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The Organizational Structure of Banks and Their Industry

The Organizational Structure of Banks and Their Industry. Organizational Forms of Banks. Over the years, bankers and the managers of other financial institutions have evolved different organizational forms to perform these various roles and to supply the services their customers demanded.

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The Organizational Structure of Banks and Their Industry

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  1. The Organizational Structure of Banks and Their Industry www.AssignmentPoint.com

  2. Organizational Forms of Banks • Over the years, bankers and the managers of other financial institutions have evolved different organizational forms to perform these various roles and to supply the services their customers demanded. • Changing public mobility and changing public demand for financial services, the rise of potent competition for the financial services, and changing government rules have dramatically changed the structure, the size, and the types of organizations dominating the banking and financial services industry over time. • Organizational forms and the structure of a bank, basically the arrangement of personnel & departments within a bank to produce & deliver its services. www.AssignmentPoint.com

  3. Types of Banks: Based on types of Operation • Retail Banking • Wholesale Banking Based on Size: • Small Banks • Large Bank i) Bank Holding Company ii) Bank Subsidiary Based on operation system • Unit Banking System • Branch Banking System www.AssignmentPoint.com

  4. Types of Bank: Based on Operation Retail Banking: A bank with heavy involvement in consumer loans & deposits is called “Retail Bank”. Retail banking basically engaged in small denomination/volume banking. Wholesale/Corporate/Institutional Banking: The bank which concentrates mainly upon serving commercial customers & making large corporate loans is called “Wholesale Institution”. Wholesale banking is large denomination banking. www.AssignmentPoint.com

  5. Types of Bank: Based on Size Small Bank: in terms of services, bank can be classified as small bank. It may not offer widest menu of services. By looking at the organogram, a small bank can be identified. Small Banks, the service operations of small banks are usually monitored by a Cashier & Auditor working in the accounting division & by Vice-Presidents heading up the bank’s loan-fund raising, marketing & trust departments. These officers reports to the Senior Executives of the bank, consisting of the board Chairman; the President, who usually runs the bank from day to day; & Senior Vice Presidents, who are responsible for long-range planning & for assisting heads of the various departments in solving their most pressing problems. Senior management, in turn, reports periodically to the members of the Board of Directors that is selected by the Stockholders. www.AssignmentPoint.com

  6. Types of Bank: Based on Size, cont.. • Large Banks: This bank is owned & controlled by a holding company whose stockholders elect a Board of Directors to oversee the bank & nonbank firms allied with the same holding company. The largest institutions serve many different markets with many different services, they are better diversified – both geographically & product line – to withstand the risks of a fluctuating economy. www.AssignmentPoint.com

  7. Types of Bank: Based on Size, cont.. Holding Companies: • Its job is to hold stock of different entities and organization. • Entities, like- banks and non-banks financial institution. • Each entity will have a legal identity. • Financial Holding Company (FHC) • Bank Holding Company (BHC) • HSBC • Citi Group (bank and non bank holding company) www.AssignmentPoint.com

  8. Bank Holding Company Organizations A bank holding company is simply a corporation chartered for the purpose of holding the stock of at least one bank.. Banks acquired by holding company are identified as Affiliated Bank. Two types of Bank Holding Company • One Bank Holding Company • Multi-bank Holding Company For any multi-bank holding company to acquire direct or indirect ownership or control of any voting shares of any additional bank if, after such acquisition, such company will directly or indirectly own or control more than 5 percent of the voting shares of such bank; again prior approval from the fed is required. www.AssignmentPoint.com

  9. Bank Holding Company Organizations, Cont.. Advantages of Bank Holding Company: • Greater Efficiency • Different types of Services • Lower possibilities of Failure • Higher & stable profit Disadvantages of Bank Holding Company • Reduce competition • Increase service charges • Ignore the credit needs of small towns & cities • Accept higher High www.AssignmentPoint.com

  10. Other forms of large Bank • Financial Holding Companies (FHC) • Bank Subsidiaries (BS) -under a parent bank, bank subsidiaries are working. It can operate in different countries. Bank subsidiaries will not have different legal entity. www.AssignmentPoint.com

  11. Types of Bank: Based on Operating System Unit Banking: The oldest kinds of banking, offer all of their services from one office, though a small number of services [taking deposits, cashing checks ] may be offered from limited service facilities such as: • Drive-up windows. • Automated teller machine (ATM). • Retail store point-of-sale terminals (POS). • Reasons for the growth of Unit banking system are: • Rapid formation of new banks. • On-line banking. • Mega mergers. www.AssignmentPoint.com

  12. Types of Bank: Based on Operating System, cont... Branch Banking: Branch banking is a system of banking where business is carried with a network of branches spreaded throughout the country. Such an organization is also likely to offer limited services through a supporting network of drive-in-windows, ATMs, POS, tele-banking, and internet banking and etc. Senior management of a branch banking organization is usually located at home office, though each full-service branch has its own management team with limited authority to make decisions on customer loan applications & other facets of daily operations. www.AssignmentPoint.com

  13. Branch Banking, cont.. Branch Banking System Full-Service Branch Office Home or Head Office Full-Service Branch Office Drive-up Window ATM or Point-of-sale Terminals in Store Electronic Communications networks www.AssignmentPoint.com

  14. Branch Banking, cont.. • Reasons for the growth of Branch Banking: • Shifting of population from cities to suburban communities. • Bank failures causes healthier banks to take over sick ones & convert them into branch offices. • Growth of business increases the credit needs of rapidly growing corporations. • Advantages of Branch Banking/Argument for Branch Banking: • Greater operating efficiency. • Increases the availability & convenience of services to customers. • Stimulate faster economic growth. • Fewer bank failures because a branch bank is less dependent on the volume of business from single industry or local market area. www.AssignmentPoint.com

  15. Branch Banking, cont.. • Argument Against Branch Banking: • Drives out small competitors. • Leaving the customer with fewer sources of banking services. • Leads to higher service fees. • Drains scarce capital away from local communities toward the largest cities. • Slowing local economic development. • Loans & deposits interest rates increases through mergers. www.AssignmentPoint.com

  16. Foreign Bank penetration of Domestic Market • Representative Offices: A representative office is an office established by a company to conduct marketing and other non-transactional operations, generally in a foreign country where a branch office is not warranted. Representative offices are generally easier to establish than a branch or subsidiary, as they are not used for actual "business" (e.g. sales) and therefore there is less incentive for them to be regulated. • Agency Offices: Offices that provide limited services to customers in distant markets, such as credit & cash management services. • Full-Service Branches: Offices that provide the same full menu of services as a bank’s home office. • Shell Branches: Special offshore facilities set up to raise new funds & avoid some regulations. www.AssignmentPoint.com

  17. Reasons for the Rapid Growth of Foreign Bank Activities • The financing of exports from the home country to host country. • Providing services to foreign nationals who have come to study or work. • Tapping the Money Market for liquid funds. • Assisting with the flow of foreign capital into the most promising local investments. • Avoiding regulatory restrictions on banking in their home countries by entering the more open local market. www.AssignmentPoint.com

  18. Foreign Banks in Bangladesh • American Express Bank Ltd. • Citibank N.A • Commercial Bank of Ceylon Limited. • Habib Bank Ltd. • National Bank of Pakistan • Shamil Bank of Bahrain E.C. • Standard Chartered Bank Ltd. • State Bank of India • The Hong Kong and Shanghai Banking Cor. Ltd.(HSBC) www.AssignmentPoint.com

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