Suritis and rkts - Case Study Example

Inтrоduстоry Sесuriтiеs and Маrkетs Name: Course: Instructor: Date: The present crisis with its continuing banking sector complications has brought to the open various cases of financial scam and banking scandals which have additionally destabilized the already flopping sector (Zopounidis 2013, p.15). The issue has raised a lot of concerns on the structural flaws in the manner banks are run, regulated and supervised. Restoration of investor confidence has proved a major hill and brought the need to bring new tactics to redesign the rules and regulations for the sector. The banks have faced major drawbacks from the dishonest dealings and the financial crisis that has hit the European markets. Towards the beginning of the 21st century, several salient changes and radical transformation have been witnessed in the banking sector globally. These advances are mostly due to the change in focus in trying to clean up the face of the banks and win back the investors trust. Besides, the advances also tend to curb tremendous changes in the customers’ needs and the rising competition in the economies from both the private and public banking institutions (CERBAF 2015, p.56). Changes since 2008 The developments have been social, technological and even structural. Some regulations have also emerged that makes the current banking sector one of the most competitive and growing sectors in the world. i. Technological advancement. Modern technologies have enabled banks advance in many dimensions, Banks have tried to embrace the new innovations to help them cut their costs, advance in their security and even beat other market players (Dutta 2011, p.19). Since 2008, several changes have been noted; a. Cash Deposit Machines (CDMs) This machine is one of the latest developments in the banking industry. It is a machine that allows a customer to make deposit at the machine using ATM cards cum debit cards. It is a development of the card technology. This has highly reduced the frauds committed by the tellers when deposits are made over the counters. b. E-Trade SBI. Launched in 2011,this is a web based portal that assist the banks to check the different interest rates of other banks.it assist the customers to make easier financial decisions on where and how to save by use of internet. This method facilitates online analysis of the competitive edge thus giving a room for action promptly. c. Application of artificial neural network in banking. ANN is nonlinear models that are trained to extract hidden structures and relationships. In banks, credit risks can be reduced through the application of this model. This model tries to approximate the chances of loan repayment and this in return assist the bank to evaluate whether to advance the loan or not. Lot of emphasis has been put on the level of trust on the ANN but it has only been 34% reliable from the studies. d. Installation of solar ATMs. These are special ATMs that use solar power to run. It is a development that cuts the electricity cost and utilizes the solar energy. ii. Regulatory and structural changes. More stringent regulatory norms on finance have been imposed by the new regulatory changes. Regulations such as European Market Infrastructure Regulation (EMIR) and European Banking Authority (EBA) Governance Guidelines have made a step in shaping and reducing on the structure and clearing of derivatives. iii. Vertical integration. Vertical integration have attempted to align and shape the organization structure of banks in Europe. Through outsourcing, banks have improved their vertical integration and this in return has shown superior financial performance. Standardization of complex interfaces has brought about standard and homogenous results and this in turn has resulted in creation of superior products to the consumers (Demetriades and Luintel 2009, p.31). iv. Structural alignment. Several banks have realigned their structure through downsizing and reduction in staff volume. This is through an attempt to adjust their business model. Some of the business models applied by the banks such as renationalization of assets have shown negative results more so in the European periphery. This event could be reduced by a European Banking Union that would also aid break the negative link between banks and sovereigns. Some structural changes are like; Branch makeovers: Old bank branches are reducing in size, relocating to more strategic areas, and are embracing other channels such as online services ATMs and other technologies handle more transactional activities within and outside the bank.  Expanding skill sets: The modern bank tellers are lengthening their skill sets to concurrently provide multiple services. Traditionally, they exclusively focused on serving customers. Bank representatives are becoming multi-tuskers and use customer-facing technology to sell products and services. They are also well equipped with the analysis skills in order to assist the customers even at the counters. This has revolutionized the way in which customer handling is done as they don’t move from one individual to another since the teller can as well be a financial advisor. Increasing mobile app activity: Mobile banking has revolutionized banking activities and changed the sector image. It has created a competitive edge and many banks have invested heavily in a bid to satisfy their customers’ needs. Only now, mobile apps are giving customers more options to do more things from their smartphones and other mobile devices (Todri 2013, p.42). Adding security layers: Currently, most banks are at risk of errors and fraud. It's the emerging norm. But having more multiple security layers such as device reputation technology  that protect customers and banking assets can help institutions to manage and lower that risk. Adapting to the fast changing consumer trends is very important for all banks to keep their customers satisfied, remain more competitive, and always stay at the cutting edge of banking sector. When it comes to expansion stages, the industry is fundamentally a moving target. While it may not be fully clear on how much banks need to invest in technology, keeping up with consumer banking trends and online conduct is one way today’s banking institutions can mitigate their risks while moving their business forward and achieving their goals. Effects of Changes to The Future With the current developments and technological advances, the changes will have different effects on both the customers and the players. The changes may be both positive and negative. Some of the changes may include; The rise of state directed capitalism This is a scenario where the banks will be at the government control and major legislation will be created by the government. It will be solely upon the CEOs to facilitate their play and to ensure that their institutions are competitive. State directed capitalism gives the consumers a large range of protection on their deposits (Kensinger 2011, p.39). The traditional financial institutions were more of the controllers and they set and overseen the laws regarding banking. With the tarnished image of banks due to frauds and constant errors, the government will step in to control most European banks. The government will bring regulations to shape the industry and bring up different models of control. Technology will change everything. As a potent enabler of increased service, technology will change everything and it will be a basis of competition. All transactions from savings to deposits and to financial advices will be digitalized. Even though this will be advantageous to both the customers and the bank, several loopholes will arise and this will lead to losses from fraudster and dishonest bank attendants. Internet hackers will also find a way of interfering with the bank online processes and may also lead to massive loss of funds. Technology will reduce the costs of services by the banks and hence the profit margins will increase. Demographic changes This will occurs when the banks changes their priorities and development focus. Strategic alignment will play a major role in establishment of banks as they will be looking forward to locate in areas with potential customer. The institutions will also try to analyze fully on where to locate their sub-branches. The positioning should be where potential customers are clustered. Social and behavioral change Due to rising customer expectations and the speed of need to regain public trust, the banks and other financial institutions will attempt to improve on their social aspects in relation to customers. Customer handling will tend to be friendlier and ethical conducts will form the center stage of banking institutions. There will be need to obtain, integrate and examine multiple sources of both internal and external data about their customers. They will also need to understand their customers’ needs, and have relevant solution at the right time of need. Developing of customer-centric business model These are models that will focus mostly on the ways which the customers’ needs can be addressed. The models will be of great importance to both the management and the consumers. Several improvements and revision will be done to ensure that the models give the bank a desirable image. The model should enable the employees to express their innovation and give them the capabilities to foster it (Avgouleas 2009, p.64). Objectives of the Shareholders. The owners of financial banks have several expectations in relation to their money. Traditionally, the shareholders were mainly concerned with the annual returns from the dividends declared. But with the emerging investment trends and changes that are shaping the global forum, their goals are restructuring to more of long term than the short term. As discussed in this paper, the changes in the banks are long term strategies and hence the shareholders objectives. The objectives include; Wealth maximization-This allows for the appreciation of the original investment and even if the dividends may be low, the share value is substantial. Clear representation-CEOs and the management are agents of the shareholders and the duty to clearly and honestly represent the shareholders are bestowed upon them by law. The shareholders therefore expect honest dealings from them. Higher return on investment-The shareholders expect higher dividend declarations from both the interim dividends and the final. This has been the major objective of the business owners. Conclusion The banking sector has been the most evolving sector in the European economies. This has been due to the steady fight to regain their lost reputation. While doing this, major shareholders goals are achieved. The banks focus on reduction of costs and this in turn lead to higher profits which later translate to higher dividends. The ethical values of both the managements and their employees are improving and this show clear representation of the shareholders by their agents. Finally, the heavy investment in technology and innovation will lead to future profits and value hence there will be wealth maximization by the managers. In order to fully achieve this, the management should adapt to regulatory changes as fast as possible and comply with the legislation to be at pace with the standards laid down by government and as expected by the shareholders. The banks should also be organized and demonstrate security, dependability, integrity and quality of their service offerings as this will help to regain the lost trust with all their stakeholders. Innovation should be a major focus by the management. They should invest heavily on innovation to enable future returns to the shareholders. REFERENCES Avgouleas, E. (2009). The Global Financial Crisis and the Disclosure Paradigm in European Financial Regulation: The Case for Reform. European Company and Financial Law Review, 6(4). Banking Sector. (2010). European Economic Trends, 8(4), pp.94-96 CERBAF, (2015). Financial market trends no. 29, special feature on ‘Banking and monetary policy’. Journal of Banking & Finance, 9(3), p.463. Demetriades, P. and Luintel, K. (2009). BANKING SECTOR POLICIES AND FINANCIAL DEVELOPMENT IN NEPAL. Oxford Bulletin of Economics Dutta, V. (2003). Banking Revisited: Key Trends Reshaping Banking in India. Paradigm, 7(1), pp.103-108.and Statistics, 58(2), pp.355-372. Dutta, V. (2011). Banking Revisited: Key Trends Reshaping Banking in India. Paradigm, 7(1), pp.103-108. etrini, C. (2012). Ethical issues in umbilical cord blood banking: a comparative analysis of documents from national and international institutions. Transfusion, 53(4), pp.902-910. Kensinger, J. (2011). Research in finance. Bingley, U.K.: Emerald. Todri, A. (2013). The Unforeseen Ethical Issues and Respective Consequences in Lending Process: Albanian Banking System Case. MJSS. Zopounidis, C. (2013). New trends in banking management. New York: Physica-Verlag. Read More