Banks management

1. The components :
 The concept and types of banking
 Departments of banking :
 Administrative department
 Technical department
 Role and principles of banking
 Electronic banking
 Risk management in banking

2. The concept and
types of
banks

3. The definition of banking
 It’s a financial institution that trade on
money, its major purpose is to act as an
intermediary between the capital “which
seeks to find areas of investment” and the
areas of investment “which seeks to find
capital”.

4. Types of banks:
 The legal status of the bank
 The sources of funds
 The legitimacy of operations
 The diverse nature of business in the bank

5. A) In terms of the legal status of
the bank:
1-Public Banks:
Banks are owned by the state; they have
full capital and oversee their works and
activities:
 Central banks (the national banks, SAMA Saudi
Arabic monetary association).
 Specialized banks i.e., specialized in a particular
area), such as Commercial Banks, Industrial
Banks, Agriculture Banks and Real-State Banks

6. 2. Private Banks:
Banks are owned by persons whether
natural or legal persons; they take
over management of its affairs and
consider all legal and
financial responsibilities for the
State (represented in the Central
Bank)

7. 3. Mixed Banks:
 Both the state and individuals have the
right to participate in the ownership and
management of those banks' in order to
maintain the state control over them.
 Those banks are permitted to acquire
capitals that allow the state to oversee and
channel them in line with the financial and
economic policy of the state.

8. B) In terms of the sources of funds
 Central banks:
 The Banks that are established by the State to
take over the supervision, guidance and
oversight to the banking system
 They also have the right to issue currency and
keep liquid assets for the state such as gold
and foreign currencies.
 Their capital come from what’s allocated to
them by the state as well as what’s deposited
on them by the commercial banks.

9. 2. Deposits Banks (Commercial
Banks):
The Banks that make up their own
funds through the partners own
capital as well as the Individuals and
institutions Deposits, for the purpose
of investment or current accounts.

10. 3. Business and investment banks:
 The Banks, which rely mainly on their own
funds in addition to deposits, it carry out
the work set up (created) for them.
 The most important works for the purpose
of investment is to provide long-term loans
for projects or at least to contribute on it.
 Therefore these banks are allowed by law
to create investment companies.

11. C) In terms of the legitimacy of
operations :
 1. Conventional banks (usury)
 2. Islamic banks (interest- free Banks)
· They Are banks operate according to the
provisions and rules imposed by Islamic law.
· They are characterized by not dealing with
benefits neither with depositors nor borrower

12.  Its relationship with customers is characterized by its simplicity such as
a partner relation with his partner, as it neither specifies in advance a
return on its deposited funds nor provides funds in the form of profit,
speculation or participation
 As both borrowers and depositors strictly try to keep away from dealing
in interest which is prohibited by religion.
 Islamic banks also perform a various services for charged
commissions, such as those carried out by conventional banks.
 Generally speaking, all interest-free banks agree on the basic
principles. However, individual banks differ in their application. These
differences are due to several reasons including the laws of the
country, objectives of the different banks, individual bank’s
circumstances and experiences or maybe their need to interact with
other interest-based banks.

13. (A) Commercial Bank:
1. The financial institution that
provides services, such as
accepting deposits, giving
business loans and auto loans,
mortgage lending, and basic
investment products like (savings
accounts and certificates of
deposit).

14. 2. In exchange, they generally pay
higher interest rates on investments
and deposits, and charge lower fees.

15. 3. Commercial banking activities are
different than investment banking which
include underwriting acting as
intermediary between an :
(issuer of securities and the investing
public)
(facilitating mergers and other corporate
reorganizations).
and also acting as (broker for institutional
clients).

16.  Notes:
a) Some commercial banks do not have any
physical branches and required consumers
to complete all transactions by (phone or
internet).
b) Commercial bank such as (CIB/City Bank).
c) City Bank has investment banking
divisions.

17. (B) Industrial Bank :
• The financial institution with a
limited scope of services.
• Industrial banks sell certificates
that are labeled as investment
shares and also accept customer
deposits.

18. 3. They then invest the proceeds in
installment loans for consumers and small
businesses.
4. Industrial banks differ from commercial
lenders because they accept deposits.
5. Industrial banks differ from commercial
banks because they do not offer checking
accounts.

19.  Note :
 industrial banks are known as
industrial loan companies.

20. Departments
of Banks

21. Types of Departments
 Administrative
 Technical

22. 1.Administrative
Departments

23. 1. Department of Budget and
Administrative Services
 Isresponsible for providing senior
management and the Board of Executive
Directors information on performance
and resource allocation in order to inform
and enhance decision-making

24. 2.Department of Legal Affairs
 consistsof a large number of skilled
lawyers and also seeks outside counsel
from those professionals who can provide
responsible and cost-effective services
well on time while keeping the standard
of bank's professional and ethical
practices.

25. 3. Department of
Investigation and Inspection
 Its Mission is to strive for soundness
and stability of the financial System to
safeguard interest of stakeholders
through proactive inspections.
 Its main function is to conduct regular
and special onsite inspection of
Commercial Banks, Micro Finance
Institutions and exchange companies

26. 4. Department of General
Accounting
 Explains how to analyze a bank's financial
position and operations using the bank's
financial statements, and illustrates
alternative bank financial statement
presentations
 Discusses accounting principles applicable
to banks within the framework of their
operations
 Trading account securities, loans,
property and equipment

27. • Provides a working knowledge of
bank operations and internal
accounting controls
• Demonstrates applications of
internal accounting controls,
accounting and reporting principles
to banks' cash, investment
securities,

28. 5. Department of
managing External Relations
 Seeking and researching foreign partners
for raising funds
 Maintaining relationship and
correspondence with foreign partners
 Tracking the process and timelines of report
preparation and final submission
 Organizing the process of signing
international agreements

29. • Updating information about bank in
international web pages
• Managing relationship with Media
representatives
• Organizing interviews and press
releases
• Preparing internal announcements and
organizing the activity of internal clubs

30. 6. Department of Publications
 Banking publications provides the
latest industry data and statistics, and
the latest banking technology trends
 Publications focusing on Banking
technology is the key to run a
successful business

31. 7.Queries
department
 Queries allow the user to describe desired data, leaving
the database management system (DBMS) responsible
for planning, optimizing and performing the physical
operations necessary to produce chooses.
 Queries can be divided according to which functions
undertaken
by the three main sections:
-Data definition language (DDL)
-Data manipulation language (DML)
-Data control language (DCL)

32. 8.Planning, Studies and research
department
 planning and studies department is responsible
for suggesting the general policies of the bank,
developing resources, raising the workers
efficiency, providing assistance and technical
advice for productive projects.

33.  planning and studies department perform its
duties through :
-department of planning and training.
-department of studies and research.
-department of resources development.

34. 9.Public relations department
 public relations department is a basic
administrative role which is to provide
advices for management to rationalize the
administrative and executive decisions
and carry out the communication
processes.

35. 10.personnel management
department
 personnel management department includes all
functions of personnel administration and their
payroll. and the most important features are:

Record all data for all staff.
 The expense of social security and income tax.
 Account the receipts for employees who ended
their services.
 Record the data of members who ended their
services
in the archive department.

36. 11.Computers
department
 Computers are used in banks for a variety of
reasons. They help bank personnel operate
more efficiently and effectively. Computers are
used to track certain transactions and they help
process other customer information as well.
Without computers, it would be very hard for a
bank to offer good customer service day in and
day out. Computers help a bank save time and
money, and can be used as an aid to generate
profits.

37. 12.Archive
department
 The Bank's archive holds a broad range of
material of interest to researchers in a large
number of fields. The Bank's records are of
prime importance to economic historians, but our
holdings are also of potential interest to social,
local and business historians, architectural
specialists, biographers and genealogist

38. 13.credit facilities
department
• banks grant short-term financial assistance by
way of:
-cash credit.
-overdraft.
-discounting of bills.

39. 2.Technical Departments

40. Technical department in banking
 Definition : It is the sections which allow
the bank to introduce his work and it’s
daily activity for his client and it divided
into 15sections

41. 1- Department of Treasury
(Teller)
 Bank tellers are responsible for quickly and
accurately processing routine transactions that
customers conduct at banks. Routine
transactions include cashing checks and making
deposits, loan payments, and withdrawals.

42. 2 - Department of current
accounts
 Features of Current Bank Account ↓
 The main features of current account are as
follows:-
 The main objective of current bank account is to
enable the businessmen to conduct their business
transactions smoothly.

43.  There is no restriction on the number and amount
of deposits. There is also no restriction on the
withdrawals.
 Generally bank does not pay any interest on
current account. Nowadays, some banks do pay
interest on current accounts.
 Current account is of continuing nature and as
such there is no fixed period.

44. 3–Deposits Department
 Deposits: are the amounts that were deposited
in a bank account either in the form of demand
deposit or a deposit fund and savings deposits
represent an important source of money in
traditional banks

45. 4 - Department of clearing
 Every bank performs the function of paying and
collecting. The cheque drawn on other bank by the
customers of the bank is collected by the bank for or
without charging fee is called clearing
 To accept transfer, transfer delivery and clearing
Cheques from the customers of the branch and to
arrange for their collection

46.  To arrange the payment of Cheque drawn
on the branch and give Cheque for
collection to any other branch. or any
other member or sub member of local
clearing house.
 To collect amounts of Cheques drawn on
members of local clearing house sent for
collection. branches, not represented at
the local clearing house.

47. 5 - Department of commercial
paper
 commercial paper is an unsecured promissory note with a
fixed maturity of 1 to 270 days.
 Commercial paper is a money-market security issued
(sold) by large banks and corporations to get money to
meet short term debt obligations .
 Commercial paper is usually sold at a discount from face
value, and carries higher interest repayment rates than
bonds.

48. 6 -section rental lockers
 Leased to its customers for the deposit of
valuables or secret no desire to keep them in
their homes or their offices for fear of theft or
disclosure of secrets like jewelry, precious
and secret documents, letters and so on.

49. 7-Department of Foreign
Exchange
 Foreign Exchange department in a
bank has following functions:
1-EXPORTs
2-IMPORTS
3-EXCHANGE DEALINGS
4-REMITTANCES

50. 8 -Department of Letters of
Guarantee
There are two types of letters of guarantee there are :
 first a contract given by a bank that states that the bank will
guarantee a customer's business purchases if the customer
ends up defaulting
 Second The other letter of guarantee is issued by a bank
when someone writes a call option. It guarantees that the call
writer owns the asset in question and promises that the bank
will transfer the assets to the purchaser if the call is exercised.

51. Other departments
 Department of securities .
 Department of Securities
 Department of documentary credits
 Department of remittances and foreign operations
 Department of Provident Fund
 Operations Section
 Credit department is the most important department in
the bank and often in small branches includes letters of
guarantee and documentary credits and loans and
advances and the Social Fund .
 Purchases, supplies and maintenance
 Department of documentary credits

52. Role and principles
of bank

53. The Roles Played byBanks
 Due to the important role played by banks as
financial intermediaries, banks have emerged as
unique institutions enjoying the trust of people.
As a financial institution, banks perform the
following functions:
 Financial Intermediary
 Constituent of the payment system
 Provider of other financial services

54. Principles of Banking
 In order to retain the trust of people, banks have
to adhere to certain principles while conducting
their business. These principles are listed below:
 Liquidity
 Safety
 Secrecy
 Profitability
 Service Quality

55. Electronic banking (e-banking)
 What is electronic bank ?
 E-banking is a result of the growing
expectation of banks customer

56. E-banking include :
 ATM (automated  Phone banking
teller machine)  Electronic funds
 Debt card transfer
 Credit card
 Smart card
 Net banking

57. Advantage of E-banking
 Operating cost per unit service is lower for
the banks .
 There is very low incidence of errors.
 It offers convenience to customers as they
are not required to go to the bank’s
premises

58.  The customer can obtain funds at any time
from ATM machines
 The credit cards and debit cards enables
the obtain discount from retail outlets
 The customer can easily transfer the funds
from one place to another place
electronically

59. Automated Teller Machine [ATM]
 The introduction of ATMs has provided
customers with an option to access the
banking services beyond the regular
banking hours. An ATM is a device for
receiving and dispensing cash, round the
clock, and may be placed either inside or
outside the bank s premises.

60. Working of the ATMs
 For availing the services of an ATM, a
customer needs to have an ATM card,
debit card, or credit card, as well as
Personal Identification Number [PIN]. PIN
is issued to the customers along with the
card. PIN is a randomly generated
sequence of digits. Only the customer
knows the PIN and has to secure it.

61. Core Services
The core services provided by ATMs include:
 Cash withdrawal
 Cash or cheques deposit
 Ultra fast cash
 Funds transfer
 Balance enquiry
 Mini statement
 PIN change
 Check book requests

62. Types of ATMs
 Onsite ATM: is situated either within the
branch premises or in very close proximity
of the branch.
 Offsite ATM: is not situated within the
branch premises but is located at other
places, such as shopping centres,
airports, railway and petrol stations

63.  Worksite ATM: is located within the premises of an
organization and is generally meant only for the
employees of the organization
 Cash dispenser: Allows only cash withdrawal,
balance enquiry, and mini statement requests.
Unlike an ATM, CD cannot be used for depositing
cash or cheques.
 Mobile ATM: refers to an ATM that moves in
various areas for the customers. Few private
banks have introduced ATM on wheels.

64. Risk management in
banking

65. Risk Management is the process of
measuring or assessing the actual or
potential dangers of a particular situation.

66. Risk Has Two Components
 Uncertainty.
 Exposure

67. Types of Risk
 Operational.
 Credit.
 Reputational

68. Operational Risk
The risk of loss resulting from inadequate or
failed internal processes, people and
systems, or from external events.

69. Operational Risks Include
 Internal Fraud.
 External Fraud.
 Employment Practices and Workplace Safety.
 Clients, Products and Business Practices.
 Damage to Physical Assets.
 Business Disruption and System Failures.
 Execution, Delivery and Process Management.

70. Credit Risk
Risk due to an uncertainty in a
counterparty’s ability to meet its
obligations in accordance with agreed
upon terms.

71. Credit risks include :
 Loans  Equities
 Acceptances  Letters of credit
 Interbank transaction  options
 Trade financing
 FX transaction
 Futures
 Swaps

72. Reputational Risk
Reputational risk is the potential that
negative publicity, whether true or not, will
result in loss of customers, severing of
corporate affiliations, decrease in
revenues and increase in costs.

73. Benefits of Effective Reputation
Management
 Improving relations with shareholders.
 Creating a more favorable environment for
investment.
 Recruiting/retaining the best employees.
 Reducing barriers to development in new
markets.
 Securing premium prices for products.
 Minimizing threats of litigation.

74. Success Depends Upon
 A positive corporate culture.
 Actively observed policies and
procedures.
 Effective use of technology.
 Independence of risk management
professionals.