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McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies Inc! "ll rights reser#e$ .

Chapter One

An Overview of the Changing

Financial-Services Sector

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McGraw-Hill/Irwin

Bank Management and Financial © 2008 !e McGraw-Hill "#m$anies, Inc%, &ll 'ig!ts'eserved% 1-2

Key Topics

• Powerful Forces Reshaping the Inustry

• !hat Is a "an#$

•

The Financial Syste% an Co%peting Financial-Service Institutions

• Ol an &ew Services Offere to the Pu'lic

• Key Trens Affecting All Financial-Service Fir%s

• Appeni() Career Opportunities in "an#ing an

Financial Services

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McGraw-Hill/IrwinBank Management and Financial © 2008 !e McGraw-Hill "#m$anies, Inc%, &ll 'ig!ts

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Introuction

• "an#s are the principal source of creit *loana'le funs+for %illions of iniviuals an fa%ilies an for %anyunits of govern%ent

• !orlwie 'an#s grant %ore install%ent loans toconsu%ers *iniviuals an fa%ilies+ than any otherfinancial-service provier

• The assets hel 'y ,.S. 'an#s represent a'out one-fifthof the total assets▫ In other nations 'an#s hol half or %ore of all assets in the

financial syste%

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!hat Is a "an#$

• A 'an# can 'e efine in ter%s of). The econo%ic functions it perfor%s

. The services it offers its custo%ers

/. The legal 'asis for its e(istence

• 0istorically1 'an#s have 'een recogni2e for the greatrange of financial services they offer

▫ "an# service %enus are e(paning rapily toay to inclue

invest%ent 'an#ing1 insurance protection1 financialplanning1 avice for %erging co%panies1 the sale of ris#-

%anage%ent services to 'usinesses an consu%ers1 an

nu%erous other innovative financial proucts

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340I"IT - The 5any 6ifferent Kins of Financial-Service

Fir%s Calling The%selves "an#s

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!hat Is a "an#$ *continue+

• 5oney-Centere "an#s vs. Co%%unity "an#s

▫ 5oney-center 'an#s

▫ Inustry leaers

▫

Cover whole regions1 nations1 an continents▫ Offer the wiest possi'le %enu of financial services

▫ Ac7uire s%aller 'usinesses

▫ Face tough glo'al co%petition

▫

Co%%unity 'an#s▫ 5uch s%aller

▫ Service local co%%unities an towns

▫ Offer a narrower1 'ut often %ore personali2e1 %enu of

financial services

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!hat Is a "an#$ *continue+

• The 8egal "asis for "an#ing

▫ A 'an# is any 'usiness offering eposits su'9ect to

withrawal on e%an an %a#ing loans of a co%%ercial or

'usiness nature

▫ Congress then efine a 'an# as any institution that coul

7ualify for eposit insurance a%inistere 'y the Feeral

6eposit Insurance Corporation *F6IC+

▫ ,ner feeral law in the ,.S.1 a 'an# ha co%e to 'e efine1not so %uch 'y its array of service offerings1 'ut 'y the

govern%ent agency insuring its eposits

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The Financial Syste% an Co%peting

Financial-Service Institutions• Roles of the Financial Syste%

▫ The pri%ary purpose of the financial syste% is to encouragesaving an to transfer those savings to iniviuals aninstitutions planning to invest an neeing creit to o so

▫ This process of encouraging savings an transfor%ing savingsinto invest%ent spening causes the econo%y to grow1 new

9o's to 'e create1 an living stanars to rise

▫ The financial syste% also provies a variety of supportingservices)

▫ Pay%ent services

▫ Ris# protection services

▫ 8i7uiity services

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Financial-Service Institutions *continue+• The Co%petitive Challenge for "an#s

▫ 8ately1 the financial %ar#et share that 'an#ing co%prise hasfallen

▫ So%e authorities in the financial-services fiel fear that thisapparent erosion of %ar#et share %ay i%ply that traitional'an#ing is ying

▫ Other e(perts counter that 'an#ing is not ying 'ut changing 'yoffering new services an changing its for%

▫ The 'an#ing inustry:s largest custo%ers have foun waysaroun 'an#s to o'tain the funs that they nee▫ "orrowing in the open %ar#et

▫

Perhaps 'an#ing is 'eing ;regulate to eath<

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Financial-Service Institutions *continue+• 8eaing Co%petitors with "an#s

▫ Savings Associations

▫ Creit ,nions

▫

Fringe "an#s▫ 5oney 5ar#et Funs

▫ 5utual Funs *Invest%ent Co%panies+

▫ 0ege Funs

▫ Security "ro#ers an 6ealers

▫ Invest%ent "an#s

▫ Finance Co%panies

▫ Financial 0oling Co%panies

▫ 8ife an Property=Casualty Insurance Co%panies

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Financial-Service Institutions *continue+• 8eaing Co%petitors with "an#s

▫ Financial-service proviers are converging in ter%s of

the services they offer

▫The ,.S. Financial Services 5oerni2ation *>ra%%-8each-"liley+ Act of ??? has allowe %any ifferent

types of financial fir%s to offer the pu'lic one-stop

shopping for financial services

▫

The challenge of ifferentiating 'an#s fro% otherfinancial-service proviers is ifficult toay

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340I"IT @ Co%parative Si2e 'y Inustry of Co%%ercial

"an#s an Their Principal Financial-Service Co%petitors

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Services "an#s an 5any of Their Closest

Co%petitors Offer the Pu'lic• Services "an#s 0ave Offere for Centuries

▫ Carrying Out Currency 3(change

▫ 6iscounting Co%%ercial &otes an 5a#ing "usiness

8oans▫ Offering Savings 6eposits

▫ Safe#eeping of alua'les an Certification of alue

▫ Supporting >overn%ent Activities with Creit

▫ Offering Chec#ing Accounts *6e%an 6eposits+▫ Offering Trust Services

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Services "an#s an 5any of Their Closest

Co%petitors Offer the Pu'lic *continue+• Services "an#s an 5any of Their Financial-Service Co%petitors

"egan Offering in the Past Century

▫ >ranting Consu%er 8oans

▫ Financial Avising

▫ 5anaging Cash▫ Offering 37uip%ent 8easing

▫ 5a#ing enture Capital 8oans

▫ Selling Insurance Policies

▫ Selling an 5anaging Retire%ent Plans

▫6ealing in Securities) Offering Security "ro#erage an Invest%ent"an#ing Services

▫ Offering 5utual Funs1 Annuities1 an Other Invest%ent Proucts

▫ Offering 5erchant "an#ing Service

▫ Offering Ris# 5anage%ent an 0eging Services

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TA"83 @ The 5any 6ifferent Roles "an#s an Their

Closest Co%petitors Play in Toay:s 3cono%y

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TA"83 @ So%e of the 8eaing Financial-Service Fir%s

aroun the >lo'e

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Key Trens Affecting All Financial-Service

Fir%s @ Crisis1 Refor%1 an Change• Service Proliferation

• Rising Co%petition

• >overn%ent 6eregulation an then Reregulation

• Crisis1 Refor%1 an Change in "an#ing an FinancialServices

• An Increasingly Interest-Sensitive 5i( of Funs

• Technological Change an Auto%ation

• Consoliation an >eographic 3(pansion

• Convergence

• >lo'ali2ation

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Buic# Bui2• !hat is a 'an#$ 0ow oes a 'an# iffer fro% %ost other financial-

service proviers$

• !hy are so%e 'an#s reaching out to 'eco%e one-stop financial-

service conglo%erates$ Is this a goo iea$

•

!hich 'usinesses are 'an#ing:s closest an toughest co%petitors$!hat services o they offer that co%pete irectly with 'an#s:

services$

• !hat is happening to 'an#ing:s share of the financial %ar#etplace

an why$

• 0ow have 'an#ing an the financial-services %ar#et change in

recent years$ !hat powerful forces are shaping financial %ar#ets an

institutions toay$

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Appeni() Career Opportunities in "an#ing

an Financial Services• !hat ifferent #ins of professionals wor# insie

financial fir%s$

▫ 8oan Officers

▫ Creit Analysts

▫ 5anagers of Operations

▫ "ranch 5anagers

▫ Syste%s Analyst

▫ Auiting an Control Personnel

▫ Trust 6epart%ent Specialist

▫ Tellers

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Appeni() Career Opportunities in "an#ing

an Financial Services *continue+• !hat ifferent #ins of professionals wor# insie

financial fir%s$

▫ Security Analysts an Traers

▫ 5ar#eting Personnel

▫ 0u%an Resources 5anagers

▫ Invest%ent "an#ing Specialists

▫ "an# 3(a%iners an Regulators

▫ Regulatory Co%pliance Officers

▫ Ris# 5anage%ent Specialists

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