the business environment for hong kong banking industry hong kong, both as a local banking market...

The business environment The business environment for Hong Kong banking for Hong Kong banking

industryindustry Hong Kong, both as a local banking Hong Kong, both as a local banking

market with a large representation of market with a large representation of global players and as an global players and as an international financial center, is international financial center, is subject to changes and subject to changes and developments in the global financial developments in the global financial market. It is essential to understand market. It is essential to understand the forces driving change in banking the forces driving change in banking industry.industry.


industryindustry The global economyThe global economy Economic growth and development Economic growth and development

over the past two decades has been over the past two decades has been a key driver of the development of a key driver of the development of financial services. Increasing cross-financial services. Increasing cross-border capital flows and exponential border capital flows and exponential growth in international trade all growth in international trade all affecting banking industry. In the affecting banking industry. In the future, it is likely that the growth in future, it is likely that the growth in Asia especially China will lead the Asia especially China will lead the global economic growth. global economic growth.


industryindustry Change in regulationChange in regulation Deregulation of financial, capital and Deregulation of financial, capital and

trade markets has facilitated the trade markets has facilitated the development of the global financial development of the global financial markets. Reductions in regulatory markets. Reductions in regulatory barriers have opened banking barriers have opened banking markets to foreign competition. It is markets to foreign competition. It is expected that liberalization will expected that liberalization will continue in the future.continue in the future.


industryindustry Technological innovation and the development Technological innovation and the development

of new skillsof new skillsDevelopments in technology (lower costs, more Developments in technology (lower costs, more

powerful software, broader and wider access powerful software, broader and wider access to communications and advances in to communications and advances in databases) enable change in all areas of databases) enable change in all areas of banking and financial management including:banking and financial management including:

The development of new products;The development of new products; Improvements in efficiency of operations;Improvements in efficiency of operations; Electronic distribution and delivery of Electronic distribution and delivery of

products;products; Improvements in risk managementImprovements in risk management


industryindustry Customer needs and demographic changesCustomer needs and demographic changes

Customer needs are one of the major forces Customer needs are one of the major forces driving change in financial markets. The driving change in financial markets. The key developments influencing customer key developments influencing customer needs are population growth and aging, needs are population growth and aging, increasing education levels, changing work increasing education levels, changing work patterns and increasing consumer wealth. patterns and increasing consumer wealth. As a result, Hong Kong consumers now rely As a result, Hong Kong consumers now rely more on the financial sector and have more on the financial sector and have greater exposure to banks in general (e.g. greater exposure to banks in general (e.g. though the provision of investment and though the provision of investment and deposit services). deposit services).


industryindustry Changes in demographics and in Changes in demographics and in

consumer needs have and will consumer needs have and will continue to cause fundamental shifts continue to cause fundamental shifts the way in which consumers interact the way in which consumers interact with banks:with banks:

Product and services preferencesProduct and services preferences Distribution channel preferencesDistribution channel preferences Brand/supplier relationshipsBrand/supplier relationships


industryindustry Financial markets developmentsFinancial markets developments Explosive growth in global financial markets, Explosive growth in global financial markets,

the development of new complex financial the development of new complex financial products and increasing linkages between products and increasing linkages between countries are forces which are driving countries are forces which are driving fundamental changes in how companies fundamental changes in how companies raise capital and manager their risk. raise capital and manager their risk. Additionally, these forces are also driving Additionally, these forces are also driving the investment vehicles consumers have the investment vehicles consumers have access to and demand, and are reshaping access to and demand, and are reshaping the traditional role that banks play as the traditional role that banks play as intermediaries.intermediaries.

Changes in the organization Changes in the organization structure of a Commercial structure of a Commercial

BankBank Rapid expansion in the number and variety Rapid expansion in the number and variety

of financial products and servicesof financial products and services Banks provide and offer wider number Banks provide and offer wider number

and variety of financial products and and variety of financial products and services to the public to compensate the services to the public to compensate the decrease in net interest income.decrease in net interest income.

Establishment of Insurance and Establishment of Insurance and Investment Services Division to provide Investment Services Division to provide diversified products and servicesdiversified products and services


BankBank Compete on information technologies Compete on information technologies

basisbasis Competitions are mainly on competence Competitions are mainly on competence

in information technology of bank. in information technology of bank. More self-service machines and More self-service machines and

internet bankinginternet banking Outsourcing of Information Outsourcing of Information

Technologies Technologies


BankBank Compete with other banks in other Compete with other banks in other

countriescountries Financial markets around the globe Financial markets around the globe

become more closely interconnected become more closely interconnected to each other.to each other.

China market becomes important China market becomes important Development of China market is Development of China market is

affected by the pace of opening affected by the pace of opening China banking industryChina banking industry


BankBank Deregulation to allow competitionDeregulation to allow competition Interest rate deregulationInterest rate deregulation Removal of the three-building conditioRemoval of the three-building conditio

nn Relaxation of entry of foreign bankRelaxation of entry of foreign bank


BankBank Increased in complexity of risk Increased in complexity of risk

managementmanagement Risk management become more Risk management become more

important as a result of diversified important as a result of diversified products and services provided.products and services provided.

Enlarge the Risk Control Division Enlarge the Risk Control Division


BankBank More supervision from HKMAMore supervision from HKMA As the complexity of banking business inAs the complexity of banking business in

creases, Hong Kong Monetary Authority creases, Hong Kong Monetary Authority has more supervision over the authorizehas more supervision over the authorized institutions.d institutions.

Setting up of Compliance DivisionSetting up of Compliance Division


BankBank Consolidation of financial institutionsConsolidation of financial institutions More mergers and acquisitions take More mergers and acquisitions take

place in the past few years to make place in the past few years to make smaller banks become large smaller banks become large conglomeratesconglomerates

Many mergers and acquisitions take Many mergers and acquisitions take place since the past decade.place since the past decade.

Consortium of banks appears in Hong Consortium of banks appears in Hong KongKong

The segregation of duties in The segregation of duties in a commercial banka commercial bank

Banking Operation DivisionBanking Operation Division Banking Operation Division gives support to the Banking Operation Division gives support to the

Risk Management & Marketing Division Risk Management & Marketing Division through the following back-up services :through the following back-up services :

The Accounting Department is the planner The Accounting Department is the planner and controller of the bank’s budgets, and controller of the bank’s budgets, provides management information and provides management information and keep track records of the financial status of keep track records of the financial status of the bank.the bank.

The Remittance Department deals with the The Remittance Department deals with the process of transferring funds to and from process of transferring funds to and from customers’ accounts, either instructed by customers’ accounts, either instructed by the customers or by other banks.the customers or by other banks.


The Deposits and Loans Departments handle The Deposits and Loans Departments handle all paper work and documentation related to all paper work and documentation related to customers’ deposits and loans transactions.customers’ deposits and loans transactions.

The Foreign Exchange Department backs up The Foreign Exchange Department backs up the bank’s Treasury Division in the recording, the bank’s Treasury Division in the recording, position keeping and follow up on the position keeping and follow up on the purchases and sales of foreign exchange purchases and sales of foreign exchange contracts.contracts.

The Bills Department handles customers’ The Bills Department handles customers’ trade transactions with third parties and trade transactions with third parties and provides trade finance to earn both interest provides trade finance to earn both interest and commission income.and commission income.


Treasury DivisionTreasury Division The Treasury Division buys funds to The Treasury Division buys funds to

cover the bank’s exposure in lending cover the bank’s exposure in lending and sell the surplus funds to earn and sell the surplus funds to earn interests. The funds can be Hong interests. The funds can be Hong Kong currency and foreign Kong currency and foreign currencies.currencies.


Administration DivisionAdministration Division The Administration Division looks after The Administration Division looks after

the bank’s premises, maintains the bank’s premises, maintains supplies of stationery and supplies of stationery and equipment, and provides other equipment, and provides other services like printing, messengers, services like printing, messengers, security, etc.security, etc.


Human Resource DivisionHuman Resource Division The Human Resource Division is The Human Resource Division is

responsible for recruiting and responsible for recruiting and allocating the bank’s manpower, allocating the bank’s manpower, administration of salary and fringe administration of salary and fringe benefits, and staff training.benefits, and staff training.


Marketing DivisionMarketing Division Marketing Division is the front line to Marketing Division is the front line to

contact, liaise, negotiate and serve contact, liaise, negotiate and serve the customers. It is responsible for the customers. It is responsible for retail marketing and wholesale retail marketing and wholesale marketing.marketing.


Marketing DivisionMarketing Division To ensure adequate fund supply, the To ensure adequate fund supply, the

retail marketing group has to innovate retail marketing group has to innovate new products and provide better new products and provide better services, such as higher interest rates services, such as higher interest rates for larger amount deposits and tailor-for larger amount deposits and tailor-made customer services. On the made customer services. On the other hand, personal loans are offered other hand, personal loans are offered to individuals which contribute some to individuals which contribute some interest income to the bank.interest income to the bank.


Marketing DivisionMarketing Division The target customers of wholesale The target customers of wholesale

marketing group are composed of marketing group are composed of corporate customers with a constant corporate customers with a constant need of bank financing. By making need of bank financing. By making use of the funds absorbed by the retail use of the funds absorbed by the retail marketing group, the wholesale marketing group, the wholesale marketing group earns interest income marketing group earns interest income through successfully selling the through successfully selling the products like letter of credit, bills products like letter of credit, bills collection, foreign exchange, overdraft, collection, foreign exchange, overdraft, etc.etc.


Marketing DivisionMarketing Division The operations of the wholesale The operations of the wholesale

marketing group start with the marketing group start with the initiation of account relationship, initiation of account relationship, setting up credit facilities, and credit setting up credit facilities, and credit review. Corporate customers may review. Corporate customers may deposit their idle funds with their deposit their idle funds with their bankers to earn interest. The bankers to earn interest. The deposits are of large amount and deposits are of large amount and short tenor.short tenor.


Risk Management DivisionRisk Management Division

It performs the credit review and It performs the credit review and monitoring duties. It ensures the risk monitoring duties. It ensures the risk of the advances granted by the of the advances granted by the Credit and Marketing Division is of Credit and Marketing Division is of acceptable level. As a result, the acceptable level. As a result, the credit risk will not be high and asset credit risk will not be high and asset quality is good.quality is good.


Internal Audit DivisionInternal Audit Division The Internal audit Division inspects the The Internal audit Division inspects the

operations from checking of operations from checking of accounting records and counting accounting records and counting cash in vaults to interviewing of staff cash in vaults to interviewing of staff to discuss management problems. It to discuss management problems. It ensures that the bank is operating in ensures that the bank is operating in accordance with the government’s accordance with the government’s regulations and management’s regulations and management’s objectives and policies.objectives and policies.


Investment Services DivisionInvestment Services Division Bank offers a full spectrum of investment Bank offers a full spectrum of investment

products and services to both private products and services to both private and corporate investors. The funds and corporate investors. The funds cover different asset classes including cover different asset classes including global equities, bonds, money markets global equities, bonds, money markets and foreign exchange markets. Banks and foreign exchange markets. Banks also provide asset management also provide asset management services for retirement schemes, services for retirement schemes, institutional investors and charitable institutional investors and charitable organisations. organisations.


Investment Services DivisionInvestment Services Division With the professional knowledge and With the professional knowledge and

expertise in asset management, expertise in asset management, customer are interested in taking customer are interested in taking part in managing investment part in managing investment portfolios to enhance investment portfolios to enhance investment performance. performance.


The Information and Technology The Information and Technology DivisionDivision

In the past, it is mainly responsible for In the past, it is mainly responsible for collecting all the source documents collecting all the source documents and posting them onto the bank’s and posting them onto the bank’s accounting records on a daily basis.accounting records on a daily basis.


The Information and Technology DivisionThe Information and Technology Division But now it deploys the latest technologies to But now it deploys the latest technologies to

meet changing customer needs and meet changing customer needs and enhance bank’s leading edge. It develops enhance bank’s leading edge. It develops customer-oriented systems to ensuring that customer-oriented systems to ensuring that customers can enjoy a sophisticated range customers can enjoy a sophisticated range of banking products in the most efficient of banking products in the most efficient and convenient way. Innovative e-banking and convenient way. Innovative e-banking services such as Internet Banking and other services such as Internet Banking and other wireless financial services allow customers wireless financial services allow customers to manage their wealth with ease any time to manage their wealth with ease any time around the world. around the world.


The Information and Technology The Information and Technology DivisionDivision

Designing and delivering the best Designing and delivering the best solutions as well as maintaining the solutions as well as maintaining the stability and security of different stability and security of different computer systems will be their computer systems will be their critical mission. They also contribute critical mission. They also contribute to enhancing operational efficiency to enhancing operational efficiency and increasing the productivity of the and increasing the productivity of the user departments. user departments.


The setting up of Compliance DivisionThe setting up of Compliance Division

There are many laws and regulations There are many laws and regulations governing the operation of banks. governing the operation of banks. The Compliance Division ensures that The Compliance Division ensures that the regulations set by the the regulations set by the supervisory institution (e.g. HKMA supervisory institution (e.g. HKMA and HKAB) have been adhered. and HKAB) have been adhered.


Setting up of subsidiary company for Setting up of subsidiary company for Insurance businessInsurance business

It provides a wide range of general It provides a wide range of general insurance services including fire, insurance services including fire, marine and accident insurance that marine and accident insurance that we have learned in chapter 9. we have learned in chapter 9.

the business environment for hong kong banking industry hong kong, both as a local banking market...

Documents

banking markets

global financial markets

hong kong consumers

financial management

financial sector

areas of banking

variety of financial

international financial