INTRODUCTION TO BANK

OPERATION

AFT 05107

BANK’S ACTIVITES AND SERVICE

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 LECTURE OUTLINE
Explain the business offered by bank(cash management, status enquiries
and factoring
Explain the investment service offered by bank(investment advice and
investment management
Explain executor and trustee service offered by a bank

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INTRODUCTION
A bank is a financial institution and financial intermediary that accepts deposits
and channels those deposits into lending activities, either directly by loaning or
indirectly through capital markets
As the nature of the banking business, it reviews the main services offered by
banks (loans and deposits, and payment services) as well as a wide range of
additional services, such as insurance and investment services

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 Business offered by Banks
A bank is a business. Banks sell their services to earn money, and they market
and manage those services in a competitive field. In many ways, banks are like
other that must earn a profit to survive. Understanding this fundamental idea
helps explain how banks work, and helps you understand many modern trends in
banking and finance
Banks provide a multitude of financial services of many types beyond the
traditional practices of holding deposits and lending money

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Business offered by banks
The following are business offered by the banks
Cash management
Status enquiries
Investment advice
Investment management
Factoring
Bancassurance

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 Cash management
In a banking institution, the term cash management refers to the day-to-day
administration of managing cash inflows and outflows. Because of the multitude
of cash transactions on a daily basis, they must be managed
The ultimate goal of cash management is to maximize liquidity and minimize
the cost of funds

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 Status enquiries
A status enquiry ( also known as a banker’s reference) gives third parties an
indication of a person’s or business finance from their bank
A request made to a bank asking whether a customer is likely to be able to pay
back a loan or pay for something bought on credit
A status enquiry request could be made for any number of reasons. Common
request are credits arrangement for the customers or an account inquiry as this is
a review of the past records, payments, and other specific transaction, or to any
other entries relating to the account.

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 Investment advices
Beyond the traditional baking services of accepting deposits from the public
and provision of loans banks also provides the investment advice on property,
managed funds and other areas of investment to make sure you get the best return

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 Investment management
Investment management is all about investment decisions and asset allocation.
This means the banks coming up with investment strategies and directing funds
to property, equities or debt securities on behalf of clients
Investment managers perform financial analysis, portfolio allocation between
bonds and stocks, equity research, and issue buy and sell recommendations
Investment bankers help with corporate finance needs, such as raising funds or
capital. Companies and government hire investment bankers to facilitate mergers
and acquisitions

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 Factoring
Factoring is a transaction between a business and a third-party (the factor) which
provides quick cash flow in exchange for accounts receivable and or other assets.
Usually, a business sells goods and services to its customers either in cash or credit.
In the case of credit, the company sends an invoice to customers, which is typically
paid back to the business as per credit terms.
Instead of waiting for the customer to make a payment on due dates (duration of
credit terms), a business can sell its account receivable at a discount from their face
value (invoice value) to the specialized company known as “factor” and receive cash
immediately

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 Bancassurance
Bancassurance is a relationship between a bank and insurance company that is
aimed at offering insurance products or insurance benefits to the bank’s
customers.
Bancassurance refers to banks acting as corporate agents for insurers to
distribute insurance products
Its is an arrangement between a bank an insurance company allowing the
insurance company to sell its products to the bank’s client base and by doing this
both companies earn a profit

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Executor and Trustee
Besides performing the main functions that are accepting deposits and lending
money, modern commercial banks cover a wide range of financial and non-
financial services to the customers and the general public. Modern commercial
banks act as Agent, Trustees, Executor, and Administrators for their customers.
The services are as follows:
Agency services
Banker as a trustee
Banker as an executor
Baker as administrator

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Banker as a trustee
A person may desire that a part or whole of his property be held in a trust to
benefit various beneficiaries named in the will after his death.
In such a case, he may create a trust under his will, directing a certain person to
hold the property to such persons after a specified time. When the bankers take
the liability to administrate this property type, they will be called the trustee.

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Banker as an Executor
A person may make will expressing his intention regarding the disposal of his
property after his death. A will has to be in writing, signed by the person making
the will, trusted and attested by two witnesses.
A will become effective only after the court approves it as a private. A private
copy of the will is dully certified under the court’s seal together with a grant
administrator.
The person appointed as administrator of the deceased is known as the executor,
and the bank may appoint as an executor for such services
Class Activity
Explain when the bank act as the agent of his customer what are the functions performing

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 Various Banking Services
Advancing of loans
Overdraft
Cash management
Foreign Currency Exchange
Bank Guarantee
Credit cards
ATMs Services
Online banking
Mobile banking
Remittance of Funds

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Various Banking Services in Detail…
Advancing loans: after keeping certain cash reserves, banks provide short term,
medium-term and long-term loans to needy borrowers
Overdraft: sometimes, the bank provides overdraft facilities to its customers
through which they are allowed to withdraw more than their deposits
Foreign currency exchange: banks deal with foreign currencies. As the
requirement of customers, banks exchange foreign currencies with local
currencies, which is essential to settle down the dues in the international trade

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Banking services (continued)
Consultancy: in this function, banks hire financial, legal and market experts
who provide advice to customers regarding investment, industry, trade, income,
tax etc
Remittance of Funds: Banks help their customers in transferring funds from one
place to another through cheques, drafts, etc
Credit Cards: a credit card is cards that allow their holders to make purchases of
goods and services in exchange for the credit card’s provider immediately paying
for the goods or services, and the cardholder promising to pay back the amount
of the purchase to the card provider over a period of time, and with interest

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Banking Services (continued)
ATM Services: ATM replace human bank tellers in performing banking
functions such as deposits, account inquires
Debit Cards: debit cards are used to electronically withdraw funds directly from
the cardholders accounts. Most debit cards require a personal identification
number (PIN) to be used to verify the transaction
Online Banking: online banking is a service offered by banks that allow account
holders to access their account data via the internet. Online banking is also
known as “ internet banking” or “Web banking”

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 Q&A

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