerned. It insists that the problem is not the number of guards deployed, but their inefficiency. Some are even incapable of using the weapons they have, he added.

Former general manager of Adamjee Insurance company, Shamsul Haque, said that “perhaps it is true to a certain extent” that some local banks have lax security at their branches because they rely more on insurance policies.

But he said that as bank robberies increase, insurance companies are conducting surveys to check if banks are adhering to agreements made with the companies. “The insurance cover can be blown if all arrangements are not properly done.”

Insurance Association of Pakistan Secretary-General NA Usmani also said that no insurance company would want to suffer a loss. “The basic principle of insurance is that one has to protect the entity, for example a mobile phone, in the same way that one would protect it if there was no insurance cover.”

But if there are such basic clauses in place, how come there is never any news of a bank being robbed and not being given insurance cover for not having adequate security arrangements?

Although both Haque and Usmani did not give any specific examples, they said that it is possible that in some cases the insurance cover is not given. “It is just not made public since it would harm the interests of both the bank and the insurance company,” said Haque.

But Apsaa’s general secretary is not convinced. He wants the State Bank of Pakistan to intervene and direct insurance companies not to compensate for any losses unless security arrangements have been screened by the central bank and home department. “We have been assured by Home Minister Manzoor Wassan that a meeting will be arranged sometime in the first week of January to sort out the issue. The meeting will include members of Apsaa, Pakistan Bankers Association and the deputy governor of SBP,” Islam added.

On December 21, Interior Minister Rehman Malik chaired a meeting with banking representatives and decided to form a committee headed by National Police Bureau DG Waseem Kausar to probe the issue. Additional Home department Chief Secretary Waseem Ahmed said that it was decided that SBP will be included in the committee, which is set to give its recommendations within three weeks.

Former SBP governor Dr Ishrat Hussain, however, opposed dragging the regulator into the issue. “The State Bank’s job is to make the monetary policy, not to sort out the internal management issues of banks, private security companies or insurance companies.”

Published in The Express Tribune, January 1st, 2012.


Ahsan J | 9 years ago | Reply

These moral hazards arrive in one form or the others when risks are insured. And it has been well documented by the financial theory. But there is a very easy solution to all this. SBP can regulate operational risk more vigilantly by imposing fines if the bank is found not to have taken proper security measures. There are numerous ways to do this, by calling in investigations, frequency of robberies etc.. Bank robberies in Karachi, according to police are the main source of finance for terrorist activities. So it is extremely important that these robberies must come to an end.

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