Uniglobe College, MBA-III, Kathmandu, Nepal

1. PRESENTATION
ON
CREATING AND MANAGING BANK SERVICES
OUTLETS AND SETTING BANKING TECHNOLOGY
PRESENTED BY:
DEEPA SHRESTHA
PAWAN KAWAN
RABI SHRESTHA
SONA SHRESTHA
TIL BAHADUR BHANDARI

2. Introduction
• The Bank Charter Act 1844 was an Act of the
Parliament of United Kingdom, passed under
the government of Robert Peel , which
restricted the powers of British banks and
gave exclusive note-issuing powers to the
central Bank of England.

3. • The Act served to restrict the supply of new
notes reaching circulation, and gave the Bank
of England an effective monopoly on the
printing of new notes. The Act exempted
demand deposits from the legal requirement
of a 100-percent reserve which it did demand
with respect to the issuance of paper money
Cont…

4. • Also, while the act restricted the supply of
new notes, it did not restrict the creation of
new bank deposits and these would continue
to increase in size over the course of the 19th
century.
• As a result of the Act, as provincial banking
companies merged to form larger banks, they
lost their right to issue notes.
Cont…

5. • Bank organizers have several options from
which to choose when forming their bank.
This topic discusses these options, which
depend significantly on the organizers' vision
for the institution
Cont…

6. In deciding how consumer respond to the
changing demands for timely access to services,
financial firms today have several options to
choose
• Chartering new (De Novo) financial institutions.
• Establishing new full service branch office.
• Setting up limited service facilities.
Cont…

7. Chartering a new (De Novo) financial
service institution:
• No one can start a major financial firms
without the express approval of federal or
state authorities, and sometimes both.
• Bank must supply enough start up capital to
cover several years.

8. Cont..
• Bank should show that they will achieve
adequate level of profitability.
• Bank in a particular location must be
demonstrated and the honesty and
competence of its organizers and proposed
management established

9. Government chartering agencies believe that
financial service providers need special scrutiny
for several reasons:
• Hold public savings and unregulated chartering
activity might result in excessive number of
poorly capitalized institutions that fail.
• Financial firms are at the heart of the payments
process to support trade and commerce.
Cont..

10. • They often create money, which suggests that
chartering too many might result in excessive
money creation and inflation.
Cont..

11. The Bank Chartering Process in the United
States
• Take a close look at how new banks are chartered in the US
• Office of the Comptroller of the currency a division of the
Treasury Department can issue a charter of incorporation to
start a new US Bank
• Organizers often seek a federal bank charter for the added
prestige it conveys in the minds of customers, especially large
depositer

12. Benefit of Applying for a Federal Bank
Charter
• It brings added prestige due to stricter regulatory standard
• In times of the technical assistance supplied to a struggling
bank by national bank authorities may be of better quality,
giving the troubled bank a better chance of long run survival
• Federal banking rules can pre-empt state laws

13. Benefit of Appling for a State Bank
Charter
• It is generally easier and less costly
• The bank need not join the Federal Reserve System
• Some states allow a bank to lend a higher percentage of its
capital to a single borrower
• State charted bank may be able to offer certain services that
national bank may not be able to offer

14. Questions Regulators Usually Ask the
Organizers of a New Bank
• It is instructive to look at the types of information chartering
authorities may demand before approving or denying a
charter application.
• This criteria may be used by organizers and chartering
agencies to assess a new financial firm’s prospects for future.

15. Questions Regulators Usually Ask the
Organizers of a New Bank
• Area of operation
• Competitors in the operating area
• Number, types, and size of business in the area.
• Traffic patterns in the proposed service area.
• Population
• Financial history of the community served
• Capital Structure
• Projections
• Experience in the field of banking sector

16. Questions Regulators Usually Ask the
Organizers of a New Bank
Area of operation
– Area and geographic boundaries of the PSA
– PSA must have enough business and household to
ensure an adequate customer base for the new
institution.

17. Questions Regulators Usually Ask the
Organizers of a New Bank
Competitors in the operating area
– Number of competing banks, saving and loans,
credit unions, finance companies, and insurance
companies.
– Competitors services, hours of operations, and the
distance from the proposed new institutions.
– The more intense competition is, the more difficult
it is for a new financial firm to attract customers.

18. Questions Regulators Usually Ask the
Organizers of a New Bank
Number, types, and size of business in the area.
– Many new financial services providers depend
heavily on the demands of businesses for
commercial deposit services and for loans to stock
their shelves with investors and purchase
equipment.

19. Questions Regulators Usually Ask the
Organizers of a New Bank
Traffic patterns in the proposed service area.
– Adequacy of roads and highways, and
geographical barriers to the flow of traffic.
– Most new financial institutions are situated along
major routes of travel for commuters going to
work and to shopping and schools, providing the
greater customer convenience.

20. Questions Regulators Usually Ask the
Organizers of a New Bank
Population
– Current situation of the population growth,
income, types of occupations represented,
educations levels, and age distributions of
residents in the proposed service area.
– The presence of well-educated residents in the
service area implies higher incomes and grater use
of financial services.

21. Questions Regulators Usually Ask the
Organizers of a New Bank
Financial history of the community served
– The rapid growth of financial institutions in the
service area and good profitability among these
institutions suggests that the proposed new
institutions might also become profitable and
experience growth

22. Questions Regulators Usually Ask the
Organizers of a New Bank
Capital Structure
– The proportion of stock held by the promoters.
– The ability to raise the fund for its future growth
and protect the public interest.

23. Questions Regulators Usually Ask the
Organizers of a New Bank
Projections
– The organizers projections for deposit, loans,
revenue, operating expenses, and net income for
the first few years.

24. Questions Regulators Usually Ask the
Organizers of a New Bank
Experience in the field of banking sector
– The experience of the organizers, senior
management, and the board of directors of the
new institutions.
– Successful businesspeople on the board and staff
will help attract new accounts.

25. Factors Weighing on the Decision to Seek a
New Charter
• External factors the organizers should consider include:
a. The level of economic activity
• Is it high enough to generate sufficient service demand?
• Often measured by the volume of retail sales, personal income, bank
debits and number of households and businesses in the service area.
b. Growth of economic activity
• Is the market area growing fast enough to generate additional
deposits and loans so that the new institution can grow to an efficient
size?
• Often measured by trends in deposits and loans, retail sales, bank
debits, population growth, construction activity and school
enrollments.
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26. c. The need for a new financial firm
• Has the population grown or moved into new areas not currently
receiving convenient financial services?
• Often measured by population per banking office, recent earnings and
deposit growth and the number and size of new residential
construction process.
d. The strength and character of competition in supplying financial
services
• How many competing financial institutions are there and how
aggressive are they in advertising their services?
• This is often measured by the number of offices relative to area
population and the number of other financial institutions offering
checkable accounts, saving plans, consumer loans and business credit.
Factors Weighing on the Decision to Seek a
New Charter Cont…

27. • Internal factors the organizers should consider include:
a. Qualifications and contacts of the organizers
• Do the organizers have adequate depth of experience?
• Is their reputation in the community strong enough to attract
customers?
b. Management quality
• Have the organizers been able to find a chief executive officer with
adequate training and experience in management?
• Will the organizing group be able to find and pay competent
management and staff to fill the new institution’s key posts?
Factors Weighing on the Decision to Seek a
New Charter Cont…

28. c. Pledging of capital to cover the cost of filing a charter application and
getting under way
• Is the net worth position of the organizers strong enough to meet the
initial capitalization requirements imposed by regulation and cover
consulting and legal fees?
• Because the chartering process covers many months and may wind up
in court if competitions file suits before the new firm is allowed to
open, do the organizers have sufficient financial strength to see the
project through to its completion?
Factors Weighing on the Decision to Seek a
New Charter Cont…

29. Banking Technology

30. Establishing and Monitoring Automated Limited-Service
Facilities (“Branchless Banking”)
• There has been a recent spike in branchless
banking due to the high cost of chartering new
financial firms and setting up full-service branch
offices
▫ Point-of-sale (POS) terminals
▫ Automated teller machines (ATMs)
▫ Telephone banking
▫ Internet-supplied services
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31. • Core Banking Software
Core banking software that carries entire
financial transactions and store customer
information .
• ATM switches
• Inter and intra bank communication interface
Establishment
• Electronic Money Transfer Solutions
• Customized Solutions for HR management,
logistics management, etc.
Setting Banking Technology

32. Technology trends
• Online customer-facing technology.
• Mobile, tablet, and social computing.
• Integrating online channels with customer service.
• Smart implementation of regulatory and
compliance systems.

33. Mobile application adopted by financial
institutions
• Mobile Check Deposit
• Peer to Peer Payments/Mobile Money Transfer
• Photo Bill Pay
• Advanced Trading and Research
• Mobile Wallet/Payments

34. Banking in Homes, Offices, Stores, and
on the Street
• Telephone Banking and Call Centers
▫ The telephone remains among the most popular channels for
putting customers in touch with financial-service providers today
• Internet Banking
▫ Features include
▫ Verify in real time account balances at any time and from any location
▫ Move funds instantly from one account to another
▫ Confirm that deposits of funds have been received, checks have cleared,
and online transactions have been completed
▫ View and print images of checks that have passed through a customer’s
account
▫ Submit an application for loans and credit cards
▫ Carry out online bill paying
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35. THANK
YOU