Banker Institutions - Essay Example

30-10-2006 Banker s Banking industry s are the most important tools in the development of economy and financial system inany country. Countries financial system is a facilitative setup like any other infrastructure. It is comprised of financial institutions like Banks, insurance agencies, financial development institutions, financial instruments like deposits, bonds, shares etc. and financial markets i.e. money and capital market. The essence of the financial system is to cater the needs of lenders and borrowers. The whole financial system lies in its role as an intermediary between those who have surpluses to lend and those who wants to borrow. Banker institutions play as an intermediary. It provides different types of financial services to both. Banker institutions contribute enormously and significantly in the expansion of economy of any country and development. It facilitates trade, savings and investment. These institutions work as intermediaries and with the help of several instrument and products for different segments of the population and facilitate their customers to grow all-round. The financial market consists of money market and capital market. The former consists of buying/selling of lending/borrowing instruments whereas the later concerns with share, equity etc. Human being is often called as social animal. As the society progresses needs of human being increased leaps and bounds. The earliest financial system comes into knowledge is the' Barter system' in which goods were exchanged. Later on when money comes into existence some sort of informal banking comes into the society. Banking history holds evidences way back to Babylonian civilization. Greeks hold further evidences of banking. Romans later on perfected the administrative aspect of banking and saw greater regulation of financial institutions. Modern economic and financial history is usually traced back to coffee houses of London. The London royal exchange was established in 1565. Banking offices were usually located near centers of trade and in the late 17th century the largest centers for commerce and trade were the ports of Amsterdam, London and Hamburg. By the early 1900s New York was beginning to emerge as a world financial center. Companies and individuals acquired large investments in (other) companies in the US and Europe, resulting in the first true market integration. This comparatively high level of market integration proved especially beneficial when World War I came-both sides in the conflict sought funds from the United States, by issuing new securities and selling existing holdings, though the Allied Powers raised by far the larger amounts. Being a lender to the world resulted in the largest growth of a financial economy to that point. Banks during the 1920s were with either the crash or the subsequent depression of the 1930s. Nonetheless, there were three prominent results from these events that had great effect on American banking. The first was the passage of the Banking Act of 1933 that provided for the Federal Deposit Insurance system and the Glass-Steagall provisions that completely separated commercial banking and securities activities. Second was the depression itself, which led in the end to World War II and a 30-year period in which banking was confined to basic, slow-growing deposit taking and loan making within a limited local market only. And third was the rising importance of the government in deciding financial matters, especially during the post-war recovery period. As a consequence, there was comparatively little for banks or securities firms to do from the early 1930s until the early 1960s. In the 1970s, a number of smaller crashes tied to the policies put in place following the depression, resulted in deregulation and privatization of government-owned enterprises in the 1980s, indicating that governments of industrial countries around the world found private-sector solutions to problems of economic growth and development preferable to state-operated, semi socialist programs. This spurred a trend that was already prevalent in the business sector, large companies becoming global and dealing with customers, suppliers, manufacturing, and information centers all over the world (Rothbard, Richardson & Snyder,1983). Global banking and capital market services proliferated during the 1980s and 1990s as a result of a great increase in demand from companies, governments, and financial institutions, but also because financial market conditions were buoyant and, on the whole, bullish. Interest rates in the United States declined from about 15% for two-year U.S. Treasury notes to about 5% during the 20-year period, and financial assets grew then at a rate approximately twice the rate of the world economy. Such growth rate would have been lower, in the last twenty years, were not it for the profound effects the internationalization of financial markets had on the U.S. Foreign investments, particularly from Japan, not only provided the funds to corporations in the U.S., but also helped finance the federal government; thus, transforming the U.S. stock market by far into the largest in the world. In the last four decades impressive expansion in the financial sector has been seen worldwide. Banks and banker institutions were the most important components of financial sector witnessed phenomenal growth as well as change. Geographical spread of the banker institutions could be easily felt. Worldwide assets of the largest 1000 banks grew 15.5% in 2005 to reach record $ 60.5 trillion. This follows a 19.3% increase in the previous year. EU banks held the largest share, 50% at the end of 2005. The share of US banks rose from 10% to 14%. The US has had by far the most banks (7,540 at the end of 2005) and 75000 branches. The large number of banks in the US as an indicator of its geographical diversity and regulatory structure resulting in large number of small to medium sized institutions in the banking system. Japan had 129 banks and 12000 branches in 2004 and Germany, France and Italy have more than 30000 branches each, which is more than double the U.K. The phenomenal increase in financial sector poses lots of challenges to the banker institutions. In the last two decades of the 20th century, the Financial Services Industry underwent significant change. Retail banks transformed themselves from transaction oriented deposit taking and lending institutions into deliverers of retail financial services. At the same time, additional complexity was introduced into the less retail forms of banking. New investment products developed. International finance became more complex. Derivatives became available to hedge risk, or in some cases to amplify risk. The distinctions between retail banks, investment banks, building societies, insurance companies and other financial services institutions became blurred. Institutions complimented their own services with additional ranges of services offered by other institutions. It became possible to satisfy all needs for financial services through one financial institution. Customers can bank at home, at their nearest ATM or, of all places, at a bank. They can choose from a list of products and services so extensive as to be confusing. Banks have become much more competitive and price-conscious. The technology has improved, making banking more convenient. Banking is like the car business: we all have the same products; it's the "value-added" that distinguishes one from the next. They are very focused on what our customers need, want and desire. Banking system in line with the kinds of corporate governance and transparency common to much of the industrialized world, In order to stimulate economic growth, we need a strong, aggressive banking system (Rothbard,2002). We need professionals who have requisite training and adaptability to change fast. Banker institutions around the world are basically training the persons according to the needs of the market. They are basically emphasize on the following area: 1) Legal and regulatory issues: focusing on "how" to make it happen vs." why" we can't, 2) Organizational structure: aligning the company's infrastructure to support meeting customer needs, 3) Performance measures: redefining them to support revised business models focused on relationship management, 4) Capturing customer information from banking, investment and insurance product groups: you can't effectively cross sell if you don't know what your customers already have and what they need, 5) Solving the sales versus service arguments: understanding how they can be integrated, and 6) Skill set development: integrating sales, marketing, financial planning and customer service. Most institutions have only begun to understand the amount of change that is required to shift the paradigm and become true relationship managers. For banks in particular, the last 5-10 years have been fraught with increased competition from all arenas. Most bankers understand the importance of continuing education. In-house training efforts, banking schools, programs offered through trade associations and consultants offer bankers array of training options. New regulations, new technology end new competition guarantees the need for lifelong learning. If a bank chooses to neglect training, it can say goodbye to customers and its best employees. Banks should be providing some training to improve people's knowledge and the industry needs to attract people who want to learn. Besides knowledge training, bankers must learn the ropes on the skills side. Most financial institutions have difficulty addressing this aspect, which includes sales, customer service and management skills, leading, managing, living the company's core values and mission, relating effectively with others, and knowing the financial services and banking business. Banks have to learn to create a learning environment. That learning environment comes when banks provide the tools and programs to ensure their employees keep ahead of the learning curve. Banker institutions provide education -skills and knowledge. For knowledge, financial institutions turn to a number of sources such as banking schools to get their employees better versed in the industry. But the learning process shouldn't be placed entirely on the bank's shoulders. An employee must strive to learn more about his or her job, and then some. The most important bankers institution, which provide banking industry the required skilled manpower in UK is The Chartered Institute of Bankers (CIB) which was founded in 1879, as the professional body for members of the banking profession in the United Kingdom. It was granted its royal charter in 1988. In 2000 it rebranded itself as the Institute of Financial Services, reflecting the changing needs for professionalism across a wide range of financial services. The CIB was, and continues to be, an important aid to the professionalism of bankers. After studying a series of Banking related topics and passing exams, and after working for a minimum period within the Banking Industry, it is possible to be elected to an Associate of the Chartered Institute of Bankers. The letters ACIB continue to demonstrate to others the experience and academic standards of the designee. The CIB needed to respond to changes in the industry. In 1986, its professional exams were linked to and moderated by UMIST. Any student passing the exams required to attain ACIB status is now awarded a BSc. (Hons.) in financial services, underscoring the academic standards achieved by professional bankers. Today the CIB provides courses leading to qualifications in all areas of the financial services industry, and it has a vision to be a school of finance that is recognized for the excellence and relevance of its range of qualifications. In addition to providing education, the CIB also organizes regionally based events to enable members to both network and keep abreast of developments within their fields of interest. One of the important bankers institute in US is The Institute of International Bankers represents internationally headquartered banking/financial institutions from over 30 countries that engage in banking, securities, insurance and other financial activities in the United States. Founded in 1966, the Institute is the only national association devoted exclusively to representing and advancing the interests of the international banking community in the United States. Its membership is comprised of approximately 150 banking organizations that have their headquarters in 50 other countries around the world. Collectively, the U.S. branches, agencies, banking subsidiaries, securities affiliates and other operations of the Institute's member banks are an important source of credit for U.S. borrowers and enhance the depth and liquidity of U.S. financial markets. Institute member banks also inject billions of dollars each year into the economies of major cities across the country through the direct employment of over 100,000 U.S. citizens and permanent residents, as well as through other operating and capital expenditures. The Institute's mission is to ensure that federal and state banking laws and regulations provide international banks operating in the United States with the same competitive opportunities as domestic banking organizations. The Institute also serves as a source of information to policy makers, the media and other interested parties on international banking issues, provides a forum for the discussion of those issues, and contributes to a better understanding of the benefits of a free global financial marketplace through its studies, white papers and other publications. Growing internationalization and opportunity in financial services has entirely changed the competitive landscape, as now many banks have demonstrated a preference for the "universal banking" model, so prevalent in Europe. Universal banks are free to engage in all forms of financial services, make investments in client companies, and function as much as possible as a "one-stop" supplier of both retail and wholesale financial services. So it can be clearly evident that banker institutions play an important role in providing trained manpower, research and development, providing input to government in framing policy regarding banking and financial services, providing a common forum to all banking organizations, uniform and proper competitive environment and publishing the relevant policy and research documents and books etc. ********************************************************************* References: 1. http://www.wikipedia.org accessed on 28-10-06. 2. http://www.iib.org accessed on 29-10-06. 3. Rothbard, M. N. ( 2002 ), A History of Money and Banking in the United States: The colonial era to Worldwar II, Ludwig von Mises Institute, Alabama. 4. http://www.bb.com.br accessed on 28-10-06. 5. Rothbard M. N., Richardson & Snyder ( 1983). The Mystery of Banking. *************************************************************** Read More