商业银行管理Chap00课件4.ppt

1、Chapter FourEstablishing New Banks,Branches,ATMs,Telephone Services,and WebsitesKey Topics Chartering New Financial-Service Institutions The Performance of New Banks Establishing Full-Service Branches and In-Store Branching Establishing Limited-Service Facilities ATMs and Telephone Centers The Inter

2、net and Online BankingIntroduction Financial-service facilities are usually established today for the convenience of customers For most of the history of financial-service providers,convenience has meant location Customers views about what is convenient are changing rapidly partly due to technology

3、In deciding how they will respond to customers changing demands,financial firms today have several options:1.Chartering new(de novo)financial institutions2.Establishing new full-service branch offices 3.Setting up limited-service facilitiesChartering a New(De Novo)Financial-Service Institution No on

4、e can start a financial firm in most countries without the express approval of federal or state authorities,sometimes both In the case of banks,the publics need for a new(de novo)bank in a particular location must be demonstrated Usually the founder stockholders must supply enough start-up capital t

5、o cover several years and show that the proposed new institution will achieve adequate levels of profitability Government chartering agencies believe financial-service providers need special scrutiny for several reasons:1.They hold the publics savings2.Many financial firms are at the heart of the pa

6、yments process to support trade and commerce,so their failure could disrupt business activity3.They have the ability to create money(through granting credit)ding power),which suggests that chartering too many mightThe Bank Chartering Process in the United States Only the banking commissions in each

7、of the 50 states and the Office of the Comptroller of the Currency(OCC)can issue a charter of incorporation to start a new U.S.bank Generally,federal standards for receiving a bank charter are more rigorous than the rules of state banking commissions Organizers often seek a federal bank charter for

8、the added prestige it conveys in the minds of customers,especially large depositors The choice between pursuing a federal or a state charter usually comes down to weighing the benefits and costs of each for the particular bank and its location(s)The Bank Chartering Process in the United States(conti

9、nued)Benefits of Applying for a Federal(National)Charter It brings added prestige due to stricter regulatory standards that may attract larger deposits In times of trouble,the technical assistance supplied to a struggling institution by national authorities may be of better quality,giving the troubl

10、ed bank a better chance to survive Federal rules can pre-empt state laws Benefits of Applying for a State Charter It is generally easier and less costly to secure a state charter and supervisory fees are usually lower The bank need not join the Federal Reserve System Some states allow a bank to lend

11、 a higher percentage of its capital to a single borrower State-chartered banks may be able to offer certain services that national banks may not be able to offerQuestions Regulators Usually Ask the Organizers of a New(De Novo)Bank1.What are the population and geographic boundaries of the primary ser

12、vice area(PSA)from which the new financial firm is expected to generate most of its account activity?2.How many competing banks,credit unions,finance companies,and other competitors are located within the service area of the proposed new financial institution?What are competitors services,hours of o

13、peration,and distances from the proposed new institution?3.What are the number,types,and sizes of businesses in the area?4.What are the traffic patterns in the area,adequacy of roads,and geographic barriers to the flow of traffic?Questions Regulators Usually Ask the Organizers of a New(De Novo)Bank(

14、continued)5.What is happening to population growth,incomes,types of occupations represented,educational levels,and the age distribution of residents in the proposed service area?6.The organizers often are asked to describe the financial history of the community served,the frequency with which new fi

15、nancial firms have appeared and their track record7.Who is to own any stock issued?What amount of stock will be held by the organizers,directors,and officers?8.How experienced are the organizers,management,and board of directors of the new institution?9.What are the organizers projections for deposi

16、ts,loans,revenues,operating expenses,and net income for the first few years?Factors Weighing on the Decision to Seek a New Charter External factors the organizers should consider include:a.The level and growth of economic activityb.The need for a new financial firmc.The strength and character of com

17、petition in supplying financial services Internal factors the organizers should consider include:a.Qualifications and contacts of the organizersb.Management qualityc.Pledging of capital to cover the cost of filing a charter application and getting under wayVolume and Characteristics of New Charters

18、The number of new depository institutions chartered in the United States annually has averaged over a hundred new banking firms in many recent years There appears to be considerable public demand for more personalized service sometimes not available from large financial firms Analysis of charter app

19、rovals suggests that most new banks are chartered in relatively large urban areas As population increases relative to the number of financial firms operating in a given state,increased numbers of new charters are issued The great recession of 2007-2009 tended to reduce bank chartering activity Signi

20、ficant increases in concentration ratios tend to reduce chartering activity,as does the expansion of existing branch office networksHow Well Do New Charters Perform?Launching a new financial firm entails risk Most new financial firms grow at a moderate to rapid rate Despite a track record of loan lo

21、sses that generally exceed those of established banks,most new banks are often profitable within two to three years after opening their doors Research also suggests that early performance is strongly tied to the experience,financial strength,and market contacts of those who put the organization toge

22、ther New charterings have competitive effects that generally serve the public interestHow Well Do New Charters Perform?(continued)The most recently chartered banks show evidence of being“financially fragile”and more prone to failure than established banks New banks tend to underperform established b

23、anks in profitability and efficiency until they reach maturity One reason for new banks tendency to underperform is that they appear to be more vulnerable to real estate crises Today new banks are more closely supervised by government regulators than are established institutions and tend to be exami

24、ned more frequentlyEstablishing Full-Service Branch Offices:Choosing Locations and Designing New Branches When an established financial institution wishes to enter new markets or when its valued customers move,an important vehicle for market entry is the creation of new branch offices Establishing b

25、ranches is usually much cheaper than chartering new financial-service corporations The branching leader in the United States,the Bank of America,has more than 6,000 U.S.offices of various kinds The location,design,and services offered by a branch office depend upon the preferences of customers and t

26、he preferences of management and employeesEXHIBIT 41 Number of Insured Commercial Bank and Branch Offices,1935-2009(as of Year-End)Establishing Full-Service Branch Offices:Choosing Locations and Designing New Branches(continued)Desirable sites for full-service branch offices possess some of the foll

27、owing characteristics1.Heavy traffic count2.Large numbers of retail stores3.Populations that are of above-average age4.A surrounding area that encompasses substantial numbers of business owners,managers,and professional men and women at work or in residence5.A steady or declining number of service f

28、acilities operated by financial-service competitors6.Above-average population growth7.Above-average population density8.A relatively high target ratio of population per branch9.Above-average levels of household incomeEstablishing Full-Service Branch Offices:Choosing Locations and Designing New Branc

29、hes(continued)To measure the target ratio of population per branch,the following equation is used The larger the population served by each office,the more financial services are likely to be purchased,expanding revenues and enhancing operating efficiencyEstablishing Full-Service Branch Offices:Choos

30、ing Locations and Designing New Branches(continued)The decision of whether or not to establish a branch office is a capital-budgeting decision Requires a large initial cash outflow to fund the purchase or lease of property and to begin operations Branches are usually created with the expectation tha

31、t future net cash inflows(NCF)will be large enough to guarantee the financial firm an acceptable return(E(r)on its invested capitalEstablishing Full-Service Branch Offices:Choosing Locations and Designing New Branches(continued)Other considerations when considering possible locations for new branche

32、s:a.The variance around that expected return,which is due mainly to fluctuations in economic conditions in the area served by the branchb.The covariance of expected returns from the proposed new branch,existing branches,and other assets previously acquired by the offering institution The impact of a

33、 new branchs expected return(RB)on the offering institutions total return(RT)from its existing branches and other assets(ROA)can be found from W is the proportion of total resources to be invested in new branch B(1W)is the proportion of the offering institutions resources invested in all of its othe

34、r assets(OA)Establishing Full-Service Branch Offices:Choosing Locations and Designing New Branches(continued)The marginal impact of a new branch on overall risk measured by the variance of total return(RT):where B,OA represents the correlation coefficient between the expected return from the propose

35、d new branch and the returns from other assets of the offering institution B represents the standard deviation of the proposed new branchs expected return OA represents the standard deviation of return from other assets held by the financial firm Geographic diversification can reduce overall risk ex

36、posureEstablishing Full-Service Branch Offices:Choosing Locations and Designing New Branches(continued)Regulation in the United States recently has made it more difficult to close full-service branch offices of depository institutions The FDIC Improvement Act of 1991 The Community Reinvestment Act o

37、f 1977 Many analysts see the roles played by branch offices evolving in new directions today Sales orientation Cross-selling Branches are coming to be viewed today less as mere deposit gatherers and more as sources of fee-generating service sales and for booking profitable assetsEstablishing Full-Se

38、rvice Branch Offices:Choosing Locations and Designing New Branches(continued)In-Store Branching A significant portion of financial-service branches today are located inside supermarkets,shopping centers,and other retail establishments These retail-oriented service facilities have only a few employee

39、s Highly sales oriented In-store branches typically are much less costly to build and maintain and tend to become profitable about 12 months earlier than stand-alone facilities Operate for longer hours Can experience more traffic flow than conventional branchesEstablishing and Monitoring Automated L

40、imited-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 service

41、sEstablishing and Monitoring Automated Limited-Service Facilities (“Branchless Banking”)(continued)The Decision to Install a New ATM Suppose ATMs cost$50,000 each and require$30,000 to install A bank estimates that it will save$1.00 for each check that is not written because customers will use the m

42、achine instead Life expectancy is 10 years and it will handle 30,000 cash transactions/year Cost of capital to finance the ATMs purchase is 14%Banking in Homes,Offices,Stores,and on the Street Telephone Banking and Call Centers The telephone remains among the most popular channels for putting custom

43、ers in touch with financial-service providers today Internet Banking Features includeVerify in real time account balances at any time and from any locationMove funds instantly from one account to anotherConfirm that deposits of funds have been received,checks have cleared,and online transactions hav

44、e been completedView and print images of checks that have passed through a customers accountSubmit an application for loans and credit cardsCarry out online bill paying Financial-Service Facilities of the Future Despite continually advancing technology,most experts seem to agree that the total numbe

45、r of financial-service outlets industry wide may not decline significantly for a time The use of“digital cash”will permit customers to be their own financial-service branches for certain transactions Service providers are likely to evaluate the success of their branch offices and limited-service fac

46、ilities in terms of profits and costs per square foot Outsourcing of financial service delivery is likely to growQuick Quiz Why is the physical presence of a bank still important to many customers despite recent advances in long-distance communications technology?Who charters new banks in the United

47、 States?What are the advantages of having a national bank charter?A state bank charter?What kinds of information must the organizers of new national banks provide the Comptroller of the Currency in order to get a charter?Why might this required information be important?What are the key factors the organizers of a new financial firm should consider before deciding to seek a charter?What are POS terminals,and where are they usually located?What services do ATMs provide?What are the principal limitations of ATMs as a service provider?Should ATMs carry fees?Why?