bank ant final ch 2

8/6/2019 Bank ant Final Ch 2

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Group Presentationon

Modern Banking Systems

Group Presentationon

Modern Banking Systems

Department of Management Information Systems

University of Dhaka


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Submitted To: A kram HossainLecturer,Department of ManagementInformation SystemsUniversity Of Dhaka

Submitted By:F arhana TashinID No:05F arzana SharminID No:18F arzana Al am

ID No:33Syeda Umma Ku lsumID No:49 A nika Tarannum A hmed

ID No:57


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Modern Banking SystemsModern Banking Systems

B ank p lay a significant ro le in the economic deve lopment. Theovera ll economic of a country is abso lute ly dependent on theefficient banking system. Industria l, agricu ltura l and commercia l progress of a country is not possib le without a good and modern

banking system.

A Modern Banking System:1. provides an inexpensive media of exchange through its cheques etc.2. finances trade and industry

3. acts as Reservoir of funds4. acts as the custodian of customers va luab les5. acts as the correspondent and representative of its customers, other

banks and financia l institutions.


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Cl assification of Modern Banking SystemsCl assification of Modern Banking SystemsOrganizationa l Characteristics + Techniques= Hybrid System

OrganizationalCharacteristics Techniques

BranchBanking

UnitBanking

ChainBanking

Holding CompanyBanking

DepositBanking

InvestmentBanking

MerchantBanking

MixedBanking


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Branch Banking Branch Banking

Apopu

lar banking system first deve

loped inthe United Kingdom. In B ranch banking

system, the bank has a head office whichcontro ls and directs the branches located in

mu ltip le locations. The branches may belocated in the same city or town of a countryor even in abroad.


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Branch Banking Branch Banking

A dvantage:

B ranch banking system possesses huge financial resources and enjoys the benefits of large-sca le

operations.D rawback:

There is excessive centra lization and branches have tolook up to the head office for many issues.


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Unit banking Unit banking

sing le officeparticu lar areaCo llect deposit from sma ll communityP lace deposit in bigger bank in bigger cityCorrespondent banking: Remittancefaci lity with he lp from larger bank


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Branch banking vs. unit banking Branch banking vs. unit banking

A dvantages of branchbanking:

Sca le operationRisk diversificationMore coverageUtilization of fundA rea deve lopment

Disadvantages of branchbanking:

Contro l prob lemDe layed decisionCentra lized economicpower Diversion of fundsUneconomic expansions


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Chain banking

2 or more unit bank controlled by anindividua l or members of the same fami ly

Maintain separate identity

Holding company banking2 or more unit bank he ld as subsidiaries

by a holding companyHo lding company may or may not be

invo lved in banking business


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C hain/ho lding company banking: forand againstC hain/ho lding company banking: forand against

A dvantages:Poo l greater resourcesEconomics of sca leServe loca lityeffective ly

Disadvantages:Lack of contro l

Misuti lization of fundsConcentratedeconomic power


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D eposit banking D eposit banking

Taking deposit from pub licDeposits are Payab le by chequesUse the deposit as they like, main lylendingEx: modern joint stock banks


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Investment banking Investment banking

Providing assistance to commercia l organizations

In raising long term capita lSa le of share, stock and bondsMidd leman: between corporate bodiesand genera l pub lic


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Cl assificationCl assification

Originator: bring out new issue of securities

Underwriters: buy entire issue if noresponse from investorsRetai lers: arrange sa le of securities &

private p lacement of shares throughnegotiation


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Mechanism of operationMechanism of operation

Pre liminary negotiation with issuingcorporation

Detai led report about- product, assets,ownership, capita l & purpose of issuing A greeing to bring out new issue as

underwriter- F orm underwritingsyndicate A rrange Se ll of share at market


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UsefulnessUsefulness

To business & industry:Provide necessary long term capita l

To the genera l pub lic:Independent and indepth ana lysis givesidea to desirabi lity of shares


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Investment banking in Bang ladeshInvestment banking in Bang ladesh

Started in 19761 st bank: Investment Corporation of B ang ladeshThree major products: Mutua l F und

Investors A ccount Unit Certificate


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Investment banking in Bang ladeshInvestment banking in Bang ladesh

some commercia l banks a lso carry outinvestment banking functions in B ang ladesh.

The Securities and Exchange Commission(SEC) issues certificate of registrationThe SEC has a code of conduct for issuemanagers, underwriters and portfo lio

managersis empowered to suspend or cance l thecertificate of registration for vio lation of codeof conduct .


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Types of investment banks inBang ladesh Types of investment banks inBang ladesh

open-ended

C losed-ended


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open-endedopen-ended

referred to as mutua l fundsrepurchase shares in any quantity asand when ho lders offer them for sa les.amount of shares of the open-endedinvestment companies in market

changes continua lly in response topub lic demand.


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Cl osed-endedCl osed-endedse ll on ly a specific number of ownership shares.A n investor wanting to acquire shares must find

another investor who wishes to se ll.Investment companies do not take part in thetransaction.issue debt and equity securities inc luding-

preferred stock, regu lar and convertib le bonds stock warrants for raising funds.


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Merchant bank Merchant bank Merchant banks are that type of bank,

which does fo llowing type of works-

F inancing domestic trade A dvising on ama lgamation, mergers,

take overs.Leasing financeInvestment management


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Functions of Merchant bank Functions of Merchant bank

Important functions of merchant banksareUnderwriting initia l pub lic offering of shares.

Promoting or financing domestic or overseasprojectsExtending assistance to raise foreign currency nloans

Taking deposits[Continued]


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Functions of Merchant bank Functions of Merchant bank

Participating in money marketA ssisting In raising in of capita l

Providing advice and consu ltancyProviding counse ling on mergers, take-over Maintaining re lations with the government


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Merchant Banking Operations inBangladeshMerchant Banking Operations inBangladesh

Underwriting:Issue Management

Portfolio Investment ManagementServicesMerger and Adcquisition: Merchant


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Cu stomers of Merchant banking:Cu stomers of Merchant banking:

1. A ny B ang ladeshi over 18 years of age2. A ny Corporate body (ies)3. NR B (s) through NIT A A ccount


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Q ualities of merchant banker-Q ualities of merchant banker-

Essentia l qua lities of a merchant banker are fo llowing-

He must have expertiseHe must have integrityHe must be capab le of bui lding and

maintaining banker customer re lationship.


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Merchant banking in BangladeshMerchant banking in Bangladesh

J anata B anCity B ankEastern B ank

Southeast B ankOne B ankNationa l B ankICB Capita l ManagementLimited

Prime F inance andInvestment All iance F inancia l ServicesJ amuna B ank

Al fa Capita l ManagementCosmopo litan Traders PrivateLimitedIDLC F inance LimitedUttara F inance andInvestment LimitedB ang ladesh Mutua l SecuritiesLimited

Lankabang la F inanceGSP F inance CompanyMutua l Trust B ankGreen De lta Insurance


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P otentiality of merchant banking inBangladesh:

P otentiality of merchant banking inBangladesh:

Procurement of government benefits

Management of issue/underwritingF inance syndicationManagement of portfo lio


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Mixed bankingMixed banking

Meaning: Commercia l banking and investmentbanking combined together

Before the development

Commercia l banks - short-term financing;

investment banks - long-term financingidea of mixed banking -gradua lly losing ground.


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D emerits of Mixed bankingD emerits of Mixed banking

1. It reduces liquidity of the bank. A large part of the funds of the bank is raised from deposits, which are repayab le either ondemand or after a short period.it may not be ab le to pay the depositors when they demand

back their money3. During periods of depression, banks suffer heavy losseswhen the securities of companied lose their va lue because of fa ll in demand for the sa le of securities he ld by it. B anks withpoor reserves may fai l.

In B ang ladesh commercia l banks are found to cautious aboutterm lending .they c lose ly monitor their portfo lio to avoid too

much invo lvement in the area.


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D isco u nt ho u se-D isco u nt ho u se-

The banks which take money on depositfrom the banks and commercia l sector

and lend those on short-term basis togovernment/pub lic bodies andcommercia l houses are referred as todiscount banks. The securitiesdiscounted are genera lly treasury bi lls,government bonds, commercia l bills etc


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O rigin:O rigin:

The origin of discount houses datesback to the eighteenth century when

some banks started specia lizing inlending money to business houses bydiscounting of bi lls of exchange arisingout of purchase & sa les on credit.


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R ole as broker:R ole as broker:

Discount houses p lay the ro le of brokersin the money market. These are in fact

bridges between the peop le andinstitutions having surp lus of short-termfunds and those needing funds for short-term requirements


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D iscount business in Bang ladesh:D iscount business in Bang ladesh:

No specia lized bank exists in B ang ladeshwhich does discounting of bi lls on ly. The

centra l B ank, under its own norms, a llowsbill discounting faci lities to the commercia l banks. Commercia l banks a lso, withinru les, do this business part ly.. however,discounting faci lities extended by themare main ly limited to the export bi lls.


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Bang ladesh: structure of the banking systemBang ladesh: structure of the banking system


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N u mber and Types of BanksN u mber and Types of Banks

Sona li B ank is the largest among the NC B sPuba li is leading in the private ones.A

mong the 12 foreign banks, StandardChartered is the largestfinancia l sector- Samabai (Cooperative) B ank,

A nsar-VDP B ank, Karmasansthan (Emp loyment) B ank Grameen bank


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N u mber and Types of BanksN u mber and Types of Banks

B anks No. B ranches Net assets (inB illions)

NCB

s 4 3616PC B s 28 1214

DF IsF 5 31

CB s 12 1177

Tota l 49 6038


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S ervicesS ervices

AccountsSavings Bank Account

Special ServicesSavings Bank AccountAutomated Teller Machine (ATM)Internet Banking


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Thank you Thank you

bank ant final ch 2

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