...TRANSFORMATIONAL FUNCTIONS OF COMMERCIAL BANKS The commercial banks are playing a decisive role in the transformation function. Their value is essential in function of the creation of new money, in replenishing and regulating of money supply. They value less as a function of ensuring the sustainability of banking and money market as the pursuit for high profits pushing them to the most risky operations. Therefore, in this function a decisive importance is own to in central bank, but the role of commercial banks also should not be underestimated. Let’s stop more detailed on the transformational function of commercial banks. It includes several areas: * Transformation of risks; * Transformation of terms; * Transformation of capital; * Spatial transformation. Transforming of risks means that banks whose activities are associated with high risk, are taking appropriate measures that can reduce these risks to their investors and shareholders to a minimum. Such measures include: asset diversification, provisioning , differentiation of interest rates depending on riskiness of loans, deposit insurance etc. Thanks to these measures banks take on an overwhelming portion of risk of default on loans. Transformation of the terms means that mobilizing usual amounts of short-term funds and keep adding them, some banks may direct a part of them in long-term loans and other long-term assets. This is benefits not only for banks (they receive a higher income), but also for their...
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... The author will use the following banks: NatWest and HSBC. According to Karna (2006) financial intermediaries are: “Banking and non-banking institutions which performs intermediation between from economic agents with surplus funds (surplus units) to economic agents (deficit units) that would like to utilise those funds”. There are two types: Bank Financial Intermediaries, BFIs (Central banks and Commercial banks) and Non-Bank Financial Intermediaries, NBFIs (insurance companies, mutual trust funds, investment companies, pensions funds, discount houses and bureaux de change). Please find attached in the appendix p11 a table demonstrating the uses and sources of funds from the different types of financial intermediaries Franklin and Santomero (1998) suggested that lenders and borrowers are not able to diversify perfectly and obtain optimal risk sharing. As a consequence, financial intermediaries are needed. According to Buckle and Thompson (1998), FIs and the associated theories exist to solve and/or reduce market imperfections such as different requirements from lenders and borrowers (in terms of size, maturity, liquidity, risk), occurrence of transaction costs, changes in consumers’ consumption and asymmetric information (both adverse selection and moral hazard). According to Bain, the following theories have been developed to explain how financial intermediaries reduce/solve these market imperfections: Asset transformation Transaction costs reduction Liquidity...
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...do not claim to have read the manuscript Of Changes and Transformations: Bangladesh Bank [July 2009-June 2013] highlighting changes the central bank has gone through in the past four years, but certainly had a cursory look at it. The publication of the book is of great significance at a time when the present government has just completed its four years in office. I welcome this initiative by Bangladesh Bank. I would like to thank Governor Dr. Atiur Rahman and others concerned with the project. The effort put in by the editors and their team of script writers to enrich the volume is certainly praiseworthy. I am extremely delighted to have the opportunity to write few words upon the book. Here I would like to touch upon the key aspects of the revolutionary changes that I have witnessed in Bangladesh Bank during the past four years. Firstly, digitization has taken place rapidly in the central bank and the whole banking sector was quick to follow suit. Secondly, mobile banking has been introduced and expanded significantly. This process will come its fruition with the introduction of PayPal payment system. Thirdly, revolutionary changes have taken place in CSR. Fourthly, Bangladesh Bank has achieved commendable success in financial inclusion program. Bangladesh Bank's role in involving the mass people into financial activities is undeniable. Finally, the establishment of Currency Museum is a great initiative of Bangladesh Bank. I would now like to say a few words on the economic condition...
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...School E-mail: xsales@eada.edu Abstract The present study aims to outline the characteristics of the cost systems used in banking institutions. It does so by describing the partial costs and full cost systems in banking institutions. It then looks at the limitations of these approaches to the current competitive conditions and goes on to consider the applicability of the activity based costing system in the allocation of indirect transformation costs to branches, products and customers. Finally, we will look at the findings of a questionnaire to Spanish savings banks in order to evaluate how widespread these systems are and how they are used in savings banks. We found that direct costs systems predominate in customer and products entries whereas full costs systems are much more widespread in the case of branches. Furthermore, we also found that the use of activity based costs systems is very limited. Keywords: Saving banks Cost structure Management accounting Cost systems Activity based costing. JEL Classification Codes: M41 – Accounting G21 - Banks; Other Depository Institutions. 1. Introduction Historically, management accounting in banking institutions was introduced considerably later in comparison with companies in other sectors. There are a number of reasons for this limited development. This was due, on the one hand, to external causes. For example, it was not until...
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...Proposal for Operations Transformation at Westpac March 26, 2009 To: Ms. Gail Kelly, CEO and Managing Director, Westpac Bank Mr. Peter Clare, Group Executive, Products and Operations From: __________, Principal, Asia-Pacific & Australia, Verint Systems Date: March 26, 2009 Re: Operations Transformation at Westpac We are very pleased with the opportunity to deepen our partnership with Westpac and believe our proposal provides the most comprehensive approach for Westpac to execute its strategy successfully. This initiative is critical for Westpac to differentiate its service delivery model in the midst of an industry shift towards growing customer share. Westpac lags behind its key competitors and the risk of further customer attrition will result in a systemic deterioration of profitability. Westpac and Verint have formed a shared perspective on the importance of operational improvements to the bank’s overall transformation. Our diagnostic work earlier this year suggests that a successful transformation program can free up at least 2,000 personnel for frontline sales roles over the next 12-24 months. Assuming current levels of Westpac sales productivity, migration of 2,000 personnel to the frontline could add $156 million in annual revenues. As important, a successful redesign of existing operating processes...
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...Abstract The present study aims to outline the characteristics of the cost systems used in banking Institutions. It does so by describing the partial costs and full cost systems in banking institutions. It then looks at the limitations of these approaches to the current competitive conditions and goes on to consider the applicability of the activity based costing system in the allocation of indirect transformation costs to branches, products and customers. Finally, we will look at the findings of a questionnaire to Spanish savings banks in order to evaluate how widespread these systems are and how they are used in savings banks. We found that direct costs systems predominate in customer and products entries whereas full costs systems are much more widespread in the case of branches. Furthermore, we also found that the use of activity based costs systems is very limited. 1. Introduction Historically, management accounting in banking institutions was introduced considerably later in comparison with companies in other sectors. There are a number of reasons for this limited development. This was due, on the one hand, to external causes. For example, it was not until the 80's that competitive conditions in the banking sector fostered the development of accounting management planning and control systems. On the other hand, there were also internal conditions that had to do with the nature of the banking business and the operations that these companies carry out, which differ significantly...
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...Mock Exam MNA106 1(a). What are the key functions of a financial system? [8 marks] The main functions of financial systems are to: • provide the mechanisms by which funds can be transferred from units in surplus to units with a shortage of funds in order to directly or indirectly facilitate lending and borrowing • enable wealth holders to adjust the composition of their portfolios • provide payment mechanisms • provide mechanisms for risk transfer 1(b) Describe the key functions of financial markets. [6 marks] PRICING FUNCTION: financial markets provide both buyers and sellers with “fair” valuation of the asset they are buying/selling DISCIPLINE FUNCTION: financial markets are regulated – regulation encourages issuers of securities (borrowers) not to engage in activities that the market deems detrimental to the value of their assets 1(c) Describe the problems arising due to information asymmetry. [12 marks] Adverse selection is the problem created by asymmetric information before the transaction occurs. It arises when the potential borrowers who are most likely to produce an undesirable (adverse) outcome are the ones who most actively seek out loans. Thus adverse selection increases the probability that bad credit risks will get loans. As a consequence, lenders may decide not to give any loans, even to good credit risks. Moral hazard is the problem that occurs after the transaction is made. It is the risk (hazard) that the borrower will engage in activities...
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...Transformation Series 2015 - Case INNOVATION or INNOVATION PRELUDE Business history has many examples of companies redefining the boundaries of business through break-through innovation, there are also those who made the tragic mistake of missing ‘gamechanging innovations’ in their industry thereby ending up with inexorable commercial disasters. In each case, the disaster occurred, as the Wall Street Journal, points out, “not because of ‘bad’ management, but because they followed the dictates of ‘good’ management. They listened closely to their customers. They carefully studied market trends. They allocated capital to the innovations that promised the largest returns. And in the process, they missed disruptive innovations that opened up new customers and markets for lower-margin, blockbuster products.” The threat of disruption, on many an occasion, isn’t perceived as a threat! The disruptor appears to the incumbent to be doing the incumbent a favor by relieving the incumbent of its ‘least valuable’ customers. In due course, the disruptor moves upstream and relieves the incumbent of its most valuable customers. Seemingly, no industry is spared: steel, computers, telephony, photography, stock markets; the list goes on. Will it be Banks next? Burdened with legacy systems, infrastructure cost and increasingly complex security issues, banks are dealing with a double whammy: grappling with intense regulatory scrutiny as a result of a prior “missteps,” while a generation of disruptors...
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...Tables of contents Part 1 Introduction and Problem Statement 5 1.1Introduction 5 1.2Problem Statement 6 Part 2 Methodology 7 2.1 Theory of international financial center 7 2.2 Theory of bank management mode 8 Part 3 Analysis 10 3.1 Management mode of China Merchants Bank 10 3.21 Industrial structures 10 3.22 Services provide to customers 11 3.23 Source of profit 12 3.24 Financial products 12 3.3 The advantages of China Merchants Bank under the construction of international financial center 13 3.31 History and location 13 3.43 Headquarters circle 15 3.5 The challenges of China Merchants Bank under the construction of international financial center 16 3.52 Competitions from the non-bank financial institutions 17 3.53 Weakness in leading of Shanghai 17 Part4 Evaluation 19 4.1 The transformation of China Merchants Bank 19 4.11 Introduce financial talents 19 4.12Enhance the service satisfaction 21 4.13Adjust the industrial structure 22 4.14 Promote efficiency 22 4.15 Innovative financial products 23 4.2 GFIC analysis and People Factor 24 5. Suggestions 28 5.1 Diversified financial services 28 5.2 Financial personnel policy after the subprime crisis 29 5.3 Make reasonable risk early warning mechanism 30 6. Conclusion 31 7. Bibliography 32 Student statement 33 I hereby declare that the contents of my thesis on 33 Part 1 Introduction and Problem Statement 1.1Introduction In the development of financial globalization...
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...Implementing risk transformation in financial institutions Governance and culture Risk transformation can enable a financial institution to elevate risk management from a functional capability to an enterprise responsibility that permeates the entire organization. When that happens, every business, function, and individual becomes responsible for, accountable for, and capable of recognizing and addressing the risks within their purview. Moreover, risk awareness and appropriate risk-related skills can become an integral component of every individual’s responsibilities at every level. In these ways, risk transformation can enhance the organization’s ability to implement business strategies and achieve goals while addressing risks and complying with evolving regulations. This document is one in a series of four on the cornerstones of risk transformation (see Figure 1): • Strategy • Governance and culture • Business and operating models • Data, analytics, and technology As explained in Aligning risk and the pursuit of shareholder value: Risk transformation in financial institutions,1 when these cornerstone frameworks and capabilities are in place, risk management, risk governance, and regulatory compliance can be implemented in a more aligned and integrated manner. Figure 1: The cornerstones of risk transformation What vision drives the Organization? Business Model Operating Model culture What oversight ensures the strategy is executed? ...
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...time-pattern of cash flows. Savers are able to satisfy their own personal preferences by choosing various combinations of these attributes. By encouraging savings, and allocating savings to the most efficient users, the financial system has an important role to play in the economic development and growth of a country. A range of different financial institutions has evolved to meet the needs of financial market participants and to support economic growth. Chapters 2 and 3 examine the major types of financial institutions. At this stage the institutions are categorised by the nature of their principal activities. Depository institutions, such as commercial banks, building societies and credit unions, specialise in gathering savings in the form of deposits and use those funds in the provision of loans to customers. Investment banks and merchant banks tend to specialise in the provision of off-balancesheet advisory services to clients (e.g. merger and acquisition advice). Contractual savings institutions, such as insurance offices and superannuation funds,...
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...instruments and markets that provide a wide range of financial products and services. • A financial system encourages accumulated savings which are then available for investment within an economy. • Financial instruments incorporate attributes of risk, return (yield), liquidity and time–pattern of cash flows. Savers are able to satisfy their own personal preferences by choosing various combinations of these attributes. • By encouraging savings, and allocating savings to the most efficient users, the financial system has an important role to play in the economic development and growth of a country. Learning objective 1.2: categorise the main types of financial institutions, being depository financial institutions, investment banks and merchant banks, contractual savings institutions, finance companies and unit trusts • A range of different financial institutions has evolved to meet the needs of financial market participants and to support economic growth. Chapters 2 and 3 examine the major types of financial institutions. At this stage the institutions are categorised by the nature of their principal activities. • Depository...
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...this lecture, the reasons why intermediaries such as banks exist is related to the various market failures which vitiate the complete markets paradigm. In particular, there is the key issue of imperfect information which makes financial institutions such as banks key channels for intermediating between savers and borrowers. We cover the key concepts of liquidity insurance and delegated monitoring in this context Why intermediation? Definition: Intermediate between providers and users of financial capital Besides banks - pension funds, insurance companies, securities firms (differ in terms of assets. liabilities, matching). - But in an Arrow-Debreu “complete markets” world, financing of firms and governments by households occurs via financial markets – no transactions costs, full set of contingent markets, no credit rationing, Pareto optimal allocation and no role for intermediaries - Moreover, (Modigliani-Miller) financial structure is irrelevant as households can construct portfolios offsetting actions of intermediaries and intermediaries cannot add value - Corollary - markets are not strong form efficient or banks would not exist. Banks rather assist market efficiency as their information spills over. Why do intermediaries exist? (1) Transactions costs restricting scope for direct financing, or incomplete information means financial markets cannot be complete in an Arrow Debreu sense (theories of intermediation) (2) Banks and other financial intermediaries offer services to...
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...MATH133 Unit 5 Individual Project – A 1) Describe the transformations on the following graph of f x= log( x) . State the placement of the vertical asymptote and x-intercept after the transformation. For example, vertical shift up 2 or reflected about the x-axis are descriptions. 10 9 8 7 6 5 4 3 2 1 -1 -10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 -2 -3 -4 -5 -6 -7 -8 -9 -10 Y X 1 2 3 4 5 6 7 8 9 10 a) g(x) = log(x - 5) Description of transformation: horizontal shift 5 units to the right Equation(s) for the Vertical Asymptote(s): x-5=0 x=5 x-intercept in (x, y) form: o=log(x-5) 100=x-5 6=x 6,0 b) gx=- log x+ 2 Description of transformation: Vertical shift 2 units up, reflected about the x axis Equation(s) for the Vertical Asymptote(s): x=o x-intercept in (x, y) form: -logx+2=0 -logx=-2 logx=2 x=102 x=100 (100,0) 2) Students in an English class took a final exam. They took equivalent forms of the exam at monthly intervals thereafter. The average score S(t), in percent, after t months was found to be given by S(t) = 68 - 20 log (t + 1), t ≥ 0 a) What was the average score when they initially took the test, t = 0? Answer: s0=68 Show your work in this space: s0=68-20 log (0+1)^0 20 log (0+1)^0 = 0 s0=68 b) What was the average score after 14 months? Answer: s=44.48 Show your work in this space: s14=68-20log(14+1) s14=68-20log15= s=44.48 c) After...
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...department which has a Bank branches which under department of Bank, that located 1. Branch of Hargaysia 2. Branch of Gebiley 3. Branch of Boraoama 4. Branch of Burco 5. Branch of Caynabo 6. Branch of Berbera 7. Branch of Lascanood 8. Branch of Ceerigabo General Secretary Department 1) This department responsible all the information about Bank. The document s which sending local and international, A branch of Bank and things has a near relationship. 2) Department of monitoring and inspector , auditing which responsible research and auditing and responsible for the Bank, the general director of Bank. Write latter which investigate, but they are not independent direct to what they are investigate. 3) Personnel department office Which is responsible the employee s affairs what related employees need , creating their programs and promotion , monitoring when employees makes bad action things which is an ethics ,that means transmitted bad thing to another and they transmitted the director of Bank . 4) General central cash department Department of personnel which responsible manage of money and care of money transmitted of branches, of bank anybody who need. The money which sent or receives and the authority only have general director of Bank, or the chairman he is no independent without command. 4) Department technical and transformation , which responsible stationary of Bank, If the Bank need and preached transformation that department responsible...
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