MANAGING AND PRICING DEPOSITS

Key Terms
 Deposit pricing: Định giá tiền gửi
 Non-Interest bearing deposits: Tiền gửi ko hưởng lãi
 Core deposits: Tiền gửi cơ sở
 Insurance coverage: Khoản bảo hiểm tiền gửi
 FDIC: Federal Depository Insurance Corporation: Cơ quan bảo hiểm tiền
gửi liên bang
 Cost plus Profit Pricing: Định giá dựa trên chi phí và lợi nhuận kỳ vọng
 Historical Average Pricing: Định giá dựa trên chi phí TB quá khứ
 Market Penetration Pricing : Định giá xâm nhập thị trường
 Conditional Pricing: Định giá dựa trên điều kiện
 Upscale Target Pricing: Định giá mục tiêu cao cấp
 Relationship Pricing: Định giá dựa trên quan hệ khách hàng
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 Learning Objectives
 Topic 1: Managing Banks Deposits
 Type of bank deposits
 Typical deposit products (example)
 Core deposits
 FDIC insurance coverage
 Topic 2: Pricing Deposits
 Cost plus Profit Pricing
 Historical Average Pricing
 Market Penetration Pricing
 Conditional Pricing
 Upscale Target Pricing
 Relationship Pricing
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MANAGING BANK DEPOSITS

Type of Bank Deposits

 Checking deposits
 Saving deposits
 Related services/value
added products

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An Account Used Primarily to
Make Payments for
Purchases of Goods and
Services
▪ Noninterest-Bearing
Deposits (ATM)
▪ Interest-Bearing Deposits

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 An Account Whose Primary Purpose is to Encourage
the Bank Customer to Save Rather than Make
Payments
▪ Passbook Saving Account
▪ Certificate of Deposits

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 Value-added products are usually bundled with deposit products and offered
for a small charge or for free. Every bank has its own strategy for bundling
products and services.

Products Likely bundles

ATM/debit card Usually bundled with every checking and savings account

Automatic transfer Offered as a way to save automatically (by transferring money to a savings
account on a regular schedule) or to make loan payments automatically from a
checking account.
Computer banking Offered with checking accounts; may be bundled with a specific checking account
and bill paying

Credit card Usually bundled with a checking account; often linked to the checking account to
provide overdraft protection

Overdraft protection Checking account linked to a credit card or savings account to avoid bounced
checks. Service is specific to checking accounts.

Telephone transfers Typically offered to all bank clients to move money from one of their accounts to
another for no fee or a small fee. 10
 In the left column below are five deposit products; their corresponding features and
benefits are listed in the right column. Click once on a product in the left column, then click
once on the feature and benefit in the right column to make a match.

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Solution:

1. ATM checking: Convenient access to your money

2. Regular savings account: Flexible way to have money
available for unexpected expenses
3. Holiday account: Helps you make money for a specific
year-end purpose
4. Certificate of deposit: Helps you make money by providing
higher returns, which also helps you achieve long-term
goals faster
5. Premium checking: Saves money on check orders
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 A Stable Base of Funds that is Not
Highly Sensitive to Movements in
Market Interest Rates and Which Tend to
Remain with the Bank

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 Banks Insured Through Bank Insurance Fund (BIF)
 Savings and Loans Insured Through Savings Association Insurance Fund
(SAIF)
 Covers Only Those Deposits
Payable in the U.S.
 Many Types of Accounts are
Covered Up To $100,000 for Each
Account Holder within the Same
Bank (Even if Different
Branches)
 Deposits Placed in Separate
Institutions are Insured
Separately

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 Video: What is FDIC doing?
Discuss the role of FDIC

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PRICING BANK DEPOSITS

 Cost plus Profit Pricing

 Historical Average Pricing
 Market Penetration
Pricing
 Conditional Pricing
 Upscale Target Pricing
 Relationship Pricing

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 Estimating
Unit Price Operating Planned
Overhead
Charged the Expense Profit from
Expense
Customer = Per Unit of + + Each
Allocated to
for Each Deposit Service Unit
the Deposit
Service Service Sold
Function

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Determines the Bank’s Cost of Funds by
Looking at the Past. It Looks at What Funds
the Bank Has Raised to Date and What those
Funds Have Cost

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 The Method of Selling Deposits That
Usually Sets Low Prices and Fees Initially
to Encourage Customers to Open an
Account and Then Raises Prices and
Fees Later On.

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 Schedule of Fees were Low If Customer Stayed
Above Some Minimum Balance - Fees Conditional
On How the Account Was Used
 Conditional Pricing Based On One or More Of the
Following Factors
 The Number of Transactions Passing Through the Account
 The Average Balance Held in the Account During the
Period
 The Maturity of the Deposit

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Bank Aggressively Goes After High-
Balance, Low-Activity Accounts. Bank
Uses Carefully Designed Advertising to
Target Established Business Owners and
Managers and Other High Income
Households.

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 The Bank Prices Deposits According to
the Number of Services Purchased or
Used. The Customer May Be Granted
Lower Fees or Have Some Fees Waived
If Two or More Services are Used.

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 Lesson Wrap up
 Topic 1: Managing Banks Deposits
 Type of bank deposits
 Typical deposit products (example)
 Core deposits
 FDIC insurance coverage
 Topic 2: Pricing Deposits
 Cost plus Profit Pricing
 Historical Average Pricing
 Market Penetration Pricing
 Conditional Pricing
 Upscale Target Pricing
 Relationship Pricing
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