Beruflich Dokumente
Kultur Dokumente
CHAPTER 1
INTRODUCTI
ON
What is a Bank?
Can be defined in terms of:
The economic functions it serves
The services it offers its customers
The legal basis for its existence
A bank is any business offering deposits
subject to withdrawal on demand and
making loans of a commercial or business
nature
Cont
Bank size
Differences in bank size will lead to greater differences,
in the way banks are organized
In the types and variety of financial
services each bank offers in the markets
that it serves
5
Cont
Small banks:
Heavily committed to attracting
smaller, consumer-oriented deposits
and making consumer installment
and small business loans
Heavy involvement in consumer
loans and deposits
Often called as retail bank
6
Cont
Small banks (community banks)
Close contact between top management
and the management (and staff of each
division)
Significantly impacted by changes in the
local economy
Limited opportunity for advancement or for
the development of new banking skills
Have close relationship with their
customers
7
Cont
Large banks
The organization chart is more complex
Most banks are owned and controlled by a holding
company whose stockholders elect a board of
directors to oversee the bank and nonbank
businesses allied with the same holding company
Selected members of the holding companys
board of directors serve on the banks board as
well
Cont
Key problem span of control
More diversified (geographical and by product)
to withstand the risks of a fluctuating economy
Rarely dependent on the economic fortunes of a
single industry or even single nation
More stable due to their greater capacity to
accept the risks of entering new markets and
their potentially greater access to capital and
managerial talent
9
Technology based
Convergence
Cont
Cont
Computer-based systems and
electronic service delivery
Growing numbers of people with
computer skills
Bank operations are more efficient
Greater opportunity for planning new
services and new service delivery
facilities
12
onvergence
service proliferation and greater competitive
rivalry among financial institutions have led to a
powerful trend convergence
Convergence movement of businesses across
industry lines
Banks broaden their business by venturing into
other product lines
13
14
Cont
ranch Banking
- Offer full range of services from several
locations
Branch Banking
Organizations
As unit bank grows larger in size
establish branch banking
Offer the full range of banking services
from several locations, including a head
office and one or more full service branch
offices (branches scattered all over the
country and even outside)
Likely to offer limited services through a
supporting network of drive-in windows,
ATMs, computer electronically linked to the
banks computers etc
17
Cont
Each branch may have their own
management team with limited authority to
make decisions on customer loan application
and other facets of daily operations
Eg: branch bank manager may be
authorized to approve a customer loan of up
to RM100,000. Larger loan requests must be
referred to the head office for final decisions
Senior management of a branch banking is
usually located at the head office
18
Organizational Structure
Branch
Branch Manager
Assistant Manager
Bank Officer
Deposit
Remittance
Account
Credit
19
Organizational Structure
Head Office
Board of Directors
Chief Executive Officer
Head of Department
Departments*
20
Organizational Structure
Example of departments:
Islamic Banking
Corporate Banking
Retail Banking
Electronic Banking
International Banking
Information technology and
management information system
Finance and administration
Risk Management
Insurance & Takaful
Branch Banking
21
Advantages of Branch
Banking
G
reater operating efficiency
I
ncreases the availability and convenience of services
(can be extended to small towns and rural areas)
S
timulates faster economic growth as branch banks
tend to make more loans available
L
eads to fewer bank failures as a branch bank is less
dependent on the volume of business from a single
industry or single local market area (spreading of risk)
22
Disadvantages of Branch
Banking
igher operating costs
Setting up new full-service branches
seems to be a costly way to grow
ranch banks do not seem to earn
higher average profits than other
banks
23
Organizational Structure
Bank Holding Companies
Holding Corporation
Main Bank
Bank Subsidiaries
Associated Business
Non-bank Subsidiaries
25
Cont
T
he principal advantage for bank holding
companies entering non-bank lines of business
is the prospect of diversifying sources of
revenue and profits (reduce risk exposure)
T
he holding company form permits the legal
separation between banks and non-bank
businesses having greater risk, allowing these
different firms to be owned by the same group
of stockholders
28
Cont
isadvantage:
Reduce or eliminate competition
between banks
Overcharging the customers
Being indifferent to local community
needs
Take excessive risks
31
Conclusions concerning
organization type and size
1. The profitability of a bank is not determined
primarily by how it is organized; the quality of
its management and the economic conditions
in its market area appear to be far more
important to its success
2. Small banks of any organizational type can
compete successfully with large banks,
provided they aggressively seek to preserve
their profits and market share. Economies of
scale from bank growth appear ton be limited
to banks of relatively modest size
32
Cont
3. Branch banks and banks affiliated with
holding companies have greater protection
against failure than small unit banks. They
also tend to offer more services than unit
banks and operate more offices per unit of
population, thus providing more convenient
services
4. The prices charged and deposit interest rates
paid by banks do not appear to depend
greatly on how each bank is organized but
rather on the amount of competition the
bank faces, the strength of market demand
for bank services, and the rate of inflation.
33
Cont
5. The public receives about the same
quality of banking services and pays
about the same for them under
branching, holding company, or
independent unit banking systems
6. The types of banking organizations
serving the public do not appear to be a
key factor in the growth and
development of the economy, though
greater branching activity seems to
accelerate economic growth
34
BANK MARKETING
arketing - refers to the need satisfaction of the
institutions clients.
nvolves
identifying the needs of the customers
developing products to suit their needs or
modifying the existing products accordingly.
the need for foreseeing wants of the
customers in future and developing suitable
products of their requirement.
36
Cont
ank marketing consists of
identifying the most profitable markets now
and in the future;
assessing the present and future needs of
customers;
setting business development goals and
marketing plans to meet them;
managing the various services and
promoting them to achieve the plans.
37
38
Liberalizations of Malaysian
Financial Sector
ssuance of New Licenses
ncreases in foreign equity limits
perational flexibilities
39
Cont
1.
2.
3.
4.
Competition
Technology transfer virtual banking
Eliminates trade restrictions
Standardized basic product designs
40
42
43