Disruptions in the financial markets, increased regulatory complexity and operational risk are major challenges for domestic and international banking institutions and capital markets-securities firms. These challenges, along with event-driven opportunities and new technologies have transformed the sector. In the current risk-adverse climate, institutions seek innovative solutions and ways to reduce their exposure.PricewaterhouseCoopers professionals can assist with your most critical business needs including:
Risk management
Regulatory & compliance
Anti-money laundering
Securitizations & valuations
Cost containment
Tax
Sarbanes-Oxley
Mergers & acquisitions
How PwC can helpOur banking and capital markets practice is organized to fully leverage our global team of over 33,000 professionals in every segment of the financial industry – consumer/retail banking, commercial banking, wholesale banking, mortgage banking, securitization, capital markets, insurance, investment management, broker/dealer and real estate. Our professionals include not only auditors and tax specialists with deep industry experience, but dedicated teams that provide internal control assessments, financial systems design and implementation services and solutions across a broad range of industry-related matters, including regulatory compliance and risk management.
Thursday, September 10, 2009
Mobile banking
Mobile banking (also known as M-Banking, mbanking, SMS Banking etc.) is a term used for performing balance checks, account transactions, payments etc. via a mobile device such as a mobile phone. Mobile banking today (2007) is most often performed via SMS or the Mobile Internet but can also use special pMobile Banking Services
Mobile banking can offer services such as the following:
[edit] Account Information
Mini-statements and checking of account history
Alerts on account activity or passing of set thresholds
Monitoring of term deposits
Access to loan statements
Access to card statements
Mutual funds / equity statements
Insurance policy management
Pension plan management
Status on cheque, stop payment on cheque
Ordering check books
Balance checking in the account
Recent transactions
Due date of payment (functionality for stop, change and deleting of payments)
PIN provision, Change of PIN and reminder over the Internet
Blocking of (lost, stolen) cards
[edit] Payments, Deposits, Withdrawals, and Transfers
Domestic and international fund transfers
Micro-payment handling
Mobile recharging
Commercial payment processing
Bill payment processing
Peer to Peer payments
Withdrawal at banking agent
Deposit at banking agent
Especially for clients in remote locations, it will be important to help them deposit and withdraw funds at banking agents, i.e., retail and postal outlets that turn cash into electronic funds and vice versa. The feasibility of such banking agents depends on local regulation which enables retail outlets to take deposits or not.
A specific sequence of SMS messages will enable the system to verify if the client has sufficient funds in his or her wallet and authorize a deposit or withdrawal transaction at the agent. When depositing money, the merchant receives cash and the system credits the client's bank account or mobile wallet. In the same way the client can also withdraw money at the merchant: through exchanging sms to provide authorization, the merchant hands the client cash and debits the merchant's account.
[edit] Investments
Portfolio management services
Real-time stock quotes
Personalized alerts and notifications on security prices
[edit] Support
Status of requests for credit, including mortgage approval, and insurance coverage
Check (cheque) book and card requests
Exchange of data messages and email, including complaint submission and tracking
ATM Location
[edit] Content Services
General information such as weather updates, news
Loyalty-related offers
Location-based services
Based on a survey conducted by Forrester, mobile banking will be attractive mainly to the younger, more "tech-savvy" customer segment. A third of mobile phone users say that they may consider performing some kind of financial transaction through their mobile phone. But most of the users are interested in performing basic transactions such as querying for account balance and making bill payment.rograms called clients downloaded to the mobile device.
Mobile banking can offer services such as the following:
[edit] Account Information
Mini-statements and checking of account history
Alerts on account activity or passing of set thresholds
Monitoring of term deposits
Access to loan statements
Access to card statements
Mutual funds / equity statements
Insurance policy management
Pension plan management
Status on cheque, stop payment on cheque
Ordering check books
Balance checking in the account
Recent transactions
Due date of payment (functionality for stop, change and deleting of payments)
PIN provision, Change of PIN and reminder over the Internet
Blocking of (lost, stolen) cards
[edit] Payments, Deposits, Withdrawals, and Transfers
Domestic and international fund transfers
Micro-payment handling
Mobile recharging
Commercial payment processing
Bill payment processing
Peer to Peer payments
Withdrawal at banking agent
Deposit at banking agent
Especially for clients in remote locations, it will be important to help them deposit and withdraw funds at banking agents, i.e., retail and postal outlets that turn cash into electronic funds and vice versa. The feasibility of such banking agents depends on local regulation which enables retail outlets to take deposits or not.
A specific sequence of SMS messages will enable the system to verify if the client has sufficient funds in his or her wallet and authorize a deposit or withdrawal transaction at the agent. When depositing money, the merchant receives cash and the system credits the client's bank account or mobile wallet. In the same way the client can also withdraw money at the merchant: through exchanging sms to provide authorization, the merchant hands the client cash and debits the merchant's account.
[edit] Investments
Portfolio management services
Real-time stock quotes
Personalized alerts and notifications on security prices
[edit] Support
Status of requests for credit, including mortgage approval, and insurance coverage
Check (cheque) book and card requests
Exchange of data messages and email, including complaint submission and tracking
ATM Location
[edit] Content Services
General information such as weather updates, news
Loyalty-related offers
Location-based services
Based on a survey conducted by Forrester, mobile banking will be attractive mainly to the younger, more "tech-savvy" customer segment. A third of mobile phone users say that they may consider performing some kind of financial transaction through their mobile phone. But most of the users are interested in performing basic transactions such as querying for account balance and making bill payment.rograms called clients downloaded to the mobile device.
threats to online banking
Network Security,
Online Banking,
Security Management amples presented in this paper shows that the biggest threat to online banking is still malicious code executed carelessly on the end-user's computer. The attackers tend to target the weakest link. Once the attacker has control over a user's computer, he or she can modify the information flow to his or her advantage. This may have happened in the case of the businessman from Miami. The situation most likely will not change until new transaction methods are introduced. So, whenever using an online financial system, ensure that the system is still under control and not a spoofed puppet, or one could end up featuring as the businessman in the next fraud case article.
Online Banking,
Security Management amples presented in this paper shows that the biggest threat to online banking is still malicious code executed carelessly on the end-user's computer. The attackers tend to target the weakest link. Once the attacker has control over a user's computer, he or she can modify the information flow to his or her advantage. This may have happened in the case of the businessman from Miami. The situation most likely will not change until new transaction methods are introduced. So, whenever using an online financial system, ensure that the system is still under control and not a spoofed puppet, or one could end up featuring as the businessman in the next fraud case article.
banking regulations
Objectives of bank regulation
The objectives of bank regulation, and the emphasis, varies between jurisdiction. The most common objectives are:
Prudential -- to reduce the level of risk bank creditors are exposed to (i.e. to protect depositors)
Systemic risk reduction -- to reduce the risk of disruption resulting from adverse trading conditions for banks causing multiple or major bank failures
Avoid misuse of banks -- to reduce the risk of banks being used for criminal purposes, e.g. laundering the proceeds of crime
To protect banking confidentiality
Credit allocation -- to direct credit to favored sectors
[edit] General principles of bank regulation
Banking regulations can vary widely across nations and jurisdictions. This section of the article describes general principles of bank regulation throughout the world.
[edit] Minimum requirements
Requirements are imposed on banks in order to promote the objectives of the regulator. The most important minimum requirement in banking regulation is maintaining minimum capital ratios.
[edit] Supervisory review
Banks are required to be issued with a bank license by the regulator in order to carry on business as a bank, and the regulator supervises licenced banks for compliance with the requirements and responds to breaches of the requirements through obtaining undertakings, giving directions, imposing penalties or revoking the bank's licence.
[edit] Market discipline
The regulator requires banks to publicly disclose financial and other information, and depositors and other creditors are able to use this information to assess the level of risk and to make investment decisions. As a result of this, the bank is subject to market discipline and the regulator can also use market pricing information as an indicator of the bank's financial health.
[edit] Instruments and requirements of bank regulation
[edit] Capital requirement
Main article: Capital requirement
The capital requirement sets a framework on how banks must handle their capital in relation to their assets. Internationally, the Bank for International Settlements' Basel Committee on Banking Supervision influences each country's capital requirements. In 1988, the Committee decided to introduce a capital measurement system commonly referred to as the Basel Capital Accords. The latest capital adequacy framework is commonly known as Basel II. This updated framework is intended to be more risk sensitive than the original one, but is also a lot more complex.
[edit] Reserve requirement
Main article: Reserve requirement
The reserve requirement sets the minimum reserves each bank must hold to demand deposits and banknotes. This type of regulation has lost the role it once had, as the emphasis has moved toward capital adequacy, and in many countries there is no minimum reserve ratio. The purpose of minimum reserve ratios is liquidity rather than safety. An example of a country with a contemporary minimum reserve ratio is Hong Kong, where banks are required to maintain 25% of their liabilities that are due on demand or within 1 month as qualifying liquefiable assets.
Reserve requirements have also been used in the past to control the stock of banknotes and/or bank deposits. Required reserves have at times been gold coin, central bank banknotes or deposits, and foreign currency.
[edit] Corporate governance
Corporate governance requirements are intended to encourage the bank to be well managed, and is an indirect way of achieving other objectives. Requirements may include:
To be a body corporate (i.e. not an individual, a partnership, trust or other unincorporated entity)
To be incorporated locally, and/or to be incorporated under as a particular type of body corporate, rather than being incorporated in a foreign jurisdiction.
To have a minimum number of directors
To have an organisational structure that includes various offices and officers, e.g. corporate secretary, treasurer/CFO, auditor, Asset Liability Management Committee, Privacy Officer etc. Also the officers for those offices may need to be approved persons, or from an approved class of persons.
To have a constitution or articles of association that is approved, or contains or does not contain particular clauses, e.g. clauses that enable directors to act other than in the best interests of the company (e.g. in the interests of a parent company) may not be allowed.
[edit] Financial reporting and disclosure requirements
Banks may be required to:
Prepare annual financial statements according to a financial reporting standard, have them audited, and to register or publish them
Prepare more frequent financial disclosures, e.g. Quarterly Disclosure Statements
Have directors of the bank attest to the accuracy of such financial disclosures
Prepare and have registered prospectuses detailing the terms of securities it issues (e.g. deposits), and the relevant facts that will enable investors to better assess the level and type of financial risks in investing in those securities.
[edit] Credit rating requirement
Banks may be required to obtain and maintain a current credit rating from an approved credit rating agency, and to disclose it to investors and prospective investors. Also, banks may be required to maintain a minimum credit rating.
The objectives of bank regulation, and the emphasis, varies between jurisdiction. The most common objectives are:
Prudential -- to reduce the level of risk bank creditors are exposed to (i.e. to protect depositors)
Systemic risk reduction -- to reduce the risk of disruption resulting from adverse trading conditions for banks causing multiple or major bank failures
Avoid misuse of banks -- to reduce the risk of banks being used for criminal purposes, e.g. laundering the proceeds of crime
To protect banking confidentiality
Credit allocation -- to direct credit to favored sectors
[edit] General principles of bank regulation
Banking regulations can vary widely across nations and jurisdictions. This section of the article describes general principles of bank regulation throughout the world.
[edit] Minimum requirements
Requirements are imposed on banks in order to promote the objectives of the regulator. The most important minimum requirement in banking regulation is maintaining minimum capital ratios.
[edit] Supervisory review
Banks are required to be issued with a bank license by the regulator in order to carry on business as a bank, and the regulator supervises licenced banks for compliance with the requirements and responds to breaches of the requirements through obtaining undertakings, giving directions, imposing penalties or revoking the bank's licence.
[edit] Market discipline
The regulator requires banks to publicly disclose financial and other information, and depositors and other creditors are able to use this information to assess the level of risk and to make investment decisions. As a result of this, the bank is subject to market discipline and the regulator can also use market pricing information as an indicator of the bank's financial health.
[edit] Instruments and requirements of bank regulation
[edit] Capital requirement
Main article: Capital requirement
The capital requirement sets a framework on how banks must handle their capital in relation to their assets. Internationally, the Bank for International Settlements' Basel Committee on Banking Supervision influences each country's capital requirements. In 1988, the Committee decided to introduce a capital measurement system commonly referred to as the Basel Capital Accords. The latest capital adequacy framework is commonly known as Basel II. This updated framework is intended to be more risk sensitive than the original one, but is also a lot more complex.
[edit] Reserve requirement
Main article: Reserve requirement
The reserve requirement sets the minimum reserves each bank must hold to demand deposits and banknotes. This type of regulation has lost the role it once had, as the emphasis has moved toward capital adequacy, and in many countries there is no minimum reserve ratio. The purpose of minimum reserve ratios is liquidity rather than safety. An example of a country with a contemporary minimum reserve ratio is Hong Kong, where banks are required to maintain 25% of their liabilities that are due on demand or within 1 month as qualifying liquefiable assets.
Reserve requirements have also been used in the past to control the stock of banknotes and/or bank deposits. Required reserves have at times been gold coin, central bank banknotes or deposits, and foreign currency.
[edit] Corporate governance
Corporate governance requirements are intended to encourage the bank to be well managed, and is an indirect way of achieving other objectives. Requirements may include:
To be a body corporate (i.e. not an individual, a partnership, trust or other unincorporated entity)
To be incorporated locally, and/or to be incorporated under as a particular type of body corporate, rather than being incorporated in a foreign jurisdiction.
To have a minimum number of directors
To have an organisational structure that includes various offices and officers, e.g. corporate secretary, treasurer/CFO, auditor, Asset Liability Management Committee, Privacy Officer etc. Also the officers for those offices may need to be approved persons, or from an approved class of persons.
To have a constitution or articles of association that is approved, or contains or does not contain particular clauses, e.g. clauses that enable directors to act other than in the best interests of the company (e.g. in the interests of a parent company) may not be allowed.
[edit] Financial reporting and disclosure requirements
Banks may be required to:
Prepare annual financial statements according to a financial reporting standard, have them audited, and to register or publish them
Prepare more frequent financial disclosures, e.g. Quarterly Disclosure Statements
Have directors of the bank attest to the accuracy of such financial disclosures
Prepare and have registered prospectuses detailing the terms of securities it issues (e.g. deposits), and the relevant facts that will enable investors to better assess the level and type of financial risks in investing in those securities.
[edit] Credit rating requirement
Banks may be required to obtain and maintain a current credit rating from an approved credit rating agency, and to disclose it to investors and prospective investors. Also, banks may be required to maintain a minimum credit rating.
division of banking
Main Phone: 609-292-7272
The Division of Banking consists of two major units - the Office of Consumer Finance and the Office of Depositories.
The Office of Consumer Finance provides consumer protections through the regulation of 16 types of businesses that provide a variety of consumer financial services. Included in the Office's supervisory responsibilities are the investigation of complaints, on-site examinations, the monitoring of net worth and surety bonding requirements through annual report filings, and the initiation of enforcement actions as may be required. In addition, the Office supervises state-chartered credit unions through on-site examinations and report filings to ensure safety and soundness, as well as compliance with applicable state and federal laws.
The Office of Depositories processes and reviews applications by depository institutions for new charters, branches, relocations, plans of acquisition, mergers, bulk sales, stock conversions and auxiliary offices. In addition, the Office is responsible for the examination of state-chartered commercial banks, savings banks and savings and loan institutions and for enforcement actions involving these depositories.
The Division of Banking consists of two major units - the Office of Consumer Finance and the Office of Depositories.
The Office of Consumer Finance provides consumer protections through the regulation of 16 types of businesses that provide a variety of consumer financial services. Included in the Office's supervisory responsibilities are the investigation of complaints, on-site examinations, the monitoring of net worth and surety bonding requirements through annual report filings, and the initiation of enforcement actions as may be required. In addition, the Office supervises state-chartered credit unions through on-site examinations and report filings to ensure safety and soundness, as well as compliance with applicable state and federal laws.
The Office of Depositories processes and reviews applications by depository institutions for new charters, branches, relocations, plans of acquisition, mergers, bulk sales, stock conversions and auxiliary offices. In addition, the Office is responsible for the examination of state-chartered commercial banks, savings banks and savings and loan institutions and for enforcement actions involving these depositories.
banking and securities
Total Assets of Banks andCredit Unions in Alaska
Total assets for all banks with home offices in Alaska were $4,581,657,000 as of December 31, 2008, an increase of $179,323,000 or 4.07% from a year ago. This total excludes Key Bank, National Association and Wells Fargo Bank, National Association, which are interstate branches and do not furnish balance sheet information for Alaska.
Total assets of all state-chartered banks in Alaska were $1,953,698,000 as of December 31, 2008, an increase of $48,465,000, or 2.54% from a year ago. Approximately 43% of the total assets of all banks headquartered in Alaska were held in state-chartered institutions.
Total assets for all credit unions in Alaska were $5,544,045,216 as of December 31, 2008, an increase of $473,375,573 or 9.34% from December 31, 2007. Total assets for all state-chartered credit unions in Alaska were $624,672,189 as of December 31, 2008, an increase of $83,679,791 or 15.47 % from the end of 2007. Approximately 11.27% of the total assets of all credit unions were held in state-chartered institutions.
Total assets for all banks with home offices in Alaska were $4,581,657,000 as of December 31, 2008, an increase of $179,323,000 or 4.07% from a year ago. This total excludes Key Bank, National Association and Wells Fargo Bank, National Association, which are interstate branches and do not furnish balance sheet information for Alaska.
Total assets of all state-chartered banks in Alaska were $1,953,698,000 as of December 31, 2008, an increase of $48,465,000, or 2.54% from a year ago. Approximately 43% of the total assets of all banks headquartered in Alaska were held in state-chartered institutions.
Total assets for all credit unions in Alaska were $5,544,045,216 as of December 31, 2008, an increase of $473,375,573 or 9.34% from December 31, 2007. Total assets for all state-chartered credit unions in Alaska were $624,672,189 as of December 31, 2008, an increase of $83,679,791 or 15.47 % from the end of 2007. Approximately 11.27% of the total assets of all credit unions were held in state-chartered institutions.
banking sectors
The once boisterous media industry comprising traditional news media and advertising agencies, is now experiencing trying times. This follows reduction in the volume of adverts occasioned by the recession, centralisation of global marketing communication budgets by multinationals and increasing newsprint costs. Some local advertising agencies have become office extensions to global media agencies that control multinationals’ account. Therefore, they now affiliate themselves with international advertising groups that conceptualise the ads from which they make adaptations for the local audience. Effects of recessionInstitutional advertisers, whether local or foreign, regarded as the goose, are traumatised by the hard economic times and therefore have had to cut ad spend. For this reason, the advertising agencies and news media which feed on the golden eggs are facing difficult times. Presently, advertisement placements in mostly the print media have been scaled down by the banking and manufacturing industries that had earlier reviewed their marketing communication budgets downwards as a measure to hedge the global recession. The chief executive of a professional body who prefers anonymity notes that the multinationals who dominate the economy and whose ads spend account for over 60 percent of total ads spend in Nigeria, had recently cut down on their budgets due to the recession. This situation, he says, seriously pushed the media industry into a tight corner. For instance, Lere Alimi of Optimum Exposures confirms that the outdoor advertising business has been tremendously affected, just as the former president of AAAN, Lolu Akinwunmi, agrees that agencies are facing difficult times. Also, the president of Outdoor Advertising Association of Nigeria (OAAN), Kole Ademulegun, recently noted that “most clients are not renewing expired site rental contracts, and when contracts are renewed, some clients are asking for reduction in rates, sometimes by as much as 50 percent.” Wrap around ceasesThe present development is a sharp contrast to the period between 2005 and 2008, when it was calculated by operators in the consulting business that the media industry raked in over N2 billion from wrap around advertisement alone. The wrap around boomed during the consolidation exercise in the banking industry, when companies floated their initial public offers (IPOs), which saw increase in their capitalisation But following the stock market crash late last year, coupled with the global financial meltdown, companies have discontinued to engage in any form of wrap around advert that costs an average of N16 million per newspaper. Companies now rely on conventional ads that cost an average of N300.000 for full page to promote their brands. CBN order on banks to curtail adsBut observers in both advertising agencies and the news media are worried that wrap around appears further nailed, especially from the financial sector following the CBN’s directive late March to banks to curtail their adverts. The CBN had in March this year issued a directive to banks to restrict the publication of their annual reports to just two national dailies of their choice, a policy that the present management of CBN may not review. The restriction further denied the advertising agencies and the traditional news media advert revenues as the media outlets now struggle to find ways to become profitable again. Predictably, the fear of media columnists who drew their sword from the sheath against the CBN governor for giving an order that threatened their livelihood was not allayed as the policy indeed affected the media revenue. Within this period, the weight of global recession set in and forced companies including banks to review downwards their marketing communication budgets, a development that compelled advertising agencies and other media houses to downsize their workforce. As in the western world, observers issued the direst near-term forecast for the advertising industry, warning that the advertising business will shrink this year. For instance, Kunle Alake, the chief operating officer of Dangote Group predicted that some plants would shut down while others would go lean in operations. When this happens, it is expected that advertisement would take back stage. Recent stir in banking sector as another blowForeseeing all the challenges that lay ahead, operators in the media industry who had been holding series of seminars this year to check the effects of slide in volume of business appear further frustrated with the recent stir in the banking industry. The stir has resulted into freezing of credit to the economy by the banking sector, a situation that ultimately will stifle other sectors, especially the manufacturing and SME sector, a development analysts describe as precarious for an economy that is in a hurry for growth. The banking sector had in the face of the situation further scaled down their advertisement in the newspapers, while the advertising agencies who depend on these adverts for survival are not finding this easy, a chief executive of an agency confided in BusinessDay.He agreed that the problem of the five banks had affected the entire economy and worsened the effect of the recession on the advertising and traditional news media industry. Sources in some media houses put the reduction in the volume of advertising to about 30 percent as some of the banks whose credits are trapped with debtors may not want to embark on heavy product advertisement now, as what they needed is confidence build-up which could be achieved through public relations. Ken Egbas of TruContact lent credence to this when he said time of crisis was not the time for advertisement, it was time to use PR.These actions have resulted in adoption of some survival measures among marketing communication agencies and news media, and this includes cutting operational costs.
Finance, Banking and Investment
For the entrepreneur and the investor alike, finance, and therefore finance related information, is of paramount importance. This page lists and rates internet resources related to financial matters and financial information including real time financial news, information on banks and financial institutions, financial analysis software, small business financing, investment, stock exchanges and market informAsian equity markets were mostly higher, with financial stocks gaining and technology shares aided by a positive update from Texas Instruments. The Nikkei gained 1.5%.ation, etc.
bank
bank is a financial institution licensed by a government. Its primary activities include borrowing and lending money. Many other financial activities were allowed over time. For example banks are important players in financial markets and offer financial services such as investment funds. In some countries such as Germany, banks have historically owned major stakes in industrial corporations while in other countries such as the United States banks are prohibited from owning non-financial companies. In Japan, banks are usually the nexus of a cross-share holding entity known as the zaibatsu. In France, bancassurance is prevalent, as most banks offer insurance services (and now real estate services) to their clients.
The level of government regulation of the banking industry varies widely, with countries such as Iceland, the United Kingdom and the United States having relatively light regulation of the banking sector, and countries such as China having relatively heavier regulation (including stricter regulations regarding the level of reservesTraditional banking activities
Large door to an old bank vault.
Banks act as payment agents by conducting checking or current accounts for customers, paying cheques drawn by customers on the bank, and collecting cheques deposited to customers' current accounts. Banks also enable customer payments via other payment methods such as telegraphic transfer, EFTPOS, and ATM.
Banks borrow money by accepting funds deposited on current accounts, by accepting term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current accounts, by making installment loans, and by investing in marketable debt securities and other forms of money lending.
Banks provide almost all payment services, and a bank account is considered indispensable by most businesses, individuals and governments. Non-banks that provide payment services such as remittance companies are not normally considered an adequate substitute for having a bank account.
Banks borrow most funds from households and non-financial businesses, and lend most funds to households and non-financial businesses, but non-bank lenders provide a significant and in many cases adequate substitute for bank loans, and money market funds, cash management trusts and other non-bank financial institutions in many cases provide an adequate substitute to banks for lending savings to.[).
The level of government regulation of the banking industry varies widely, with countries such as Iceland, the United Kingdom and the United States having relatively light regulation of the banking sector, and countries such as China having relatively heavier regulation (including stricter regulations regarding the level of reservesTraditional banking activities
Large door to an old bank vault.
Banks act as payment agents by conducting checking or current accounts for customers, paying cheques drawn by customers on the bank, and collecting cheques deposited to customers' current accounts. Banks also enable customer payments via other payment methods such as telegraphic transfer, EFTPOS, and ATM.
Banks borrow money by accepting funds deposited on current accounts, by accepting term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current accounts, by making installment loans, and by investing in marketable debt securities and other forms of money lending.
Banks provide almost all payment services, and a bank account is considered indispensable by most businesses, individuals and governments. Non-banks that provide payment services such as remittance companies are not normally considered an adequate substitute for having a bank account.
Banks borrow most funds from households and non-financial businesses, and lend most funds to households and non-financial businesses, but non-bank lenders provide a significant and in many cases adequate substitute for bank loans, and money market funds, cash management trusts and other non-bank financial institutions in many cases provide an adequate substitute to banks for lending savings to.[).
banking in islam
Islamic banking refers to a system of banking or banking activity that is consistent with the principles of Islamic law (Sharia) and its practical application through the development of Islamic economics. Sharia prohibits the payment of fees for the renting of money (Riba, usury) for specific terms, as well as investing in businesses that provide goods or services considered contrary to its principles (Haraam, forbidden). While these principles were used as the basis for a flourishing economy in earlier times, it is only in the late 20th century that a number of Islamic banks were formed to apply these principles to private or semi-private commercial institutions within the Muslim community.Classical Islamic banking
Main article: Islamic economics in the world
Further information: Early reforms under Islam
During the Islamic Golden Age, early forms of proto-capitalism and free markets were present in the Caliphate,[1] where an early market economy and an early form of mercantilism were developed between the 8th-12th centuries, which some refer to as "Islamic capitalism".[2] A vigorous monetary economy was created on the basis of the expanding levels of circulation of a stable high-value currency (the dinar) and the integration of monetary areas that were previously independent.
A number of innovative concepts and techniques were introduced in early Islamic banking, including bills of exchange, the first forms of partnership (mufawada) such as limited partnerships (mudaraba), and the earliest forms of capital (al-mal), capital accumulation (nama al-mal),[3] cheques, promissory notes,[4] trusts (see Waqf), startup companies,[5], transactional accounts, loaning, ledgers and assignments.[6] Organizational enterprises similar to corporations independent from the state also existed in the medieval Islamic world, while the agency institution was also introduced during that time.[7][8] Many of these early capitalist concepts were adopted and further advanced in medieval Europe from the 13th century onwards.[3]
[edit] Riba
The definition of riba in classical Islamic jurisprudence was "surplus value without counterpart." or "to ensure equivalency in real value" and that "numerical value was immaterial." During this period, gold and silver currencies were the benchmark metals that defined the value of all other materials being traded. Applying interest to the benchmark itself (ex natura sua) made no logical sense as its value remained constant relative to all other materials: these metals could be added to but not created (from nothing).
Applying interest was acceptable under some circumstances. Currencies that were based on guarantees by a government to honor the stated value (i.e. fiat currency) or based on other materials such as paper or base metals were allowed to have interest applied to them.[9] When base metal currencies were first introduced in the Islamic world, no jurist ever thought that "paying a debt in a higher number of units of this fiat money was riba" as they were concerned with the real value of money (determined by weight only) rather than the numerical value. For example, it was acceptable for a loan of 1000 gold dinars to be paid back as 1050 dinars of equal aggregate weight (i.e., the value in terms of weight had to be same because all makes of coins did not carry exactly similar weight).
[edit] Modern Islamic banking
The first modern experiment with Islamic banking was undertaken in Egypt under cover without projecting an Islamic image—for fear of being seen as a manifestation of Islamic fundamentalism that was anathema to the political regime. The pioneering effort, led by Ahmad Elnaggar, took the form of a savings bank based on profit-sharing in the Egyptian town of Mit Ghamr in 1963. This experiment lasted until 1967 (Ready 1981), by which time there were nine such banks in the country.[10]
This section requires expansion.
In 1972, the Mit Ghamr Savings project became part of Nasr Social Bank which, till date, is still in business in Egypt. In 1975, the Islamic Development Bank was set-up with the mission to provide funding to projects in the member countries. The first modern commercial Islamic bank, Dubai Islamic Bank, opened its doors in 1975. In the early years, the products offered were basic and strongly founded on conventional banking products, but in the last few years the industry is starting to see strong development in new products and services.
Islamic Banking is growing at a rate of 10-15% per year and with signs of consistent future growth[11]. Islamic banks have more than 300 institutions spread over 51 countries, including the United States through companies such as the Michigan-based University Bank, as well as an additional 250 mutual funds that comply with Islamic principles. Conservative estimates suggest that over US$500 billion of assets are managed according to Islamic investment principles.
The World Islamic Banking Conference, held annually in Bahrain since 1994, is internationally recognized as the largest and most significant gathering of Islamic banking and finance leaders in the world.
The Vatican has put forward the idea that "the principles of Islamic finance may represent a possible cure for ailing markets."[12]
[edit] Principles
Islamic banking has the same purpose as conventional banking except that it operates in accordance with the rules of Shariah, known as Fiqh al-Muamalat (Islamic rules on transactions). The basic principle of Islamic banking is the sharing of profit and loss and the prohibition of riba (usury). Common terms used in Islamic banking include profit sharing (Mudharabah), safekeeping (Wadiah), joint venture (Musharakah), cost plus (Murabahah), and leasing (Ijarah).
In an Islamic mortgage transaction, instead of loaning the buyer money to purchase the item, a bank might buy the item itself from the seller, and re-sell it to the buyer at a profit, while allowing the buyer to pay the bank in installments. However, the fact that it is profit cannot be made explicit and therefore there are no additional penalties for late payment. In order to protect itself against default, the bank asks for strict collateral. The goods or land is registered to the name of the buyer from the start of the transaction. This arrangement is called Murabaha. Another approach is EIjara wa EIqtina, which is similar to real estate leasing. Islamic banks handle loans for vehicles in a similar way (selling the vehicle at a higher-than-market price to the debtor and then retaining ownership of the vehicle until the loan is paid).
An innovative approach applied by some banks for home loans, called Musharaka al-Mutanaqisa, allows for a floating rate in the form of rental. The bank and borrower forms a partnership entity, both providing capital at an agreed percentage to purchase the property. The partnership entity then rent out the property to the borrower and charges rent. The bank and the borrower will then share the proceed from this rent based on the current equity share of the partnership. At the same time, the borrower in the partnership entity also buys the bank's share on the property at agreed installments until the full equity is transferred to the borrower and the partnership is ended. If default occurs, both the bank and the borrower receives the proceeds from an auction based on the current equity. This method allows for floating rates according to current market rate such as the BLR (base lending rate), especially in a dual-banking system like in Malaysia.
There are several other approaches used in business transactions. Islamic banks lend their money to companies by issuing floating rate interest loans. The floating rate of interest is pegged to the company's individual rate of return. Thus the bank's profit on the loan is equal to a certain percentage of the company's profits. Once the principal amount of the loan is repaid, the profit-sharing arrangement is concluded. This practice is called Musharaka. Further, Mudaraba is venture capital funding of an entrepreneur who provides labor while financing is provided by the bank so that both profit and risk are shared. Such participatory arrangements between capital and labor reflect the Islamic view that the borrower must not bear all the risk/cost of a failure, resulting in a balanced distribution of income and not allowing lender to monopolize the economy.
And finally, Islamic banking is restricted to Islamically acceptable transactions, which exclude those involving alcohol, pork, gambling, etc. Thus ethical investing is the only acceptable form of investment, and moral purchasing is encouraged. In theory, Islamic banking is an example of full-reserve banking, with banks achieving a 100% reserve ratio.[13] However, in practice, this is not the case, and no examples of 100 per cent reserve banking are observed.[14]
Islamic banks have grown recently in the Muslim world but are a very small share of the global banking system. Micro-lending institutions founded by Muslims, notably Grameen Bank, use conventional lending practices and are popular in some Muslim nations, especially Bangladesh, but some do not consider them true Islamic banking. However, Muhammad Yunus, the founder of Grameen Bank and microfinance banking, and other supporters of microfinance, argue that the lack of collateral and lack of excessive interest in micro-lending is consistent with the Islamic prohibition of usury (riba).[15][16]
[edit] Shariah Advisory Council/Consultant
Islamic banks and banking institutions that offer Islamic banking products and services (IBS banks) are required to establish a Shariah Supervisory Board (SSB) to advise them and to ensure that the operations and activities of the bank comply with Shariah principles. On the other hand, there are also those who believe that no form of banking can ever comply with the Shariah.[17]
In Malaysia, the National Shariah Advisory Council, which additionally set up at Bank Negara Malaysia (BNM), advises BNM on the Shariah aspects of the operations of these institutions and on their products and services. (See: Islamic banking in Malaysia). In Indonesia the Ulama Council serves a similar purpose.
A number of Shariah advisory firms (either standalone or subsidiaries of larger financial groups) have now emerged to offer Shariah advisory services to the institutions offering Islamic financial services. Issue of independence, impartiality and conflicts of interest have also been recently voiced.
Main article: Islamic economics in the world
Further information: Early reforms under Islam
During the Islamic Golden Age, early forms of proto-capitalism and free markets were present in the Caliphate,[1] where an early market economy and an early form of mercantilism were developed between the 8th-12th centuries, which some refer to as "Islamic capitalism".[2] A vigorous monetary economy was created on the basis of the expanding levels of circulation of a stable high-value currency (the dinar) and the integration of monetary areas that were previously independent.
A number of innovative concepts and techniques were introduced in early Islamic banking, including bills of exchange, the first forms of partnership (mufawada) such as limited partnerships (mudaraba), and the earliest forms of capital (al-mal), capital accumulation (nama al-mal),[3] cheques, promissory notes,[4] trusts (see Waqf), startup companies,[5], transactional accounts, loaning, ledgers and assignments.[6] Organizational enterprises similar to corporations independent from the state also existed in the medieval Islamic world, while the agency institution was also introduced during that time.[7][8] Many of these early capitalist concepts were adopted and further advanced in medieval Europe from the 13th century onwards.[3]
[edit] Riba
The definition of riba in classical Islamic jurisprudence was "surplus value without counterpart." or "to ensure equivalency in real value" and that "numerical value was immaterial." During this period, gold and silver currencies were the benchmark metals that defined the value of all other materials being traded. Applying interest to the benchmark itself (ex natura sua) made no logical sense as its value remained constant relative to all other materials: these metals could be added to but not created (from nothing).
Applying interest was acceptable under some circumstances. Currencies that were based on guarantees by a government to honor the stated value (i.e. fiat currency) or based on other materials such as paper or base metals were allowed to have interest applied to them.[9] When base metal currencies were first introduced in the Islamic world, no jurist ever thought that "paying a debt in a higher number of units of this fiat money was riba" as they were concerned with the real value of money (determined by weight only) rather than the numerical value. For example, it was acceptable for a loan of 1000 gold dinars to be paid back as 1050 dinars of equal aggregate weight (i.e., the value in terms of weight had to be same because all makes of coins did not carry exactly similar weight).
[edit] Modern Islamic banking
The first modern experiment with Islamic banking was undertaken in Egypt under cover without projecting an Islamic image—for fear of being seen as a manifestation of Islamic fundamentalism that was anathema to the political regime. The pioneering effort, led by Ahmad Elnaggar, took the form of a savings bank based on profit-sharing in the Egyptian town of Mit Ghamr in 1963. This experiment lasted until 1967 (Ready 1981), by which time there were nine such banks in the country.[10]
This section requires expansion.
In 1972, the Mit Ghamr Savings project became part of Nasr Social Bank which, till date, is still in business in Egypt. In 1975, the Islamic Development Bank was set-up with the mission to provide funding to projects in the member countries. The first modern commercial Islamic bank, Dubai Islamic Bank, opened its doors in 1975. In the early years, the products offered were basic and strongly founded on conventional banking products, but in the last few years the industry is starting to see strong development in new products and services.
Islamic Banking is growing at a rate of 10-15% per year and with signs of consistent future growth[11]. Islamic banks have more than 300 institutions spread over 51 countries, including the United States through companies such as the Michigan-based University Bank, as well as an additional 250 mutual funds that comply with Islamic principles. Conservative estimates suggest that over US$500 billion of assets are managed according to Islamic investment principles.
The World Islamic Banking Conference, held annually in Bahrain since 1994, is internationally recognized as the largest and most significant gathering of Islamic banking and finance leaders in the world.
The Vatican has put forward the idea that "the principles of Islamic finance may represent a possible cure for ailing markets."[12]
[edit] Principles
Islamic banking has the same purpose as conventional banking except that it operates in accordance with the rules of Shariah, known as Fiqh al-Muamalat (Islamic rules on transactions). The basic principle of Islamic banking is the sharing of profit and loss and the prohibition of riba (usury). Common terms used in Islamic banking include profit sharing (Mudharabah), safekeeping (Wadiah), joint venture (Musharakah), cost plus (Murabahah), and leasing (Ijarah).
In an Islamic mortgage transaction, instead of loaning the buyer money to purchase the item, a bank might buy the item itself from the seller, and re-sell it to the buyer at a profit, while allowing the buyer to pay the bank in installments. However, the fact that it is profit cannot be made explicit and therefore there are no additional penalties for late payment. In order to protect itself against default, the bank asks for strict collateral. The goods or land is registered to the name of the buyer from the start of the transaction. This arrangement is called Murabaha. Another approach is EIjara wa EIqtina, which is similar to real estate leasing. Islamic banks handle loans for vehicles in a similar way (selling the vehicle at a higher-than-market price to the debtor and then retaining ownership of the vehicle until the loan is paid).
An innovative approach applied by some banks for home loans, called Musharaka al-Mutanaqisa, allows for a floating rate in the form of rental. The bank and borrower forms a partnership entity, both providing capital at an agreed percentage to purchase the property. The partnership entity then rent out the property to the borrower and charges rent. The bank and the borrower will then share the proceed from this rent based on the current equity share of the partnership. At the same time, the borrower in the partnership entity also buys the bank's share on the property at agreed installments until the full equity is transferred to the borrower and the partnership is ended. If default occurs, both the bank and the borrower receives the proceeds from an auction based on the current equity. This method allows for floating rates according to current market rate such as the BLR (base lending rate), especially in a dual-banking system like in Malaysia.
There are several other approaches used in business transactions. Islamic banks lend their money to companies by issuing floating rate interest loans. The floating rate of interest is pegged to the company's individual rate of return. Thus the bank's profit on the loan is equal to a certain percentage of the company's profits. Once the principal amount of the loan is repaid, the profit-sharing arrangement is concluded. This practice is called Musharaka. Further, Mudaraba is venture capital funding of an entrepreneur who provides labor while financing is provided by the bank so that both profit and risk are shared. Such participatory arrangements between capital and labor reflect the Islamic view that the borrower must not bear all the risk/cost of a failure, resulting in a balanced distribution of income and not allowing lender to monopolize the economy.
And finally, Islamic banking is restricted to Islamically acceptable transactions, which exclude those involving alcohol, pork, gambling, etc. Thus ethical investing is the only acceptable form of investment, and moral purchasing is encouraged. In theory, Islamic banking is an example of full-reserve banking, with banks achieving a 100% reserve ratio.[13] However, in practice, this is not the case, and no examples of 100 per cent reserve banking are observed.[14]
Islamic banks have grown recently in the Muslim world but are a very small share of the global banking system. Micro-lending institutions founded by Muslims, notably Grameen Bank, use conventional lending practices and are popular in some Muslim nations, especially Bangladesh, but some do not consider them true Islamic banking. However, Muhammad Yunus, the founder of Grameen Bank and microfinance banking, and other supporters of microfinance, argue that the lack of collateral and lack of excessive interest in micro-lending is consistent with the Islamic prohibition of usury (riba).[15][16]
[edit] Shariah Advisory Council/Consultant
Islamic banks and banking institutions that offer Islamic banking products and services (IBS banks) are required to establish a Shariah Supervisory Board (SSB) to advise them and to ensure that the operations and activities of the bank comply with Shariah principles. On the other hand, there are also those who believe that no form of banking can ever comply with the Shariah.[17]
In Malaysia, the National Shariah Advisory Council, which additionally set up at Bank Negara Malaysia (BNM), advises BNM on the Shariah aspects of the operations of these institutions and on their products and services. (See: Islamic banking in Malaysia). In Indonesia the Ulama Council serves a similar purpose.
A number of Shariah advisory firms (either standalone or subsidiaries of larger financial groups) have now emerged to offer Shariah advisory services to the institutions offering Islamic financial services. Issue of independence, impartiality and conflicts of interest have also been recently voiced.
banking in india
Banking in India originated in the last decades of the 18th century. The oldest bank in existence in India is the State Bank of India, a government-owned bank that traces its origins back to June 1806 and that is the largest commercial bank in the country. Central banking is the responsibility of the Reserve Bank of India, which in 1935 formally took over these responsibilities from the then Imperial Bank of India, relegating it to commercial banking functions. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers. In 1969 the government nationalized the 14 largest commercial banks; the government nationalized the six next largest in 1980.
Currently, India has 88 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake), 31 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively
Currently, India has 88 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake), 31 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively
public sector banking
. The public sector is a part of the state that deals with the delivery of goods and services by and for the government, whether national, regional or local/municipal.
Examples of public sector activity range from delivering social security, administering urban planning and organizing national defenses.
The organization of the public sector (public ownership) can take several forms, including:
Direct administration funded through taxation; the delivering organization generally has no specific requirement to meet commercial success criteria, and production decisions are determined by government.
Publicly owned corporations (in some contexts, especially manufacturing, "state-owned enterprises"); which differ from direct administration in that they have greater commercial freedoms and are expected to operate according to commercial criteria, and production decisions are not generally taken by government (although goals may be set for them by government).
Partial outsourcing (of the scale many businesses do, e.g. for IT services), is considered a public sector model.
A borderline form is
Complete outsourcing or contracting out, with a privately owned corporation delivering the entire service on behalf of government. This may be considered a mixture of private sector operations with public ownership of assets, although in some forms the private sector's control and/or risk is so great that the service may no longer be considered part of the public sector. (See Britain's Private Finance Initiative.)
In spite of their name, public companies are not part of the public sector; they are a particular kind of private sector company that can offer their shares for sale to the general public.
Examples of public sector activity range from delivering social security, administering urban planning and organizing national defenses.
The organization of the public sector (public ownership) can take several forms, including:
Direct administration funded through taxation; the delivering organization generally has no specific requirement to meet commercial success criteria, and production decisions are determined by government.
Publicly owned corporations (in some contexts, especially manufacturing, "state-owned enterprises"); which differ from direct administration in that they have greater commercial freedoms and are expected to operate according to commercial criteria, and production decisions are not generally taken by government (although goals may be set for them by government).
Partial outsourcing (of the scale many businesses do, e.g. for IT services), is considered a public sector model.
A borderline form is
Complete outsourcing or contracting out, with a privately owned corporation delivering the entire service on behalf of government. This may be considered a mixture of private sector operations with public ownership of assets, although in some forms the private sector's control and/or risk is so great that the service may no longer be considered part of the public sector. (See Britain's Private Finance Initiative.)
In spite of their name, public companies are not part of the public sector; they are a particular kind of private sector company that can offer their shares for sale to the general public.
bankig terms
accountaccount statementacknowledgeagent bankATMbalancebankbank discountbank draftbank examinerbank holding companybank holidaybank notebankingblank checkblank endorsementcashier's checkCDcentral bankcertificate of depositcertified checkcheckcheckbookchecking accountclearcommercial bankcommissioncompensating balancecompound interestcredit cardcredit unioncustodial accountdebit carddebt instrumentdemand depositdepositdishonordraftdraweedrawerFDICFederal Deposit Insurance Corporationfinancial institutionfloatinterest-bearingletter of creditmember bankmoney ordermutual savings banknational banknegotiable instrumentoverdraftpassbookpenaltypersonal identification numberPINpostdatereconciliationsavingsavings accountsavings and loansavings banksight draftsimple intereststate bankstop paymentthrifttime deposittime drafttransfertraveler's checkwindowwithdrawwithdrawal
banking in asia
Six years since the Asian financial crisis of 1997-98, doubts about Asia and its banks still linger. While the profits of the world's top 1,000 banks outside Asia grew an average of 18 percent a year between 1996 and 2001, the Asian banks in the top 1,000 excluding Japan eked out only 6 percent annual growth in profits. In the same period, Japanese banks in the top 1,000 went from generating $7 billion in profits in 1996 to bleeding $50 billion in losses by 2001.
By all measures of financial health, virtually all of Asia's banks have failed to rebound to pre-crisis levels. The overhang of non-performing loans and their drag on earnings are a persistent problem for most. Because of this and the region's protracted recovery, many multinational institutions have substantially lowered Asia's importance in their global strategies. Are they right to do so?Growth market
Financial institutions that write off Asia risk foregoing one of the largest growth markets of the coming decade. Retail banking alone is expected to add approximately $180 billion in new revenues over the rest of this decade, as much new growth as occurred in the United States in the boom period between 1994 and 2001. By 2010,close to 100 million Chinese are expected to sign up for their first credit card, creating the third-biggest market in the world (in terms of card holders) after the United States and Japan.Greater competition, fewer business boundaries, the rise of domestic mergers and acquisitions, and increased access to foreign capital are planting the seeds for stronger players to grow and rise to the top. They are forming the foundation for more resilient and rational banking markets across Asia.Six trends
To spot these seeds of new growth, bankers must look beneath what seems on the surface to be a messy or even forbidding landscape. The budding opportunities lie in six major trends that will drive much of the growth in Asia's banking markets: the rise of the modern consumer, the aging population, a growing concentration of wealth, a likely doubling of the bankable population, the emergence of powerful small and medium sized enterprises, and Asia's fascination with new technologies.
Banks that are able to position themselves well in anticipation of these trends stand to benefit from growth rates that the saturated banking markets in developed economies are unlikely to match.Risks
But while the seeds of opportunity are there, no player can afford to ignore the pernicious “weeds” that can stymie growth. These include the growing stock of NPLs that continue to weaken financial systems and impose a tax on economic growth; underdeveloped capital markets that do not yet provide a meaningful alternative to intermediated capital flows; the lack of true markets for corporate control that would allow the full pursuit of strategic M&A;powerful domestic political interests that are unwilling to take the pain of transforming the financial sector; and slow progress in instituting the changes in corporate governance required to promote greater transparency and real accountability to shareholders. The growth opportunities in Asia are among the biggest and potentially most lucrative anywhere. But the interplay between the seeds of gain and the weeds of pain means that while possible profits may be huge, uncertainty is high. Proactively anticipating and leveraging market volatility will be essential.A new mindset
These balancing acts are the critical context underlying the need for banks to acquire a new mindset to win. This entails accepting that the traditional corporate businesses that make up 70 percent of bank balance sheets have to shrink and that retail banking will rive profits for the next decade. It requires the foresight to build new standardized, low-cost processes that can serve millions of customers through revamped distribution networks. And it means lucking up the courage to abandon legacy personnel policies that protect protect performers and prevent banks from building highly effective sales-oriented cultures.
By all measures of financial health, virtually all of Asia's banks have failed to rebound to pre-crisis levels. The overhang of non-performing loans and their drag on earnings are a persistent problem for most. Because of this and the region's protracted recovery, many multinational institutions have substantially lowered Asia's importance in their global strategies. Are they right to do so?Growth market
Financial institutions that write off Asia risk foregoing one of the largest growth markets of the coming decade. Retail banking alone is expected to add approximately $180 billion in new revenues over the rest of this decade, as much new growth as occurred in the United States in the boom period between 1994 and 2001. By 2010,close to 100 million Chinese are expected to sign up for their first credit card, creating the third-biggest market in the world (in terms of card holders) after the United States and Japan.Greater competition, fewer business boundaries, the rise of domestic mergers and acquisitions, and increased access to foreign capital are planting the seeds for stronger players to grow and rise to the top. They are forming the foundation for more resilient and rational banking markets across Asia.Six trends
To spot these seeds of new growth, bankers must look beneath what seems on the surface to be a messy or even forbidding landscape. The budding opportunities lie in six major trends that will drive much of the growth in Asia's banking markets: the rise of the modern consumer, the aging population, a growing concentration of wealth, a likely doubling of the bankable population, the emergence of powerful small and medium sized enterprises, and Asia's fascination with new technologies.
Banks that are able to position themselves well in anticipation of these trends stand to benefit from growth rates that the saturated banking markets in developed economies are unlikely to match.Risks
But while the seeds of opportunity are there, no player can afford to ignore the pernicious “weeds” that can stymie growth. These include the growing stock of NPLs that continue to weaken financial systems and impose a tax on economic growth; underdeveloped capital markets that do not yet provide a meaningful alternative to intermediated capital flows; the lack of true markets for corporate control that would allow the full pursuit of strategic M&A;powerful domestic political interests that are unwilling to take the pain of transforming the financial sector; and slow progress in instituting the changes in corporate governance required to promote greater transparency and real accountability to shareholders. The growth opportunities in Asia are among the biggest and potentially most lucrative anywhere. But the interplay between the seeds of gain and the weeds of pain means that while possible profits may be huge, uncertainty is high. Proactively anticipating and leveraging market volatility will be essential.A new mindset
These balancing acts are the critical context underlying the need for banks to acquire a new mindset to win. This entails accepting that the traditional corporate businesses that make up 70 percent of bank balance sheets have to shrink and that retail banking will rive profits for the next decade. It requires the foresight to build new standardized, low-cost processes that can serve millions of customers through revamped distribution networks. And it means lucking up the courage to abandon legacy personnel policies that protect protect performers and prevent banks from building highly effective sales-oriented cultures.
Bank Capital Budgeting
Introduction
Capital budgeting plays an important role in allocating resources in enterprises. Through a well-structured process of capital budgeting done by individual divisions, an enterprise can compare the profitability of its divisions, assess the feasibility of new business proposals, decide which projects to expand, construct a corporate portfolio to maximize returns, such as ROA, ROE and RAROC (risk-adjusted return of capital), and minimize risk.
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Traditional metrics for capital budgeting include NPV, IRR, payback period, ROI and etc. However, these metrics may provide misleading conclusions for banks[1]. Their biases tend to more severe after the implementation of Basel II, which links bank capital charges with market risk, credit risk and operational risk.
This paper aims to discuss the limitations of traditional metrics for bank capital budgeting and suggest a new framework of capital budgeting for banks to comply with Basel II. The new framework is able to accommodate a wide range of risk measures, consider capital charges required, evaluate funding costs and compare risk-adjusted values of individual divisions and projects. This paper finally discusses how this new framework can be applied to non-bank enterprises in order to enhance their value-based management
SAVING AND INVESTING MONEY LESSONS
CHECK WRITING, CHECKING ACCOUNTS, CHECKBOOKSLearn how to write a check, make checking account deposits and withdrawals, manage and balance your checkbook, and bank reconciliation with your monthly bank checking account statement. Worksheets, lessons, and exercises are appropriate for both students involved in learning the basics about checking, as well as those looking for a curriculum to practice basic math (addition and subtraction) and problem solving skills.
BANKING AND SAVINGS ACCOUNTSA basic understanding of banking and interest rates is a fundamental money skill. Learn about bank savings accounts, banks, and interest rates.
INVESTINGAll about investing money and money management. Learn basic investing and financial concepts. Including stocks, the stock market, interest, income statements. Buying stocks, calculating shares purchased, percentage change in share price, how to read a stock table. Security pricing.
BANKING AND SAVINGS ACCOUNTSA basic understanding of banking and interest rates is a fundamental money skill. Learn about bank savings accounts, banks, and interest rates.
INVESTINGAll about investing money and money management. Learn basic investing and financial concepts. Including stocks, the stock market, interest, income statements. Buying stocks, calculating shares purchased, percentage change in share price, how to read a stock table. Security pricing.
finding the right bank account
FINDING THE RIGHT BANK ACCOUNT
Finding the right bank account seems to be very difficult. Many people have several checking and savings accounts running simultaneously with no actual benefit.
It would be better than have one efficient checking account and one efficient savings account running and then you don’t have to worry anymore about your day-to-day banking. There are two main issues you have to resolve wheCHOOSING A BANK ACCOUNT
Banks rely on your laziness
If you have a bank account you are probably paying fees on items you have no idea what they are. Most people happily carry on paying these fees every month and banks rely on this. This is how they make a lot of money. If you are paying $10 per month in fees and there are 1 million other people like you a bank will make $120 million a year just on laziness alone. What value do you get in return? Very little probably. So, make a decision today to find the right account.
Know how you bank
• Do you visit your bank a lot or do you do a lot of online banking? • Do you write a lot of checks or do you make mostly electronic transfers?• How much money are you keeping in your checking account and how much are you saving?
These questions, and more, are all critical to selecting the correct bank account for you. There are accounts which offer free internet banking and penalize you for visiting a bank teller. If you hate internet banking and like visiting your bank then clearly that is the wrong account for you.
Some accounts have high fees for writing checks and low fees for electronic transfers. So if you are a check writer then that is also the wrong account for you. Don’t be dazzled by offers of a free $50 deposit into your account when you open or a free gift. They will make their money back in the first month because you haven’t got the right account for your needs.
Finding the right bank account is really that simple, make a decision to change and then find features that suit your style of banking. This will save you time and money guaranteed. If you are concerned about bill payments being debited from your account automatically, many banks will sort out all the transfers for you. After all, they want your business.n finding the right bank account.
Finding the right bank account seems to be very difficult. Many people have several checking and savings accounts running simultaneously with no actual benefit.
It would be better than have one efficient checking account and one efficient savings account running and then you don’t have to worry anymore about your day-to-day banking. There are two main issues you have to resolve wheCHOOSING A BANK ACCOUNT
Banks rely on your laziness
If you have a bank account you are probably paying fees on items you have no idea what they are. Most people happily carry on paying these fees every month and banks rely on this. This is how they make a lot of money. If you are paying $10 per month in fees and there are 1 million other people like you a bank will make $120 million a year just on laziness alone. What value do you get in return? Very little probably. So, make a decision today to find the right account.
Know how you bank
• Do you visit your bank a lot or do you do a lot of online banking? • Do you write a lot of checks or do you make mostly electronic transfers?• How much money are you keeping in your checking account and how much are you saving?
These questions, and more, are all critical to selecting the correct bank account for you. There are accounts which offer free internet banking and penalize you for visiting a bank teller. If you hate internet banking and like visiting your bank then clearly that is the wrong account for you.
Some accounts have high fees for writing checks and low fees for electronic transfers. So if you are a check writer then that is also the wrong account for you. Don’t be dazzled by offers of a free $50 deposit into your account when you open or a free gift. They will make their money back in the first month because you haven’t got the right account for your needs.
Finding the right bank account is really that simple, make a decision to change and then find features that suit your style of banking. This will save you time and money guaranteed. If you are concerned about bill payments being debited from your account automatically, many banks will sort out all the transfers for you. After all, they want your business.n finding the right bank account.
saving accounts in banking
SAVINGS ACCOUNTS OVERVIEW
When saving your money, you will be placing money in many different types of savings instruments, including very safe and stable investments vehicles. This is especially true for money that you are going to need in the short-term (as compared to long-term investments, such as buying a house). This category includes bank savings accounts and money market mutual funds, some of the safest short term investments.
When placing your money with a bank or money market fund, you earn interest, or yield, which fluctuates, depending on general rates of interest.
TYPES OF SAVINGS ACCOUNTS:
Bank Savings Accounts:
When you are beginning to save, you should place your money in investments that are as safe as possible. In addition, you will likely always have at least some of your money in short-term investments. Bank savings accounts are such an investment. The federal government backs these accounts with what is known as Federal Deposit insurance Corporation (FDIC) Insurance.
Money Market Account:
These are accounts offered by banks. However, in these accounts the bank typically pays you a higher rate of interest than a savings account.
CD or Certificate of Deposit:
The bank holds your money for a set period of time. Usually one to six months, or one to five years. Unlike a normal savings account, you may not withdraw your money at any time. If you do, you will be subject to withdrawal fees.
Money Market Funds:
Similar to bank savings accounts are money market funds. Money market accounts are available from mutual fund companies. They are similar, but you usually get a better return with money market funds. Also, since these funds are not held with a bank, they are not FDIC insured. However, they are invested in very short-term bonds, which tend to be less risky than longer-term bonds and invest in safe government investments, corporate commercial paper, and other related investments. In addition, they are regulated by the U.S. Securities and Exchange commission. Those money market mutual funds that invests exclusively in U.S. government securities have very little risk, while giving you better rates of return then typical bank savings accounts.
When saving your money, you will be placing money in many different types of savings instruments, including very safe and stable investments vehicles. This is especially true for money that you are going to need in the short-term (as compared to long-term investments, such as buying a house). This category includes bank savings accounts and money market mutual funds, some of the safest short term investments.
When placing your money with a bank or money market fund, you earn interest, or yield, which fluctuates, depending on general rates of interest.
TYPES OF SAVINGS ACCOUNTS:
Bank Savings Accounts:
When you are beginning to save, you should place your money in investments that are as safe as possible. In addition, you will likely always have at least some of your money in short-term investments. Bank savings accounts are such an investment. The federal government backs these accounts with what is known as Federal Deposit insurance Corporation (FDIC) Insurance.
Money Market Account:
These are accounts offered by banks. However, in these accounts the bank typically pays you a higher rate of interest than a savings account.
CD or Certificate of Deposit:
The bank holds your money for a set period of time. Usually one to six months, or one to five years. Unlike a normal savings account, you may not withdraw your money at any time. If you do, you will be subject to withdrawal fees.
Money Market Funds:
Similar to bank savings accounts are money market funds. Money market accounts are available from mutual fund companies. They are similar, but you usually get a better return with money market funds. Also, since these funds are not held with a bank, they are not FDIC insured. However, they are invested in very short-term bonds, which tend to be less risky than longer-term bonds and invest in safe government investments, corporate commercial paper, and other related investments. In addition, they are regulated by the U.S. Securities and Exchange commission. Those money market mutual funds that invests exclusively in U.S. government securities have very little risk, while giving you better rates of return then typical bank savings accounts.
online banking
Online Banking
Definitely Faster, But is it Better?
Organizations move to Electronic Funds Transfer (EFT) payments to take advantage of reduced per item costs, to streamline in-house processing and to meet the demands of suppliers. Online Banking Agreements (OBA) are typically required to enable EFT, and these agreements also give organizations the ability to transfer funds between accounts, to download transaction information for import to accounting software and to monitor cash position. Unfortunately, for a certain size of non-profit entity, EFT and OBA strike down traditional internal controls on access to funds. Board Members and Treasurers of smaller non-profits that have a requirement for two signatures on cheques, may want to review internal control systems when contemplating OBA or EFT. The following two situations are interesting; the first is based on the private foundation where I work, and the second occurred at a social service organization where I volunteer.
Two-signature control
Although The Muttart Foundation is the largest private foundation in our funding area, we have a small administrative staff and a requirement for two signatures on all cheques. The internal staff member that signs cheques does not prepare the cheque run or reconcile the bank. The second signature and review of our paper cheques by an external board member (usually the Treasurer) is an important control step that provides protection for both the Foundation and for staff. With high hopes for increased efficiency of grant delivery, we examined the feasibility of EFT for our grant payments and general payables.
At least our business bank and one other (my personal bank) issue a single master password for OBA, with full authority for all banking transactions. Although subordinate levels of access and control may be delegated to users, one individual must hold the master password. Neither bank that I spoke with had contemplated, or would entertain the thought of, a dual password level of control. The omnipotent master password system may be OK for an organization that is large enough for true separation of duties in file transfer, file preparation and bank reconciliation, where other staff members act as the internal reviewers, but in a small agency, it wholly sidesteps the intent of the two-signature control step.
Internal control is not just about fraud prevention; a good control system should also catch errors. The error of sending the wrong amount by EFT can be reasonably controlled through the usual cheque run control procedures and does not require additional steps. Controlling the error of incorrect transit numbers requires detailed paperwork from our grantees and attentive re-keying on our part. The most reliable control here would be a separate automated control master file comparing agency names to transit numbers; such a step requires extra attention and staff time to maintain an additional database.
The error of sending the right amount to the wrong recipient is not so easily managed. We have many grantees with very similar names, if they happen to use the same bank, the transit numbers can look the same to a human scanner, with few clues to pick up the error before the funds are deposited. A paper cheque issued to the wrong recipient should be caught by our signers, the receptionist sending the correspondence that normally accompanies the cheque, or by the recipient before deposit. We concluded that EFT would increase the potential for error and any new internal controls would require more effort yet be inevitably less reliable than our current system of paper cheques.
Definitely Faster, But is it Better?
Organizations move to Electronic Funds Transfer (EFT) payments to take advantage of reduced per item costs, to streamline in-house processing and to meet the demands of suppliers. Online Banking Agreements (OBA) are typically required to enable EFT, and these agreements also give organizations the ability to transfer funds between accounts, to download transaction information for import to accounting software and to monitor cash position. Unfortunately, for a certain size of non-profit entity, EFT and OBA strike down traditional internal controls on access to funds. Board Members and Treasurers of smaller non-profits that have a requirement for two signatures on cheques, may want to review internal control systems when contemplating OBA or EFT. The following two situations are interesting; the first is based on the private foundation where I work, and the second occurred at a social service organization where I volunteer.
Two-signature control
Although The Muttart Foundation is the largest private foundation in our funding area, we have a small administrative staff and a requirement for two signatures on all cheques. The internal staff member that signs cheques does not prepare the cheque run or reconcile the bank. The second signature and review of our paper cheques by an external board member (usually the Treasurer) is an important control step that provides protection for both the Foundation and for staff. With high hopes for increased efficiency of grant delivery, we examined the feasibility of EFT for our grant payments and general payables.
At least our business bank and one other (my personal bank) issue a single master password for OBA, with full authority for all banking transactions. Although subordinate levels of access and control may be delegated to users, one individual must hold the master password. Neither bank that I spoke with had contemplated, or would entertain the thought of, a dual password level of control. The omnipotent master password system may be OK for an organization that is large enough for true separation of duties in file transfer, file preparation and bank reconciliation, where other staff members act as the internal reviewers, but in a small agency, it wholly sidesteps the intent of the two-signature control step.
Internal control is not just about fraud prevention; a good control system should also catch errors. The error of sending the wrong amount by EFT can be reasonably controlled through the usual cheque run control procedures and does not require additional steps. Controlling the error of incorrect transit numbers requires detailed paperwork from our grantees and attentive re-keying on our part. The most reliable control here would be a separate automated control master file comparing agency names to transit numbers; such a step requires extra attention and staff time to maintain an additional database.
The error of sending the right amount to the wrong recipient is not so easily managed. We have many grantees with very similar names, if they happen to use the same bank, the transit numbers can look the same to a human scanner, with few clues to pick up the error before the funds are deposited. A paper cheque issued to the wrong recipient should be caught by our signers, the receptionist sending the correspondence that normally accompanies the cheque, or by the recipient before deposit. We concluded that EFT would increase the potential for error and any new internal controls would require more effort yet be inevitably less reliable than our current system of paper cheques.
banking history
The first banks were probably the religious temples of the ancient world, and were probably established sometime during the third millennium B.C. Banks probably predated the invention of money. Deposits initially consisted of grain and later other goods including cattle, agricultural implements, and eventually precious metals such as gold, in the form of easy-to-carry compressed plates. Temples and palaces were the safest places to store gold as they were constantly attended and well built. As sacred places, temples presented an extra deterrent to would-be thieves. There are extant records of loans from the 18th century BC in Babylon that were made by temple priests/monks to merchants. By the time of Hammurabi's Code, banking was well enough developed to justify the promulgation of laws governing banking operations.[1]
Ancient Greece holds further evidence of banking. Greek temples, as well as private and civic entities, conducted financial transactions such as loans, deposits, currency exchange, and validation of coinage. There is evidence too of credit, whereby in return for a payment from a client, a moneylender in one Greek port would write a credit note for the client who could "cash" the note in another city, saving the client the danger of carting coinage with him on his journey. Pythius, who operated as a merchant banker throughout Asia Minor at the beginning of the 5th century B.C., is the first individual banker of whom we have records. Many of the early bankers in Greek city-states were “metics” or foreign residents. Around 371 B.C., Pasion, a slave, became the wealthiest and most famous Greek banker, gaining his freedom and Athenian citizenship in the process.
The fourth century B.C. saw increased use of credit-based banking in the Mediterranean world. In Egypt, from early times, grain had been used as a form of money in addition to precious metals, and state granaries functioned as banks. When Egypt fell under the rule of a Greek dynasty, the Ptolemies (332-30 B.C.), the numerous scattered government granaries were transformed into a network of grain banks, centralized in Alexandria where the main accounts from all the state granary banks were recorded. This banking network functioned as a trade credit system in which payments were effected by transfer from one account to another without money passing.
In the late third century B.C., the barren Aegean island of Delos, known for its magnificent harbor and famous temple of Apollo, became a prominent banking center. As in Egypt, cash transactions were replaced by real credit receipts and payments were made based on simple instructions with accounts kept for each client. With the defeat of its main rivals, Carthage and Corinth, by the Romans, the importance of Delos increased. Consequently it was natural that the bank of Delos should become the model most closely imitated by the banks of Rome.
Christ drives the Usurers out of the Temple, a woodcut by Lucas Cranach the Elder in Passionary of Christ and Antichrist.[2]
Ancient Rome perfected the administrative aspect of banking and saw greater regulation of financial institutions and financial practices. Charging interest on loans and paying interest on deposits became more highly developed and competitive. The development of Roman banks was limited, however, by the Roman preference for cash transactions. During the reign of the Roman emperor Gallienus (260-268 AD), there was a temporary breakdown of the Roman banking system after the banks rejected the flakes of copper produced by his mints. With the ascent of Christianity, banking became subject to additional restrictions, as the charging of interest was seen as immoral. After the fall of Rome, banking was abandoned in western Europe and did not revive until the time of the crusades.
Ancient Greece holds further evidence of banking. Greek temples, as well as private and civic entities, conducted financial transactions such as loans, deposits, currency exchange, and validation of coinage. There is evidence too of credit, whereby in return for a payment from a client, a moneylender in one Greek port would write a credit note for the client who could "cash" the note in another city, saving the client the danger of carting coinage with him on his journey. Pythius, who operated as a merchant banker throughout Asia Minor at the beginning of the 5th century B.C., is the first individual banker of whom we have records. Many of the early bankers in Greek city-states were “metics” or foreign residents. Around 371 B.C., Pasion, a slave, became the wealthiest and most famous Greek banker, gaining his freedom and Athenian citizenship in the process.
The fourth century B.C. saw increased use of credit-based banking in the Mediterranean world. In Egypt, from early times, grain had been used as a form of money in addition to precious metals, and state granaries functioned as banks. When Egypt fell under the rule of a Greek dynasty, the Ptolemies (332-30 B.C.), the numerous scattered government granaries were transformed into a network of grain banks, centralized in Alexandria where the main accounts from all the state granary banks were recorded. This banking network functioned as a trade credit system in which payments were effected by transfer from one account to another without money passing.
In the late third century B.C., the barren Aegean island of Delos, known for its magnificent harbor and famous temple of Apollo, became a prominent banking center. As in Egypt, cash transactions were replaced by real credit receipts and payments were made based on simple instructions with accounts kept for each client. With the defeat of its main rivals, Carthage and Corinth, by the Romans, the importance of Delos increased. Consequently it was natural that the bank of Delos should become the model most closely imitated by the banks of Rome.
Christ drives the Usurers out of the Temple, a woodcut by Lucas Cranach the Elder in Passionary of Christ and Antichrist.[2]
Ancient Rome perfected the administrative aspect of banking and saw greater regulation of financial institutions and financial practices. Charging interest on loans and paying interest on deposits became more highly developed and competitive. The development of Roman banks was limited, however, by the Roman preference for cash transactions. During the reign of the Roman emperor Gallienus (260-268 AD), there was a temporary breakdown of the Roman banking system after the banks rejected the flakes of copper produced by his mints. With the ascent of Christianity, banking became subject to additional restrictions, as the charging of interest was seen as immoral. After the fall of Rome, banking was abandoned in western Europe and did not revive until the time of the crusades.
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