What is Banking?

Banking is an activity performed by a financial institution to serve as an intermediary between

you and other businesses during transactions.
Such transactions could be payment services, loans, savings, investments and others. A banking
system helps make business transactions smooth, easy and fast.

What is Bank Management?

To ensure a smooth running of the banking system, it must be properly managed. So banking
management takes care of all banking activities including risk management, planning and policy
formulation, profit monitoring and other relevant roles.
A bank management system ensures proper supervision of the processes of banking to maximize
profit.

Principles of bank management

There are four main parts of bank management. These are as follows-
1. Liquidity management:
Managing financial obligations through liquidity or cash money
2. Asset management:
Asset management relates to trying to obtain high-interest rates from borrowers and reducing the
risks of those loans.
3. Liability management:
Liability management is about trying to find cheap funds and use them as a loan.
4. Capital adequacy management
Capital adequacy management is maintaining a minimum level of capital adequacy in the bank.
Available capital should not be too little or too high.

The objective of bank management:

The main objective of bank management is to maximize the profit of the bank maintaining
proper management of liquidity, asset, liability and capital adequacy. For achieving this, banks
must strictly follow some standards and organized system.
Other objectives of bank management include
 To meet the challenges of the changing environment
 To improve customer service
 To introduce a new scheme
 To improve housekeeping
 To cope up with new technology for bank
 To modernize office equipment
 To train employees on a regular basis
 To improve work ethics
 To improve the overall health of the bank
 To improve organizational culture and value system
 To improve corporate social responsibility.
 To improve productivity through participative management
 To improve inspection and special audit
 To follow the instructions and stick to rules and guidelines
 To improve the human resources of the bank.
Functions of bank management:
Following are the major functions of bank management
 Deposit mobilization
 Financial management
 Project evaluation
 Credit management
 Credit planning
 Liquidity management
 Investment management
 Organizational management
 Marketing management
 Office management
 Maintenance management
 Information management
 Legal management
 Portfolio management
 Assets management

Importance of Bank Management

The following are the reasons bank management is important:

 It involves the regulation of service fees and charges
 It manages approval and disapproval of bank loan operations
 It manages bank reserve
 It supervises the recruitment of directors
 It controls the issuance of deposits
 It identifies a suitable location for bank operations
 It ensures capital adequacy
 
1. Regulation of service charges
One of the aspects of banking is the management ensuring that bank fees and charges across
boards are unified. It is also concerned with setting up reasonable market prices for banking
products and services. It is important that this regulation meets the demands of customers.
That way, the bank is able to track performance and monitor sales volume.

2. Approval and disapproval of loan request

In banking, part of the core responsibilities of the bank managers is to supervise the request
for the loan. They monitor the processing of loan requests. As loan operation is a crucial
matter in banking, it is important there is an adequate assessment of who is given loan and
for what purpose.

3. Bank reserve management

The reserves of any bank are their cash holdings, which majorly from the deposits held in the
bank accounts with the central bank. This also falls into one of the aspects of banking that is
duly managed.

4. Supervision of directors recruitment

Another significant aspect of banking management is the supervision of recruitment of the
directors. To ensure the smooth running of the bank, the hiring of the directors is an essential
process in the management system.

5. Controls Issuance of Deposits

One of the core functions of the banking sector is that it controls the issuance of deposits.

6. Suitable environment for bank operation

Among the many aspects of managing a bank is finding the best location for the branching.
In order to achieve this, the bank has to put several factors into consideration.
7. Capital Adequacy
Is a bank capital adequate? This is a revenant question especially when it is considering
serving your teeming customers seamlessly. Effective management of banking would include
a look into the capital adequacy.

Advantages and Disadvantages of the Banking System

As every aspect of human activity has its advantages and disadvantages, so does banking.
The following are the advantages and disadvantages of the banking system.
 Advantages of Banking System
The banking system helps to…
 Deposit money safely
 Get loans for investment and business growth
 Regulate cash flow in the economy
 Secure your assets
 Invest easily and safely
 Reduce unemployment
 Ensure community development through corporate social responsibility
 Curb financial irregularities and fraud with their sophisticated management system
 Enjoy easy access to financial transaction systems
 Encourage SMEs through loans and microfinance services
Disadvantages of Banking System
The banking system…
 Sometimes rips you off with excessive bank charges and service fees
 Charges high-interest rates
 Gives very tough conditions for loan requests, thereby crippling startups
 Sometimes engages in unhealthy competitions among bank branches which often affects
you the customer
 Is also prone to hacking and system failure
 Also gives a customer a lot of headache due to slow decision making
 Sometimes mandates customers to go to their office for the solution to transaction issues