Term Paper Term Paper Presentation: Presentation:

Universal BankingUniversal BankingBusi-4179Busi-4179

Josh NelsonJosh NelsonNovember 12, 2008November 12, 2008

AgendaAgenda Thesis StatementThesis Statement What is Universal BankingWhat is Universal Banking History of Universal BankingHistory of Universal Banking Issues Surrounding Universal BankingIssues Surrounding Universal Banking VideoVideo Impact of Universal Banks on Current Impact of Universal Banks on Current

Financial TurmoilFinancial Turmoil ConclusionConclusion Question and AnswerQuestion and Answer

Thesis StatementThesis Statement What are the major issues What are the major issues

surrounding Universal Banking in surrounding Universal Banking in North America? What kind of impact North America? What kind of impact can Universal Banking have on the can Universal Banking have on the current financial turmoil?current financial turmoil?

What is Universal Banking?What is Universal Banking? When a Financial Institution can When a Financial Institution can

engage in a broad range of financial engage in a broad range of financial service activities.service activities.

These services include regular These services include regular commercial banking, investment commercial banking, investment banking and insurance.banking and insurance.

History of Universal BankingHistory of Universal Banking Universal Banking began to creep into Universal Banking began to creep into

the banking system in the 1930’s and the banking system in the 1930’s and 1940’s1940’s

Europe is considered the home of Europe is considered the home of Universal Banking, although it has been Universal Banking, although it has been adopted in varying degrees around the adopted in varying degrees around the globeglobe

In 1999, U.S.A finally removed In 1999, U.S.A finally removed prohibitions on Universal Bankingprohibitions on Universal Banking

Issues Surrounding Universal Issues Surrounding Universal BankingBanking

Safety and Soundness IssuesSafety and Soundness Issues Conflict of Interest IssuesConflict of Interest Issues Deposit Insurance IssuesDeposit Insurance Issues Regulatory Oversight IssuesRegulatory Oversight Issues Competition IssuesCompetition Issues

Safety and SoundnessSafety and Soundness To protect depositors and borrowers To protect depositors and borrowers

against the risk of FI failure.against the risk of FI failure. Security activities and other non-Security activities and other non-

bank activities could have an impact bank activities could have an impact on the Financial Institutions current on the Financial Institutions current safety and soundness.safety and soundness.

Conflict of InterestConflict of Interest Salesperson’s StakeSalesperson’s Stake Stuffing Fiduciary AccountsStuffing Fiduciary Accounts Bankruptcy Risk TransferenceBankruptcy Risk Transference Third-Party LoanThird-Party Loan Information TransferInformation Transfer

Deposit InsuranceDeposit Insurance CDIC and FDIC insure up to $100,000CDIC and FDIC insure up to $100,000 Banks are able to raise funds at Banks are able to raise funds at

subsidized, lower cost rates, which they subsidized, lower cost rates, which they could pass on to their securities affiliates.could pass on to their securities affiliates.

This could cause regulators to regard This could cause regulators to regard large banking organizations as “too-big-large banking organizations as “too-big-too-fail” and these banks could feel that too-fail” and these banks could feel that they have the ability to take on excessive they have the ability to take on excessive riskrisk

Regulatory OversightRegulatory Oversight OSFI was created to regulate and OSFI was created to regulate and

supervise all banks, insurance supervise all banks, insurance companies, trust funds etc. on a companies, trust funds etc. on a federal level.federal level.

The regulation of securities activities The regulation of securities activities is done at a provincial levelis done at a provincial level

Therefore the regulation of Universal Therefore the regulation of Universal FIs is very complex. FIs is very complex.

Competition Competition The concept of a Universal bank The concept of a Universal bank

could reduce competition and could reduce competition and services to the consumer especially services to the consumer especially in the insurance aspect. in the insurance aspect.

Small insurance brokers may be put Small insurance brokers may be put out of business with the banks ability out of business with the banks ability to sell insurance products. to sell insurance products.

Universal Banking VideoUniversal Banking Video http://http://www.youtube.com/watch?vwww.youtube.com/watch?v

=_eAsGeHr9R4=_eAsGeHr9R4

Impact of Universal Banks on Impact of Universal Banks on Current Financial TurmoilCurrent Financial Turmoil

With the supervisory framework of a With the supervisory framework of a chartered bank holding companychartered bank holding company

– Risk managementRisk management– Control frameworksControl frameworks– Capital structureCapital structure

And the Universal Banking model this And the Universal Banking model this can establish confidence into the can establish confidence into the investing community investing community

ConclusionConclusion What is Universal BankingWhat is Universal Banking History of Universal BankingHistory of Universal Banking Issues Surrounding Universal BankingIssues Surrounding Universal Banking Impact of Universal Banking on Impact of Universal Banking on

Current Financial TurmoilCurrent Financial Turmoil

QuestionsQuestions