LESSON 8-11 (Bank Capital: Capital Adequacy/Evaluating Bank

Performance/Payments Systems/Classification of Crowd funding in the

Financial System)

TASK 1
1. I do agree with banking organizations needing good risk management, as for firms may be
performing appropriate risk management on a case-by-case basis in some circumstances,
but they might not be paying enough attention to exposure aggregation across the board.
organization. Rapid expansion can put a lot of strain on an organization's infrastructure,
among other things. Many of these difficulties can be met with the support of a good ERM
process. A dynamic and proactive compliance-risk management approach should be
implemented across the organization. When new business lines or activities are added,
current activities and processes are changed, or regulatory changes occur, it should
constantly monitor evolving risks. An assessment of how those changes may alter the level
and kind of risk exposures, as well as whether mitigation mechanisms are effective in
limiting exposures to targeted levels, should be part of the process. An organization must
constantly examine its risks and controls, as well as interact with all personnel involved in
the compliance process, to avoid having a program that runs on autopilot. If compliance is
viewed as a one-time job, a business may find itself in a scenario where its compliance
program has not kept pace with the organization's changes. Furthermore, the board of
directors must guarantee that the firm has a top-to-bottom compliance culture that is
clearly conveyed by senior management so that all employees are aware of their
compliance obligations.

REFERENCE: Bies, S. (2019, June 12). Perspective on Enterprise Risk Management.

https://www.bis.org/review/r060620g.pdf

TASK 2
1. In your own experience, can you narrate your first visit to the bank and rate your first-hand
experience. How do bankers handle their clients?
 I had to visit the bank with my Tita to open her account, I saw different counters so I
thought it would take us hours to get an account opened. In the account opening
counter, there was a form which needed to be filled up along with the signature of a
confidant and one’s identity proof. The other counter is the demand draft/cheques
counter where it remained less crowded. Customers of the bank visited this section to
get their demand drafts and cheques done. For each one of them, a separate form was
available which had to be filled and was to be submitted to the person sitting at the
counter along with the requisite amount of money mentioned in the form. Another is
withdrawal counter, where people come to encash cheques and withdraw money from
their accounts. The person sitting in this counter usually has a drawer or a suitcase
filled with case so that he can hand it over to the person who has rightfully claimed it.
This section remains negligibly crowded. Bankers showed a positive attitude and
answers queries in an understandable manner.
2. Are you familiar with crypto-currency? How is it operating and what are the thoughts of the
possible investors on digital currency?

 Crypto-currency, I think, it’s a form of payment that can be exchanged online for goods
and services. Many companies have issued their own currencies, often called tokens,
and these can be traded specifically for the good or service that the company provides.
Cryptocurrencies work using a technology called blockchain. Blockchain is a
decentralized technology spread across many computers that manages and records
transactions. Part of the appeal of this technology is its security. The thoughts of
possible investors may be is that investing in crypto assets is risky but also potentially
extremely profitable. Cryptocurrency is a good investment if they want to gain direct
exposure to the demand for digital currency, while a safer but potentially less lucrative
alternative is to buy the stocks of companies with exposure to cryptocurrency.

3. Difference of stock investments and crypto-currency.

 While stocks and cryptocurrencies are all types of investments, there are a few major
distinctions. For starters, stocks have been around for centuries, but cryptocurrency has
only been around for a few years. Bitcoin was founded in 2009, and the cryptocurrency
movement is still in its infancy. Stocks are also a different form of investment than
cryptocurrency. When you buy stock, you're making an investment in a company that
you think will continue to grow in the future. You can buy tokens of a certain currency
to use as a method of payment using cryptocurrencies, or you can simply hold on to
them in the hopes that their value will rise. Over the last two years, cryptocurrency has
been one of the hottest investments, and it shows no signs of slowing down.
Cryptocurrency, on the other hand, is the embodiment of a "boom or bust" asset class.
If proponents of Bitcoin and other cryptocurrencies are true, digital currency will
become commonplace around the world, propelling values to new all-time highs.
TASK 3
1. Research and present a sample copy of a Standby Letter of Credit issued by the banks and
explain how companies and other organizations used the said facility and its advantages.

The process of obtaining an SBLC is similar to a loan application process. The process starts when
the buyer applies for an SBLC at a commercial bank. The bank will perform its due diligence on
the buyer to assess its creditworthiness, based on past credit history and the most recent credit
report. If the buyer’s creditworthiness is in question, the bank may require the buyer to provide
an asset or the funds on deposit as collateral before approval. The level of collateral will depend
on the risk involved, the strength of the business, and the amount secured by the SBLC. The
buyer will also be required to furnish the bank with information about the seller, shipping
documents required for payment, the beneficiary’s bank, and the period when the SBLC is valid.
After review of the documentation, the commercial bank will provide an SBLC to the buyer. The
bank will charge a service fee of 1% to 10% for each year when the financial instrument remains
valid. If the buyer meets its obligations in the contract before the due date, the bank will
terminate the SBLC without a further charge to the buyer. If the buyer fails to meet the terms of
the contract due to various reasons, such as bankruptcy, cash flow crunch, dishonesty, etc., the
seller is required to present all the required documentation listed in the SBLC to the buyer’s bank
within a specified period, and the bank will make the payment due to the seller’s bank.