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7/27/2019 Banking Ops SZABIST Lec-1 Intro to Banking
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Banking Operations
Lecture 01 - Introduction to Banking
Banking Ops (SZABIST) - Lecture 01 (Muhammad Ali Jangda)
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We will Cover
What is a bank ?
Fractional Reserve Banking (Multiplier Effects)
Evolution of Banking
Modern Banking
Banking in Pakistan
Services offered
Banker-Customer Relationship
Accounts of Customers
Banking Instruments (Negotiable Instrument Act)
Career Opportunities in Banking and FinancialServices.
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What is a bank?
Banking
Oldest and most important industry
Largest business firms ever created
Which nation has the largest number of commercial banks?
Definition of Money
Measure of monetary aggregates (M0, M1, M2, M3 etc)
Composition of monetary aggregates in Pakistan
Role of Money (Medium of Exchange, Unit of Account, Storeof Value)
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What is bank? Continued ..
What is a bank?
Economic functions it serves
The Services it offers
Legal basis of its existence
Bank definition (1)Abank is any business offering deposits subject to withdrawal and
demand (such as by writing a cheque or making an electronic transfer)and making loans of a commercial or business nature (eg granting credit
to private business seeking to expand the inventory of goods on their
shelves or to purchase new equipment).
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What is bank? Continued ..
Bank definition (2)as defined in the BankingCompanies Ordinance 1962;(a) banking means the accepting, for the purpose of lending or
investment, of deposits of money from the public, repayable on demand
or otherwise, and withdrawable by cheque, draft, order or otherwise;
(b) banking company means any company which transacts the business
of banking in Pakistan and includes their branches and subsidiariesfunctioning outside Pakistan of banking companies incorporated in
Pakistan;
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The many different roles banks play in the economy:
Intermediation role
Payment role
Guarantor role
Risk management role
Savings role/investment advisor loan
Safekeeping /certification of value
Policy role
Role of the banks
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Top banks in the world 2013
Worldstop 10 banks:
Combined assets of over US$ 25.0 trillion
World GDP (current prices):$74.171 trillion
Top 10 banks assets are 34% of the total world
GDP Industrial and Commercial Bank of China (ICBC) is
the world's largest bank with assets of CNY18.743trillion (US$ 3.068 trillion)
- HSBC Holdings is the second largest financialinstitution in the world with assets of US$2.723
trillion
- Four of the top 11 banks are Chinese financial
institutions.
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Top Investment banks by Volume 2013
Refer to the file
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Pakistan Financial Industry Landscape as at
Dec 2012
BANKS PERFORMANCE AT A GLANCE Total assets of the sector grew from Rs. 8.3 trillion
in CY11 to Rs. 9.9 trillion in CY12 (increase of19.3%)
Profit before taxation increased by 6.7% in CY12over CY11
Investment grew by 32.1 percent while grossadvances by 12.2 percent in CY12
Lending to financial institutions decreased by Rs36.9 billion or 17.8 percent in CY12 over CY11
In case of Pakistani banks, the lending decreased by25.7 percent in CY12, however, in case of foreign
banks, it increased by 64 percent
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Pakistan Financial Industry Landscape as at
Dec 2012
BANKS PERFORMANCE AT A GLANCE
Banks advances increased to Rs 4.3 trillion in CY12showing an increase of 12.2 percent over CY11
NPLs increased to Rs 600.2 billion in CY12compared to Rs 573.1 billion in CY11
NPLs to advances ratio decreased to 13.9 percent inCY12 as compared to 14.9 percent in CY11.
NPL to total equity reduced from 73.9 percent inCY11 to 71.3 percent in CY12
NPLs provision to NPLs increased to 71 percent inCY12 from 70 percent in CY11.
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Pakistan Banking Landscape 2012
There is steady increase over 2008 to 2012 (from 22M to 36M)
CASA constitute a major junk of the total accounts
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Pakistan Banking Landscape 2012
There is steady growth in deposits (about 72% from 2008 to 2012)
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Fractional Reserve Banking
What is fractional reserve banking? (play the video) Reserve Ratio
Money Multiplier Effects
Reserve Requirements for Pakistani Banks
Prudential Measure Tool for Liquidity Management
Statutory Liquidity Reserve (SLR) is governed under Section 29of the BCO, 1962
It is being monitored at 20% of the Total Demand & Time
Liabilities of a Scheduled Bank This 20% is comprised of 5% on account of Cash Reserve
Requirement and 15% on account of Statutory LiquidityRequirement.
SLR and Interest Rate operating procedures
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Services Offered By the Banks
Historically
Currency Exchange
Lending Saving Deposits
Safe keeping of Valuables
Supporting Government Activities with Credit
Post Industrial Period (USA, Europe) offering Demand Deposits
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Services offered by the Banks
More Recently Granting Consumer loans
Financial Advising
Managing Cash (cash collection and disbursement for the clients,invest surplus in short term interest bearing assets)
Equipment Leasing
Making Venture Capital
Selling Insurance Services
Mutual Funds and Annuities
Merchant Banking Services
Convenience: The Sum Total of All Banking and Financial Services Specialized service delivery channels (ATM, call Centers, Internet
Banking)
Trend towards universal banking (banking, fiduciary, insurance,security brokerage under one roof)
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Banker-Customer Relationship
Definition of the term Customer and Banker Functions of the Banker
Special Nature of the Relationship
Rights, Secrecy, Confidentiality
Accounts of Customers Account Relationship Opening; Legal & Operational
aspects
Types of Accounts
Termination of Relationship etc
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Banking Instruments
Negotiable Instruments Act Types
Essential Elements
Parties to the Instrument
Payment of the Instrument Endorsements
Payments Methods (Bankers Cheques, Demand Drafts)
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Loan officer
Tellers
Customer Service Officers
Credit Analyst Branch Managers
System analyst
Auditing and control
personnel Compliance Officers
Relationship Officers /Managers (RMs)
Teller
Security Analyst and Trader
Marketing / SalesResources
Investment Bankingspecialist
HR Acquisition / TalentDevelopment Resources
Career opportunities in Banking