Updating the banking potential of Building Societies

Optimum situation: • Current account/Deposit / Saving contracts start to self-generate loan demand • Cost of resources is optimized • Contingency Funding Plan increases its efficiency • NII healthy increase Banking starts to use the new concept in the business strategy • Building societies stimulate the lending • A business model fitted to current economy status • Demand meets offer • Act and react to legislative limitations

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A solution by Ionut Cristian Voicu & AAA+ MindField Solutions

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1. A new form of Interest Rate calculation is applied on Deposit side in order to motivate the customers to move toward loans.

2. The new IR concept has two components: a classic one and a conditional one. The Final IR is the sum of these two components.

Description:

The classic component: is established just like and by the current methodology.

– Its level will be bellow the competition rates/costs high cutting cost with resources;

– Banks will actively pay much lower IR than the current/existing ones at deposit;

– No other changes, excepting the split between classic and conditional aspects.

The conditional component: will be paid only to customers with both deposit and loan in their portfolio in relation with building societies own by banks/holdings

– The proposal is to have a 50%-50% participation of components when computing the Final IR the Final IR could use the current IR as reference level in order to show the potential of cost cutting the cost cutting will be generated because not all customers have both loan and deposit;

– This component will join the classic one on each tenors;

– The conditional aspects for customers: to have “at least one loan with bank or a building society”

No need to radical measures: e.g. quit the 1M term deposit as some banks did.

More efficient way in doing business and drawing credit demand.

The Concept description related to Resources’ Cost Control

BANK Main three groups of

customers

Logical Impacts upon the three categories

Deposit/Savings only

Credit only

Credit & Depozit

To come with new resources

The sum of 1 and 1 equals 2, but not for all customers

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Better costs of resources

Lower liquidity excess

To ask for new loan contracts

Superior cost cutting strategy BANK

Both outflows and inflows will follow, but Assets and Liabilities are better correlated

Expectations and Environment

Efficient Contingency Funding measures

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Higher NII Activity increased

Summary of Hybrid Management Concept

New opportunities

• Solving the current concerns related to the negative interest rates impact ;

• The two components are allocated for every deposit tenors, and their sum can be easily compared with competition quotations;

• Holding /Banks can use this concept as a reference strategy;

• Contingency Funding measures more efficiently allocated in value’s generation ;

• Local currency lending is to be stimulated;

• Depending on the local decision the participation degree of each components could vary from 10%-90%, but optimum is at 50%-50%;

• Increase in lending business due to the new concept, while the liquidity surplus is naturally managed

• Retail portfolio will get the “Lion cake ”.

From high savings surplus toward an active savings and loans management - being done by each own customers. Customers turn into sales forces for the banks bigger size, better sales.

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Strategic views

Cost policy

Permanent challenge to keep the balance between Cost policy & Strategic innovation/views

Assumed selection of profitable clients

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