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Bank Accounts

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 Accounts

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  1. Bank Accounts

  2. Bank AccountsAgenda • Main duties of a bank • Types of bank • Types of Accounts • Interest calculations • Bank charges

  3. 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

  4. 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.

  5. 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

  6. Types of Accounts • Current account • Deposit/savings account • Composite account • Money market deposit • Overdraft • Loan accounts • Resident and Non-resident accounts

  7. 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

  8. Bank Accounts/ServicesTo control Float • Lockbox • Intervention accounts • Remote disbursement • Controlled disbursement • Direct collections - Negotiation - Collection

  9. Bank Accounts • So why are they important? - paying and receiving funds - safe keeping - earning interest • Considerations? - cost - how many - location - who with

  10. 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

  11. Interest calculations 2 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

  12. Bank Charges • 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

  13. Bank ChargesControl 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

  14. Bank chargesControl • 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

  15. Bank Charges Control • 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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