银行管理(第六版)教师手册Chap.pdf

1 CHAPTER 1 AN OVERVIEW OF BANKS AND THE FINANCIAL-SERVICES SECTOR Goal of This Chapter:In this chapter you will learn about the many roles banks and their financial service competitors play in the economy today.You will examine how and why the banking industry and the financial services marketplace as a whole is rapidly changing,becoming new and different as we move forward into the future.Key Topics in This Chapter Powerful Forces Reshaping the Industry What is a Bank?Competing Financial-Service Institutions Old and New Services Offered Different Types of Banks Are Traditional Banks Dead?Chapter Outline I.Introduction:Powerful Forces Reshaping the Industry II.What Is a Bank?A.Defined by the Functions It Serves and the Roles It Play:B.Nonbank Banks C.Defined by the Government Agency That Insures Its Deposits D.The Financial Firm Offering the Widest Range of Financial Services III.The Financial System and Competing Financial-Service Institutions A.Savings and Loan Associations B.Savings Banks C.Credit Unions D.Money Market Funds E.Mutual Funds F.Hedge Funds G.Security Brokers and Dealers H.Finance Companies I.Financial Holding Companies or Conglomerates J.Life and Property/Casualty Insurance Companies IV.The Services Banks and Many of Their Closest Competitors Offer the Public A.Services Banks Have Offered Throughout History 1.Carrying Out Exchanges of Currency 2.Discounting Commercial Notes and Making Business Loans 3.Offering Savings Deposits 4.The Safekeeping of Valuables and Certification of Value 5.Supporting Government Activities with Credit 2 6.Offering Checking Accounts(Demand Deposits)7.Offering Trust Services B.Services Banks and Many of Their Financial-Service Competitors Have Developed More Recently 1.Granting Consumer Loans 2.Financial Advising 3.Cash Management 4.Offering Equipment Leasing 5.Making Venture Capital Loans 6.Selling Insurance Services 7.Selling Retirement Plans 8.Offering Security Brokerage Investment Services 9.Offering Mutual Funds and Annuities 10.Offering Merchant Banking Services 11.Convenience-The Sum Total of all Bank Services IV.Trends Affecting Banks and Other Financial-Service Firms A.Service Proliferation B.Rising Competition C.Deregulation D.An Increasingly Interest-Sensitive Mix of Funds E.A Technological Revolution F.Consolidation and Geographic Expansion G.Convergence H.Globalization of Banking I.Increased Risk of Poor Performance and Failure V.Are Traditional Banks Dead?VI.The Plan of This Book VII.Summary Concept Checks 1-1.What is a bank?How does a bank seem to differ from most other financial-service providers?A bank should be defined by what it does;in this case,banks are generally those financial institutions offering the widest range of financial services.Other financial service providers offer some of the financial services offered by a bank,but not all of them within one institution.1-2.Under current U.S.federal law what must a corporation do to qualify and be regulated as a commercial bank?Under U.S.law at the federal level,commercial banks must offer two essential services to qualify as banks for purposes of regulation and taxation,demand(checkable)deposits and commercial loans.Alternatively,U.S.financial institutions whose deposits are insured by the FDIC may be classified as banks.3 1-3.Why are some banks reaching out to become one-stop financial service conglomerates?Is this a good idea in your opinion?There are two reasons that banks are increasingly becoming one-stop financial service conglomerates.The first reason is the increased competition from other types of financial institutions and the erosion of banks traditional service areas.The second reason is the Financial Services Modernization Act which has allowed banks to expand their role to be full service providers.1-4.Which businesses are bankings closest and toughest competitors?What services do they offer that compete directly with banks services?Among a banks closest competitors are Savings banks,credit unions,money market funds,mutual funds,hedge funds,security brokers and dealers,finance companies,financial holding companies,and life and property-casualty insurance companies.All of these offer some of the services that are offered by a bank,but none of them offers all the services that a bank can offer.1-5.What is happening to bankings share of the financial marketplace and why?What kind of banking and financial system do you foresee for the future if present trends continue?The Financial Services Modernization Act of 1999 allowed many of the banks closest competitors to offer a wide array of financial services thereby taking away market share from“traditional”banks.1-6.What different kinds of services do banks offer the public today?What services do their closest competitors offer?Banks offer the widest range of services of any financial institution.They offer thrift deposits to encourage saving and checkable(demand)deposits to provide a means of payment for purchases of goods and services.They also provide credit through direct loans,by discounting the notes that business customers hold,and by issuing credit guarantees.Additionally,they make loans to consumers for purchases of durable goods,such as automobiles,and for home improvements,etc.Banks also manage the property of customers under trust agreements and manage the cash positions of their business customers.They purchase and lease equipment to customers as an alternative to direct loans.Many banks also assist their customers with buying and selling securities through discount brokerage subsidiaries,the acquisition and sale of foreign currencies,the supplying of venture capital to start new businesses,and the purchase of annuities to supply future funding at retirement or for other long-term projects such as supporting a college education.All of these services are also offered by their closest competitors,but banks are the only ones that offer all of these services under one roof.1-7.What is a financial department store?A universal bank?Why do you think these institutions have become so important in the modern financial system?4 Financial department store and universal bank refer to the same concept.A financial department store is an institution where banking,fiduciary,insurance,and security brokerage services are unified under one roof.A bank that offers all these services is normally referred to as a universal bank.1-8.Why do banks and other financial intermediaries exist in modern society,according to the theory of finance?There are multiple approaches to answering this question.The traditional view of banks as financial intermediaries sees them as simultaneously fulfilling the financial-service needs of savers(surplus-spending units)and borrowers(deficit-spending units),providing both a supply of credit and a supply of liquid assets.A newer view sees banks as delegated monitors who assess and evaluate borrowers on behalf of their depositors and earn fees for supplying monitoring services.Banks also have been viewed in recent theory as suppliers of liquidity and transactions services that reduce costs for their customers and,through diversification,reduce risk.1-9.How have banking and the financial services market changed in recent years?What powerful forces are shaping financial markets and institutions today?Which of these forces do you think will continue into the future?Banking is becoming a more volatile industry due,in part,to deregulation which has opened up individual banks to the full force of the financial marketplace.At the same time the number and variety of banking services has increased greatly due to the pressure of intensifying competition from nonbank financial-service providers and changing public demand for more conveniently and reliably provided services.Adding to the intensity of competition,foreign banks have enjoyed success in their efforts to enter countries overseas and attract away profitable domestic business and household accounts.1-10 Can you explain why many of the forces you named in the answer to the previous question have led to significant problems for the management of banks and other financial firms and their stockholders?The net result of recent changes in banking and the financial services market has been to put greater pressure upon their earnings,resulting in more volatile returns to stockholders and an increased bank failure rates.Some experts see banks role and market share shrinking due to restrictive government regulations and intensifying competition.Institutions have also become more innovative in their service offerings and in finding new sources of funding,such as off-balance-sheet transactions.The increased risk faced by institutions today,therefore,has forced managers to more aggressively utilize a wide array of tools and techniques to improve and stabilize their earnings streams and manage the various risks they face.1-11 is the traditional bank really dead?What evidence do you have for your answer?5 Problems and Projects 1.You have just been hired as the marketing officer for the new First National Bank of Vincent,a suburban banking institution that will soon be serving a local community of 120,000 people.The town is adjacent to a major metropolitan area with a total population of well over 1 million.Opening day for the newly chartered bank is just two months away,and the president and the board of directors are concerned that the new bank may not be able to attract enough depositors and good-quality loan customers to meet its growth and profit projections.There are 18 other financial-service competitors in town,including two credit unions,three savings banks,four insurance agencies,and two security broker offices.Your task is to recommend the various services the bank should offer initially to build up an adequate customer base.You are asked to do the following:a.Make a list of all the services the new bank could offer,according to current regulations.b.List the type of information you will need about the local community to help you decide which of the possible services are likely to have sufficient demand to make them profitable.c.Divide the possible services into two groups-those you think are essential to customers and should be offered beginning with opening day,and those that can be offered later as the bank grows.d.Briefly describe the kind of advertising campaign you would like to run to help the public see how your bank is different from all the other financial service providers in the local area.Which services offered by the nonblank service providers would be of most concern to the new banks management?Banks can offer,if they choose,a wide variety of financial services today.These services are listed below.However,unless they are affiliated with a larger bank holding company and can offer some of these services through that company,it may be more limited in what it can offer.Regular Checking Accounts Management Consulting Services NOW Accounts Letters of Credit Passbook Savings Deposits Business Inventory Loans Certificates of Deposit Asset-Based Commercial Loans Money Market Deposits Discounting of Commercial Paper Automobile Loans Plant and Equipment Loans Retirement Savings Plans Venture Capital Loans Nonauto Installment Loans to Individuals Residential Real Estate Loans Leasing Plans for Business Property and Equipment Home Improvement Loans Security Dealing and Underwriting Personal Trust Management Services Discount Security Brokerage Commercial Trust Services Institutional Trust Services Foreign Currency Trading and Exchange 6 Personal Financial Advising Personal Cash-Management Services Insurance Policy Sales(Mainly Credit-Life)Insurance Today(Except in Some States)Standby Credit Guarantees Acceptance Financing To help the new bank decide which services to offer it would be helpful to gather information about some of the following items in the local community:School Enrollments and Growth in School Enrollments Estimated Value of Residential and Commercial Property Retail Sales Percentage of Home Ownership Among Residents in the Area Number and Size(in Sales and Work Force)of Local Business Establishments Major Population Locations(i.e.,Major Subdivisions,etc.)and Any Projected Growth Areas Population Demographics(i.e.,Age Distribution of the Area)Projected Growth Areas of Industries in the Area Essential services the bank would probably want to offer right from the beginning includes:Regular Checking Accounts Home Improvement Loans Automobile and other Consumer-type Money Market Deposit Accounts Installment Loans Retirement Savings Plans NOW Accounts Business Inventory Loans Passbook Savings Deposits Discounting of High-Quality Commercial Notes Residential Real Estate Loans Certificates of Deposit As the bank grows,opportunities for the profitable sale of additional services usually increase,especially for trust services for individuals and smaller businesses and personal financial advising as well as some commercial(plant and equipment)loans and leases.Further growth may result in the expansion of commercial trust services as well as a widening variety of commercial loans and credit guarantees.The bank would want to develop an advertising campaign that sends a message to potential customers that the new bank is,indeed,different from its competitors.Small banks often have the advantage of offering highly personalized services in which their customers are known and recognized and services are tailored to each individual customers special financial needs.Quality and reliability of banking service are often more important to individual customers than is price.A new bank must try to sell prospective customers,most of who will come from other banks in the area,on personalized services,quality,and reliability-all three of which should be emphasized in its advertising program.2.Leading money center banks in the United States have accelerated their investment banking activities all over the globe in recent years.They have also repeatedly asked the U.S.Congress for permission to offer more investment banking services in domestic markets,especially the ability to purchase corporate debt securities and stock from their business customers and resell those 7 securities to investors in the open market.Is this a desirable move by these banking organizations from a profit standpoint?From a risk standpoint?From the public interest point of view?How would you research the question?If you were managing a corporation that had placed large deposits with a bank engaged in such activities,would you be concerned about the risk to your companys funds?What could you do to better safeguard those funds?In the 1970s and early 1980s investment banking was so profitable that commercial bankers were lured into the investment banking business largely because of its greater profit potential than possessed by more traditional commercial banking activities.Later foreign banks,particularly the Britis