Banks Regarding Social Disclosure - Coursework Example

Comparison between 2 Banks Regarding Social Disclosure Introduction In this contemporary era, the needs of different people are incessantly changingwith the advancements made in economic structure and innovative technologies. With the advent of globalization in the world economy, the financial performance of developed as well as developing countries has been changed extensively. It is to be affirmed that the financial performance of any country remains highly dependent over the feasibility of the financial and banking institutions. Thus, it is clear that the performance of banking sector is recognized to be one of the decisive factors for making industrial development of several nations located throughout the globe (Hanif, 2011). It is also observed that the banking performances have been transformed over the previous decades that can also be due to the above discussed factors. Evidently, most of the banking institutions developed their respective performances based on meeting the demands of huge figure of potential customers. It is eminent to state that most of the nations are initiated to pay must attention over the requirements of majority portion of countrymen for deriving appropriate positive outcomes and also reaping several significant benefits. In this regard, the respective government of the nations and the banking sector of such nations decided to adopt few new strategies to develop the business process as per the requirements of the customers (Hasan & Ahmed, 2013). Simultaneously, the Middle East countries are also observed to take initiatives in serving their national people with a new financial approach. In this regard, the establishment of Islamic banking system is reckoned to be one of the imperative instances that depict the development of banking sector in the Middle East countries. I will be worth mentioning in this regard that the banking system of Middle East countries is quite poor as compared to others. More specifically, it can be elaborated that the banking structure of the GCC countries are regarded to be not too much satisfactory in nature (Reach, 2015). In this context, the imposition of Islamic banking within the banking sector of GCC countries more specifically in Qatar has brought immense transformation within the economical and social aspects of the economies. On the other hand, the modernizations notified within the conventional commercial banks are deemed to be regarded as the major performers for developing the world’s financial structure in a strong and aligned manner. Moreover, these conventional banks are found to play a decisive part in changing the economical overview of the respective nations as per the desired level (Merrill Lynch, Pierce, Fenner & Smith Incorporated, 2015). In relation to the above context, the objective of this essay is to conduct a detailed comparison between the banking sectors in Qatar and the United States in accordance with the notion concerning social disclosure. In order to make such comparison, the banks including Qatar National Bank (QNB) and Bank of America have been taken into concern for discussion. Thus, the study will also focus on explaining the operational structure of the above stated two banks and also finding out key similarities as well as differences that persist amid such banks. Banking Sector in Qatar Qatar economy is recognized to be one of the attractive economies amongst all the gulf countries. Qatar has witnessed huge major transformations in its different financial perspectives over the previous few years. Nonetheless, it can be apparently observed that Qatar economy has made satisfactory progression in the diversified economic and social fields. Specially mentioning, gaining huge support from the government end or side in the form of adopting and executing certain effective regulatory policies is regarded as an influential factor towards the growth of Qatar’s economy. Such policies could be related to free trade market principles. On a further note, the economic structure of Qatar is much wealthy amongst the other gulf countries. In terms of social disclosure, Qatar has been able to develop its economy by attaining maximum profitability in the petrochemical sector after being independent (Qatar National Bank, 2013). While discussing the banking sector in Qatar, it must be mentioned that Qatar is regarded as one of the fastest growing economies due to the conduct of trading in oil and fuel sectors. The oil and fuel sectors of Qatar certainly helped its banking segment to get developed consistently. Since previous few years, it can be found that the Qatari banking sector is duly considered to be a stellar performer within the GCC banking region. Therefore, the Qatar National Bank (QNB) and many other national banks operating in Qatar under their flagship are intending to expand their respective operations by following the footprints of international banks (Al-Muharrami, 2007). Financial Performances Qatar banking sector has the experience of ensuring sustainable development in its various segments that lead towards greater level of financial development. More specifically, it can be elaborated that the banking sector of Qatar has substantially improved its financial performance by attaining robust core earnings. Recently, the banking sector of has developed its performance by capitalizing over huge investments made and utilizing the financial resources in an efficient way. With this concern, it can be inferred that the banks of Qatar are well capitalized as well as financially strong in nature. It is worth mentioning that in recent years, the Qatar banking sector is becoming the most profitable among the GCC nations. More specifically, the financial sectors of Qatar along with the other GCC countries are subjugated by the banking segment (Al-Hassan, Khamis & Oulidi, 2010). With regards to the aforesaid context, it can also be elaborated that the Qatar banking sector highly follows a separate trend of banking within the nation. It is worth mentioning that through the adoption of new style in Qatar banking sector, its overall performances has developed in a quite systematic way. In recent years, the growth within the Qatar banking sector has been raised by approximately 25%, which can be depicted from the data revealed by the Qatar Exchange. It is also found that in terms of social disclosure, the banking sector of Qatar has a strong presence in the respective markets, ensuring long-term growth potential in future within such markets. Though the Qatar banking sector is deemed to be much well known and considered to be a large market player among the GCC countries, still it is not entirely free from the risk zones. However, despite this situation, it can be affirmed that the Qatar banking sector seems to be more confident of experiencing strong growth in the upcoming years ahead (Qatar National Bank, 2013). Through the evaluation from the data compiled by the Qatar National Bank (QNB), it can be ascertained that the bank has developed its annual rate by approximately 18.1% from the years 2009 to 2013. It is also observed that the overall performance of the Qatari banks remains much effective as well as strong in nature. Thus, strong and huge amounts of public spending are referred to be one of the most positive influential factors contributing in making overall growth of the bank. Apart from this, strong public investment operating environment and excessive credit growth also resulted into developing the financial performances of QNB. It is also stated that the financial matrices of the bank have remained robust. Specially mentioning, effective flow of capital and strong liquidity factor also contributed into progressing the financial performances of the banking sector of Qatar as per the desired level (Walton, 2011). Political and Legal Limitations Qatar banking industry is specifically following the path of Islamic banking system within the nation. With regards to discuss about the political as well as legal implications of Qatar banking sector, it can be affirmed that the government of Qatar intended to develop a unique banking centre within the country. Apart from this, the respective government of the nation has decided to implement a strategy for developing Qatar as a centre of Islamic banking for ensuring long-term growth and success within the industry. It must be mentioned that currently, Qatar has become one of the fastest growing Islamic banking sectors in the world (Hasan & Ahmed, 2013). Due to extensive support provided by the government in the context of social disclosure, the Qatar banking sector has become one of the most popular as well as fastest growing banks in the GCC nations. Evidently, the popularity of the Islamic banks within the country has certainly reduced the demand of conventional banking. This can be justified with reference to the fact that the government of Qatar did not imposed appraisals in limiting the rights of Qatar banking authority. In recent trends, the government of Qatar is now imposing new rules relating to limiting the expansion of retail banking growth within the country (U. S. Department of State, 2013). Due to excessive governmental support, the banks of Qatar are able to expand their respective business operations. It can be found that most of the creditors belonging to numerous countries in Europe and Asia are experiencing economic slowdown in recent past years. Consequently, Qatari banks are now experiencing huge amount of earnings or profits during the recent financial year. The political stability of the country is highly beneficial for the Qatari banking sector to get aligned with the global growth. However, one of the major limitations of the Qatar banking sector is reckoned to be the Central Bank’s restriction over the other domestic banks’ securities investment related matter. According to the circular released by the Central Bank, the investments made in bonds and stocks are duly considered to be one of the major issues or limitations within the banking sector of Qatar (Al-Hassan, Khamis& Oulidi, 2010). Over the time, the respective government of Qatar has introduced several rules along with regulations relating to banking industry for enhancing the operational performance of the domestic and international banks. Another key reason behind the introduction of such rules and regulations within the banking industry is to improving the economic structure of the nation. Apart from the above discussed reasons, it can be affirmed that the Qatari government has also imposed rules and decisions to restrict the process of Islamic banking as well as commencing restrictions over the borrowings make by the consumers. It will be vital to mention in this regard that the limitations over consumers’ borrowings and the Islamic banking process tend to lessen the profitability level of the banks. In this regard, the estimated net income of the Commercial Bank of Qatar got reduced by approximately 22 percent (Qatar National Bank, 2013). Banking Sector in the United States Financial Performances There are several banks operating in the US that include commercial, community, private and offshore banks among others. These distinct sorts of banks of the US largely contribute in making greater level of financial development of the nation (Cornett, Erhemjamtsa, & Tehranian, 2014). Moreover, it is identified that the financial performances of these banks had been considerably overwhelming. Conversely, it is also argued that the incredible financial performance of these banks has contributed in ensuring long-term economic development (Cornett et. al., 2014). Although, it is evident that the financial performance of the banks in the US during the recent crisis in 2007-08 had been devastating, the banks were able to recover from such distresses situation during the post-crisis period. From the banking financial history, it is eminent that the nation witnessed outstanding financial performances. Similar outstanding performance is also notable during the post crisis period i.e. in the current day context (Cornett et. al., 2014). The outstanding financial performance of the banking sector in the US is evident from the valuation of the total assets possessed by varied financial institutes within the nation that are insured under Federal Deposit Insurance Corporation (FDIC). These national institutes include all the commercial banks and saving institutions. It can be apparently observed that all the financial institutes under FDIC have witnessed an aggregated asset value of over 15.5 trillion USD as on the finish of 2014 (FDIC, 2015). On the other hand, all such institutions have also witnessed of an aggregate liability of over 13.8 trillion USD as on 31st December, 2014. Thus, it is eminent that the banks in the US have made commendable financial performances (FDIC, 2015; Cornett et al., 2014). The detailed report of the aggregate assets and liabilities of all the banks in the US has been depicted in Appendix 1. The commendable financial performance of the US banking sector is also evident from the total deposits made by all the banks remained under FDIC in the nation. These banks have witnessed of an aggregate cash deposits of over 11.7 trillion USD in the year ending 2014 (FDIC, 2015). The high cash deposit of all the banks in the US suggests of gaining long-term success. Moreover, it is also noted that the total deposits of all the banks in the US have considerably increased from the previous few years. This signifies the creditable financial performance of the banks in the US (FDIC, 2015; Cornett et. al., 2014). The detailed aggregate deposits of all the banks in the US from 2011 to 2014 have been depicted in Appendix 2. The attractive financial performance of the banks in the US is also evident from the aggregate profit and loss statements. The determination of profit or loss of the banks in the nation largely suggests of their overall financial performance. The reason behind this is that alike every corporate organisation throughout the world, the financial performance of the banks is also measured through their attained profits or losses (FDIC, 2015). The attainment of profits and maximization of the same are the ultimate objectives of all the corporate organisations including the banks in the US. It is eminent from the data collected by FDIC (2015) that the net aggregate income attributable to all the banks in the US is found to be over 152 billion USD by the year ending 2014. This figure significantly suggests of the considerable success acquired by the banking sector in the US. Although, the data collected from the primary data revealed that the net aggregate income of the banks in the US has reduced from 2013 to 2014, considering 2011 as the base year, the net aggregate income of those banks have considerably increased (FDIC, 2015; Cornett et al., 2014). The detailed report of the aggregate profit or loss of the banks in the US has been represented in Appendix 3. It is important to note that another factor, which determines the financial performance of all the banks in the US, is the analysis of different ratios. In this regard, it is noted that the aggregate efficiency ratio of all the banks in the US in the year 2014 stood at 61.88% (FDIC, 2015). This signifies the commendable financial performance of all the banks in the US. Other ratios including Return on Assets (ROA) and Return on Equity (ROE) are also highly admirable. The ROI and ROE of all the banks in the US during the year 2014 were estimated as 1.01% and 9.03% respectively (FDIC, 2015). Thus, it is eminent that the financial performance of the banking sector in the US has been considerably admiring in the last few years (FDIC, 2015; Cornett et al., 2014). The detailed and aggregated ratios of all the banks in the US are depicted in Appendix 4. Political and Legal Limitations The banking sector in the US possesses considerable limitations that rose from the influence of certain political and legal factors. In this regard, the banking sector in the US has one of the major political and legal limitations, which considerably influences its performance. This is related to the power of the Central Bank of the nation, which is also known as the federal bank (Meade, n.d.). It is eminent that the political and the legal structure of the nation possess the authority to limit the power of the federal bank and the corresponding banks underlying the same. In other words, it is worth mentioning that the degree of independent decision and policy making by the federal bank is largely dependent on the legal and political frameworks of the nation (Cornett, 2014; Fohlin, 2000). However, it is noted that in the current day context, there lays a considerable power of federal bank to undertake independent decisions and policy making for the development of banking sector within the nation (Meade, n.d.). In relation to legal and political limitations in terms of social disclosure, the banking sector in the US could be associated with the ownership of the banks. Similar to the above stated context, the national legal and political structure also possess the authority to determine the owners of the banks up to certain extent. This structure determines the sale and purchase of the public sector banks in the nation (Meade, n.d.). Apart from this, it is also eminent that the political and the legal framework of the US also intervene in directing and specifying the responsibilities of the Federal Reserve Bank, which correspondingly influences the banking sector of the nation (Meade, n.d.). In addition, it is also eminent that the political and legal framework of the nation intervenes in placing the objectives of the Federal Reserve Bank up to a certain extent (Cornett, 2014; Fohlin, 2000). Correspondingly, it also intervenes in assigning the objectives of all the banks in the nation. This significantly influences the growth and the development of banking sector in the US (Meade, n.d.). It is worth mentioning that the US legal and political structure largely intervenes in controlling the banking sector of the nation. It interferes in the decision-making procedure of the Federal Reserve Bank of the nation, wherein it attempts to influence the decisions made regarding fixing rates in the banking sector (Fohlin, 2000). Such interferences are generally executed for providing benefits to the nation. The respective government of the nation tends to undertake legal support and interfere on such aspects of banking sector in order to align the banking sector policies with the other national regulations (Meade, n.d.). Although, in several instances, the intervention of the respective government through legal support has proved to be considerably effective for corresponding development of the banking sector of the nation, at some point of such instances, the intervenes drastically failed (Cornett, 2014; Fohlin, 2000). Thus, it is eminent that the banking sector in the US has considerable limitations from the perspective of legal, political as well as social disclosure. Read More