Chapter-1&3 The Overview of Bank, it’s Structure and Services

1. Chapter-1&3 The Overview of Bank, it’s Structure and Services Md. Masukujjaman, Lecturer, NUB

2. What is Bank? • A bank is a Financial intermediary accepting deposits and granting loans; offers the widest menu of services to any financial institution. • Bank actually links the people whose have abundant of fund and who have not in a dedicated and systematic way and becomes the part of development of any economy and country. • Like other FI, Bank also sell their financial asset and thereby accommodate financing and investment

3. What is Bank Management? • Management of a bank’s daily operations perfectly within some rules and regulations through some sophisticated as well as traditional ( long term practice) way can be regarded as the bank management. Controlling ranges from the deposit ,lending, fund ,defending external and internal threat especially the goodwill of the banks indeed. So, Management of banks functions efficiently is called bank management

4. Financial Market & Banks • Market where financial instruments are traded on • Can be classified broadly as • Capital market (share, bond) Market place: DSE,CSE (controlled by SEC) Participants- investors and borrowers(company) • Money market (debt, banker’s acceptance) Market place: Bankingandnon bankinginstitutions (controlled by central bank -Bangladesh Banks) Participants- Savers and borrowers Bangladesh Bank

5. Economic policy and banks • Each of the country actually control their economy by • Fiscal policy • Related with the control of money flow by the tax and government expenditure • Monetary Policy • Involve with control of money flow of the economy through Central Banks reserve and lending policy .

6. Banking system of Bangladesh • Brief Sketch of Banking System in Bangladesh • Finance Division Bangladesh Bank (Central bank) SOCBs PCBs FCBs SOSCB NBFIs • •SOCB-State Owned Commercial Bank (4 nos.) • •FCPCB-Private Commercial Bank (30 nos.) • B-Foreign Commercial Bank (9 nos.) • •SCB-Specialized Commercial Bank (5 nos) • •NBFI-Non Banking financial Institution (29 nos)

7. State owned commercial Banks • Sonali Bank • Janata Bank • Agrani Bank • Rupali Bank

8. AB Bank Ltd BRAC Bank Limited Eastern Bank Limited Dutch Bangla Bank Limited Dhaka Bank Limited Islami Bank Bangladesh Ltd Pubali Bank Limited Uttara Bank Limited IFIC Bank Limited National Bank Limited The City Bank Limited United Commercial Bank Limited NCC Bank Limited Prime Bank Limited SouthEast Bank Limited Al-Arafah Islami Bank Limited Social Islami Bank Limited Standard Bank Limited One Bank Limited Exim Bank Limited Mercantile Bank Limited Bangladesh Commerce Bank Limited Mutual Trust Bank Limited First Security Islami Bank Limited The Premier Bank Limited Bank Asia Limited Trust Bank Limited Shahjalal Islami Bank Limited Jamuna Bank Limited ICB Islami Bank Moon Bank Limited United Bank Limited Private commercial Banks

9. Foreign commercial Banks • Citibank na • HSBC • Standard Chartered Bank • Commercial Bank of Ceylon • State Bank of India • Habib Bank • National Bank of Pakistan • Wo Bank • Bank Alfalah

10. Specialized development commercial Banks • Grameen Bank • Bangladesh Krishi Bank (Govt.) • Bangladesh Development Bank Ltd (Govt.) • Rajshahi Krishi Unnayan Bank (Govt.) • Basic Bank Ltd (Bank of Small Industries and Commerce) (Govt.) • Bangladesh Somobay Bank Limited(Cooperative Bank) (Govt.) • Ansar VDP Unnyan Bank (Govt.) • Karmosangesthan Bank • Exim Bank

11. Non-banking Financial Institutions • Depository institutions offering commercial loans operated under the ‘Non Banking Financial Institutions Order, 1989’ of Bangladesh Bank. • NGOs , Leasing firms, insurance com’s, etc. Non bank financial institution is now becoming the competitor of the bank with their similar packages of services.

12. Services banks offer to public • Traditional bank services: • Offering savings deposits • Carrying out currency exchanges • Discounting commercial notes and making business loan • Safekeeping of valuables and certification of value • Supporting government activities with credit • Offering checking accounts (Demand deposits) • Offering trust services

13. Services banks offer to public • Recently added bank services: • Granting consumer loans • Financial advising • Cash management • Offering equipment leasing • Making venture capital loans • Selling insurance services • Selling retirement plan Large door to an old bank vault

14. Services banks offer to public • Dealing in securities: • Security brokerage services and security loan • Offering mutual funds and annuities. • Offering merchant banking servicesd Because of having extensive competition with the non-bank institute, banks are increasingly becomes the “one stop” service provider

15. Role of banks for economy • The many different roles banks play in the economy: • Intermediation role • Payment role • Guarantor role • Risk management role • Savings role/investment advisor loan • Safekeeping /certification of value rol • Policy role

16. Illustration of banks services in BD (Uttara Bank) A. Special Loan Scheme: • Consumer credit scheme • Personal loan • Small Business Loan • Building repair loan B. Saving deposit scheme: • Savings Accounts • Short Term Deposit Accounts • Fixed deposit receipt Accounts • Double benefit deposit scheme • Monthly deposit scheme C. International Banking: • 1. Foreign currency accounts • 2. Non-Resident Foreign Currency Deposit Account • 3. Resident Foreign Currency Deposit Account Source: Uttara Bank ltd. retrieved on 2010, Website:www.uttarabank-bd.com

17. Trends demanding efficient bank management • Trends: • Service proliferation • Rising competition • Deregulation • Rising funding costs (existence of stock mkt.) • Technological revolution. • Consolidation and Geographic expansion • Globalization of banking • Increased risk of failure

18. Loan officer Credit analyst Loan workout specialist Mergers of Bank operation Branch Managers System analyst Auditing and control personel Bank examiner and specialist Trust department specialist Teller Security analyst and trader Marketing personnel Human resource managers Investment banking specialist Bank training specialist Career opportunities in Banking

19. Factors Affecting Organisational Structure of Banks Banks can be classified into three groups in terms of size and asset concentration – small, medium and large. The following are the factors affecting organisational structure: • Size • Services offered • Technology – new skills, management style etc.

20. Illustration:1 Board of Directors Chief Administrative Officer (Board Chairman/President/CEO/Managing Director Accounting & Operations Division Fund-Raising & Marketing Division Lending Division Or Loans Department Trust Division Accounting & Audit Department Tellers or Customer Service officers Commercial Loan Officers Personal Trusts Operations (check clearing, posting, Account verification, & Customer complaint) New Accounts Advertising & Planning Business Trusts Consumer Loan Officers Organizational Structure of Banks

21. Illustration:2

22. Board of Directors • Comprises of directors Appointment from the Promoters/share holders headinga Chairman. Appointed/approved by the Government • No rules regarding no. of members in a board of director .In America it is 5-25 (practiced). • No specific qualification (academic) is not required. but must not be insolvent and be a sound person. Responsibilities: • Formulating policies • Appointment of CEO • Appointment of chairman of Board of Directors • Taking Investment decision of the bank • Call for money issuing share

23. Managing Director Responsibilities: • Oversee the total administrative matter • Regulate the daily operation • Have the authority to take decision (not policy decision) • Recruit employee through HRD • Act as the secretary of the board of directors meeting

24. Standing committee • Executive committee • Loan committee • Investment committee • Salary and employee relation committee • Audit committee • Trust committee etc. • Risk management committee. Beside these banks also form Special Committee for special occasions or situations.

25. Types of banks (Structural) • Unit Banking • Branch banking • Bank Holding Company Organisation/Chain banking

26. Unit banking – Banking system whereby all services of banks are offered from one office. - Such office may have offer facilities such as, drive-in windows, automated teller machines, retail store point-of-sale terminals that are linked to the banks’ computers system, and internet website. It facilitates in the following way: • Greater control • Prompt decision • Greater verification of operation and function • Offering unique product and services.

27. Branch banking • Branch banking is a system where full range banking services are offered from several locations, including a head office, and other one or more full-service branch offices. • Head office or registered office is guided and managed and controlled by a single board of directors, of which the MD is the CEO • Actual operation is performed at the braches but controlled by the branches through manual, instructions, guidelines ,statements etc. • Branches are managed by the managers having appropriate business, financial, administrative power delegated to head office. • Each Brach is treated as separate unit for business and performance purpose. But for total performance the brach performance is aggregated.

28. Advantages - Branching allows for greater efficiency - It provides for easy, improved and convenience services to customers -Branching reduces transaction costs for customers -Branch provides security against the risk of failure –as it leads to increase in assets - It leads to growth in the banking industry that is • Scale of operation • Risk diversification • More coverage in utilization of Fund • Area development

29. Disadvantages - Full branching may lead to increase in operation/service cost - It may lead to edging out of competitors - It may lead to variation in type and quality of services of a bank

30. Bank Holding Company Organisation/Chain banking – This is a form of banking organisation whereby companies act as corporations chartered for the purpose of holding stock (equity shares) of one or more banks. This facilitates access to large pool of capital at the capital market - One-bank Holding Companies - Multi-bank Holding companies

31. Thank You Very Much