Download - Creating and managing bank service
PRESENTATION ON CREATING AND MANAGING BANK SERVICES OUTLETS AND SETTING BANKING TECHNOLOGY
PRESENTED BY:DEEPA SHRESTHAPAWAN KAWANRABI SHRESTHASONA SHRESTHA
TIL BAHADUR BHANDARI
Introduction
• The Bank Charter Act 1844 was an Act of the Parliament of United Kingdom, passed under the government of Robert Peel , which restricted the powers of British banks and gave exclusive note-issuing powers to the central Bank of England.
• The Act served to restrict the supply of new notes reaching circulation, and gave the Bank of England an effective monopoly on the printing of new notes. The Act exempted demand deposits from the legal requirement of a 100-percent reserve which it did demand with respect to the issuance of paper money
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• Also, while the act restricted the supply of new notes, it did not restrict the creation of new bank deposits and these would continue to increase in size over the course of the 19th century.
• As a result of the Act, as provincial banking companies merged to form larger banks, they lost their right to issue notes.
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• Bank organizers have several options from which to choose when forming their bank. This topic discusses these options, which depend significantly on the organizers' vision for the institution
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In deciding how consumer respond to the changing demands for timely access to services, financial firms today have several options to choose
• Chartering new (De Novo) financial institutions.• Establishing new full service branch office.• Setting up limited service facilities.
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Chartering a new (De Novo) financial service institution:
• No one can start a major financial firms without the express approval of federal or state authorities, and sometimes both.
• Bank must supply enough start up capital to cover several years.
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• Bank should show that they will achieve adequate level of profitability.
• Bank in a particular location must be demonstrated and the honesty and competence of its organizers and proposed management established
Government chartering agencies believe that financial service providers need special scrutiny for several reasons:
• Hold public savings and unregulated chartering activity might result in excessive number of poorly capitalized institutions that fail.
• Financial firms are at the heart of the payments process to support trade and commerce.
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• They often create money, which suggests that chartering too many might result in excessive money creation and inflation.
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The Bank Chartering Process in the United States
• Take a close look at how new banks are chartered in the US
• Office of the Comptroller of the currency a division of the Treasury Department can issue a charter of incorporation to start a new US Bank
• Organizers often seek a federal bank charter for the added prestige it conveys in the minds of customers, especially large depositer
Benefit of Applying for a Federal Bank Charter
• It brings added prestige due to stricter regulatory standard
• In times of the technical assistance supplied to a struggling bank by national bank authorities may be of better quality, giving the troubled bank a better chance of long run survival
• Federal banking rules can pre-empt state laws
Benefit of Appling for a State Bank Charter
• It is generally easier and less costly
• The bank need not join the Federal Reserve System
• Some states allow a bank to lend a higher percentage of its capital to a single borrower
• State charted bank may be able to offer certain services that national bank may not be able to offer
Questions Regulators Usually Ask the Organizers of a New Bank
• It is instructive to look at the types of information chartering authorities may demand before approving or denying a charter application.
• This criteria may be used by organizers and chartering agencies to assess a new financial firm’s prospects for future.
Questions Regulators Usually Ask the Organizers of a New Bank
• Area of operation• Competitors in the operating area• Number, types, and size of business in the area.• Traffic patterns in the proposed service area.• Population • Financial history of the community served• Capital Structure• Projections• Experience in the field of banking sector
Questions Regulators Usually Ask the Organizers of a New Bank
Area of operation
– Area and geographic boundaries of the PSA– PSA must have enough business and household to
ensure an adequate customer base for the new institution.
Questions Regulators Usually Ask the Organizers of a New Bank
Competitors in the operating area
– Number of competing banks, saving and loans, credit unions, finance companies, and insurance companies.
– Competitors services, hours of operations, and the distance from the proposed new institutions.
– The more intense competition is, the more difficult it is for a new financial firm to attract customers.
Questions Regulators Usually Ask the Organizers of a New Bank
Number, types, and size of business in the area.
– Many new financial services providers depend heavily on the demands of businesses for commercial deposit services and for loans to stock their shelves with investors and purchase equipment.
Questions Regulators Usually Ask the Organizers of a New Bank
Traffic patterns in the proposed service area.
– Adequacy of roads and highways, and geographical barriers to the flow of traffic.
– Most new financial institutions are situated along major routes of travel for commuters going to work and to shopping and schools, providing the greater customer convenience.
Questions Regulators Usually Ask the Organizers of a New Bank
Population
– Current situation of the population growth, income, types of occupations represented, educations levels, and age distributions of residents in the proposed service area.
– The presence of well-educated residents in the service area implies higher incomes and grater use of financial services.
Questions Regulators Usually Ask the Organizers of a New Bank
Financial history of the community served
– The rapid growth of financial institutions in the service area and good profitability among these institutions suggests that the proposed new institutions might also become profitable and experience growth
Questions Regulators Usually Ask the Organizers of a New Bank
Capital Structure
– The proportion of stock held by the promoters.– The ability to raise the fund for its future growth
and protect the public interest.
Questions Regulators Usually Ask the Organizers of a New Bank
Projections
– The organizers projections for deposit, loans, revenue, operating expenses, and net income for the first few years.
Questions Regulators Usually Ask the Organizers of a New Bank
Experience in the field of banking sector
– The experience of the organizers, senior management, and the board of directors of the new institutions.
– Successful businesspeople on the board and staff will help attract new accounts.
Factors Weighing on the Decision to Seek a New Charter
• External factors the organizers should consider include:
a. The level of economic activity
• Is it high enough to generate sufficient service demand?• Often measured by the volume of retail sales, personal income, bank
debits and number of households and businesses in the service area.
b. Growth of economic activity
• Is the market area growing fast enough to generate additional deposits and loans so that the new institution can grow to an efficient size?
• Often measured by trends in deposits and loans, retail sales, bank debits, population growth, construction activity and school enrollments.
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c. The need for a new financial firm
• Has the population grown or moved into new areas not currently receiving convenient financial services?
• Often measured by population per banking office, recent earnings and deposit growth and the number and size of new residential construction process.
d. The strength and character of competition in supplying financial services
• How many competing financial institutions are there and how aggressive are they in advertising their services?
• This is often measured by the number of offices relative to area population and the number of other financial institutions offering checkable accounts, saving plans, consumer loans and business credit.
Factors Weighing on the Decision to Seek a New Charter Cont…
• Internal factors the organizers should consider include:
a. Qualifications and contacts of the organizers
• Do the organizers have adequate depth of experience?• Is their reputation in the community strong enough to attract
customers?
b. Management quality
• Have the organizers been able to find a chief executive officer with adequate training and experience in management?
• Will the organizing group be able to find and pay competent management and staff to fill the new institution’s key posts?
Factors Weighing on the Decision to Seek a New Charter Cont…
c. Pledging of capital to cover the cost of filing a charter application and getting under way
• Is the net worth position of the organizers strong enough to meet the initial capitalization requirements imposed by regulation and cover consulting and legal fees?
• Because the chartering process covers many months and may wind up in court if competitions file suits before the new firm is allowed to open, do the organizers have sufficient financial strength to see the project through to its completion?
Factors Weighing on the Decision to Seek a New Charter Cont…
Banking Technology
Establishing and Monitoring Automated Limited-Service Facilities (“Branchless Banking”)
•There has been a recent spike in branchless banking due to the high cost of chartering new financial firms and setting up full-service branch offices▫Point-of-sale (POS) terminals▫Automated teller machines (ATMs)▫Telephone banking ▫ Internet-supplied services
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• Core Banking SoftwareCore banking software that carries entire financial
transactions and store customer information .• ATM switches• Inter and intra bank communication interface
Establishment• Electronic Money Transfer Solutions• Customized Solutions for HR management,
logistics management, etc.
Setting Banking Technology
Technology trends
• Online customer-facing technology.
• Mobile, tablet, and social computing.
• Integrating online channels with customer service.
• Smart implementation of regulatory and compliance systems.
Mobile application adopted by financial institutions
• Mobile Check Deposit
• Peer to Peer Payments/Mobile Money Transfer
• Photo Bill Pay
• Advanced Trading and Research
• Mobile Wallet/Payments
Banking in Homes, Offices, Stores, and on the Street
• Telephone Banking and Call Centers▫ The telephone remains among the most popular channels for
putting customers in touch with financial-service providers today
• Internet Banking▫ Features include▫ Verify in real time account balances at any time and from any location▫ Move funds instantly from one account to another▫ Confirm that deposits of funds have been received, checks have cleared,
and online transactions have been completed▫ View and print images of checks that have passed through a customer’s
account▫ Submit an application for loans and credit cards▫ Carry out online bill paying
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