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Bank Accounts Bank Accounts Agenda Main duties of a bank Types of bank Types of Accounts Interest calculations Bank charges Main Duties of a Bank Handle customers business in a safe and professional manner Honour customers’ cheques

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Bank AccountsAgenda

  • Main duties of a bank

  • Types of bank

  • Types of Accounts

  • Interest calculations

  • Bank charges


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Main Duties of a Bank

  • Handle customers business in a safe and professional manner

  • Honour customers’ cheques

  • Comply with any express (written) instruction from the customer

  • Maintain secrecy about customers’ affairs

  • Give reasonable notice to close an account


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Main Duties of a Bank

  • Provide balance of account on request

  • Receive customers money and cheques and credit to the correct account

  • Repay money on demand in banking hours

  • Advise customers immediately of any improper event affecting the account

  • Exercise proper care and skill when performing all its duties.


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Types of Banks

  • Global banks

    - full range of services

    - international capability

  • Commercial banks

    - wide range of services

    - limited international capability

  • Investment banks

    - arranging, originating and distributing debt

    and equity issues and advice

  • Savings banks

    - taking deposits and making loans


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Types of Accounts

  • Current account

  • Deposit/savings account

  • Composite account

  • Money market deposit

  • Overdraft

  • Loan accounts

  • Resident and Non-resident accounts


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Resident Non- Resident Some countries differentiate

So maybe

  • Restrictions as to type of accounts or services available (China)

  • Different fee structures (France)

  • Movement of funds overseas or between R/NR maybe subject to Central Bank reporting (Germany)

  • Prior approval may be needed for movements


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Bank Accounts/ServicesTo control Float

  • Lockbox

  • Intervention accounts

  • Remote disbursement

  • Controlled disbursement

  • Direct collections

    - Negotiation

    - Collection


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Bank Accounts

  • So why are they important?

    - paying and receiving funds

    - safe keeping

    - earning interest

  • Considerations?

    - cost

    - how many

    - location

    - who with


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Working out the interest due for September

Ledger Value Debits Credits Cleared Number

Date Date Balance of days

30.8.06 1.9.06 700 700 Cr 7

8.9.06 8.9.06 1,500 200 600 Dr 1

9.9.06 9.9.06 500 1,100 Dr 3

10.9.06 12.9.06 100 1,000 Dr 2

14.9.06 14.9.06 250 45 1,205 Dr 7

21.9.06 21.9.06 400 1,605 Dr 10


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Interest calculations 2 for September

No credit interest

Debit interest at 6%

Work out the ‘debit decimals’

1 day @ 600 = 600

3 days @ 1,100 = 3,300

2 days @ 1,000 = 2,000

7 days @ 1,205 = 8,435

10 days @ 1,605 = 16,050

Total 30,385

Interest charge = 30,385 x 6.0 = 4.99

365


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Bank Charges for September

  • Bankers are human and need to live but….

    - The Cash manager needs to control

    bank charges

  • Factors affecting fees

    - Balances maintained

    - Turnover

    - Volume

    - Additional services


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Bank Charges for SeptemberControl

Understand charging method

- no ‘free’ services but there are hidden

charges

- avoid turnover charges and ‘ad valorem’

- go for fixed or per item charge

- identify most important items and focus on

them

- check interest rates used and calculations

- check commission charges


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Bank charges for SeptemberControl

  • Review payment types and submission methods

    - maximise use of automated low-cost

    payment methods

    - repetitive ‘wires’ cheaper than free form

    - straight through processing, STP. Deliver to

    the bank fully formatted

    - look for economies of scale

    - challenge unspecified supplementary charges

    - beware long commitments and index linked uplifts


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Bank Charges for SeptemberControl

  • Review existing arrangements

    - cheques paid in promptly?

    - more efficient way of receiving funds?

    - courier?

    - payment procedures?

    - put out to tender, RFI/RFP

  • Better cash management

    - Netting, Pooling, Cash concentration.


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