FIN – 4733 ADVANCED BANK

MANAGEMENT

STANFORD BANK GAME

BANK MANAGEMENT SIMULATION

SIMULATION DESCRIPTION

• WORK IN “MANAGEMENT” TEAMS OF 4 – 5 PEOPLE

• REVIEW AND EVALUATE MACROECONOMIC AND COMPETITIVE CONDITIONS, AS WELL AS BANK FINANCIAL POSITION

• PROVIDE DECISION INPUTS• PREPARE A TERM REPORT AND GIVE AN

ORAL PRESENTATION OF RESULTS

TEAM ORGANIZATION

S B G B A N K M A N A G E M E N T TE A M

V IC E P R E S ID E N T O F O P E R A TIO N S(C H IE F O P E R A TIN G O F F IC E R )

V IC E P R E S ID E N T O F L E N D IN G(C H IE F C R E D IT O F F IC E R )

V IC E P R E S ID E N T O F IN V E S TM E N TS(C H IE F IN V E S TM E N T O F F IC E R )

P R E S ID E N T A N D C E O

PRESIDENT AND CEODuties: To determine general bank objectives;

develop, integrate, and implement business strategy designed to achieve bank objectives; monitor overall profitability of bank; monitor bank stock price movement; and coordinate and control all activities of the senior management team

Additional Duties (Economist): To monitor the financial, competitive, and economic environment surrounding the bank; forecast financial trends in the banking environment; assess competitive threats and opportunities within this environment; complete decision forms on a timely basis; and maintain bank records concerning group decisions

PRESIDENT AND CEOMAJOR SBG RESPONSIBILITIES:Balance Sheet Page 1Income Statement Page 1Dividend Policy Page 1Common Stock Price Page 1Forecasting Interest Rate Changes Page 7Forecasting Economic Conditions Page 7Forecasting Funds Availability Page 7Monitoring Other Banks’ Position Pages 8,9Evaluating Other Banks’ ratios Page 6

PRESIDENT AND CEO

Duties: To determine general bank objectives; develop, integrate, and implement business strategy designed to achieve bank objectives; monitor overall profitability of bank; monitor bank stock price movement; and coordinate and control all activities of the senior management team

PRESIDENT AND CEO

MAJOR SBG RESPONSIBILITIES:

Balance Sheet Page 1;

Income Statement Page 1;

Dividend Policy Page 1;

Common Stock Price Page 1.

VICE PRESIDENT OF OPERATIONS

Duties: To manage all aspects of the bank’s deposit acquisition activity, supervise personnel administration, and control bank expansion/contraction activity

VICE PRESIDENT OF OPERATIONS

MAJOR SBG RESPONSIBILITIES:Monitoring Demand Deposit Acquisition

Pages 2.2, 2.9, and 7Monitoring Time Deposit Acquisition Pages

2.3, 2.8, and 7Forecasting CD Availability

Pages 2.10, and 7Monitoring Required Reserve Position Pages 2.4

and 7Monitoring Personnel Expenses Page 3.19Managing Bank Expansion/contraction Page 3.20

VICE PRESIDENT OF LENDING

Duties: To manage all aspects of the bank’s loan portfolio, including commercial loans, commercial loan commitments, and commercial letters of credit, consumer installment loans, credit card receivables, and mortgage loans

VICE PRESIDENT OF LENDING

MAJOR SBG RESPONSIBILITIES:

Forecasting New Loan Sales Page 2.7

Monitoring Loan Charge-offs Pages 2.7, 2.11

Monitoring Loan Loss ProvisionPage 2.7

Establishing Credit Policy Page 2.7

Determining Loan Interest RatesPages 2.7, 7

Determining Loan Fees Page 2.8

Determining LOC Policy and Fees Pages 3.16, 3.18, 3.19

Monitoring Loan Commitments Pages 3.17, 3.18

VICE PRESIDENT OF LENDING

MAJOR SBG RESPONSIBILTIES (CONTINUED):

Forecasting Commercial Loan Payments Page 4.21

Determining Credit Card Fees Page 3.14

Determining Credit Card Processing Fees Page 3.19

Determining Mortgage Loan Servicing Fees Page 3.18

Determining Mortgage Loan Initiation Fees Page 3.18

Forecasting Consumer Loan Payments Page 4.22

Forecasting Mortgage Loan Payments Page 4.22

VICE PRESIDENT OF INVESTMENTS

Duties: To manage the bank’s investment portfolio, recommend and implement gap management strategy, monitor the bank’s exposure to economic risk and implement appropriate hedging strategies to minimize this risk in the futures market, recommend and implement changes in bank capital structure, supervise trust and accounting activities, and administer corporate banking services

VICE PRESIDENT OF INVESTMENTS

MAJOR SBG RESPONSIBILITIES:Monitoring Bank Cash Management Activities Page 2.5Monitoring Bank Securities Portfolio Page 6Establishing optimal gap risk factor Page 5Monitoring and Hedging Interest Rate Risk Page 1Controlling Purchase and Sale of Federal Funds

Pages 2.8, 7Controlling Discount Window Borrowing Page 2.8Issuing Capital Notes

Pages 2.6, 7Issuing New Common Stock Page 10Maintaining Trust Portfolio Page 3.12Controlling Trust Income and Expenses

Pages 3.18, 3.19

WRITTEN AND/OR ORAL ASSIGNMENTS

• NAMING THE BANK• ESTABLISHING A CORPORATE

STRATEGY FOR THE BANK• ESTABLISHING FINANCIAL

PERFORMANCE OBJECTIVES FOR THE BANK

• QUARTERLY OPERATING DECISIONS• FINAL (TERM) REPORT

ELEMENTS OF THE FINAL (TERM) REPORT

• OUTLINE OF THE BASIC CORPORATE STRATEGY• EXPLANATION OF HOW THE STRATEGY WAS

IMPLEMENTED AT EACH ITERATION (QUARTER)• IDENTIFICATION OF HOW UNANTICIPATED

CHANGES IN THE MACROECONOMY AND COMPETITION LED TO ADJUSTMENTS, MODIFICATIONS, AND OUTRIGHT CHANGES IN OPERATING TACTICS

• EVALUATION OF THE FINANCIAL PERFORMANCE AND CONDITION OF THE BANK AT THE END OF EACH ITERATION (QUARTER)

• SUMMARY EVALUATION OF THE FINANCIAL PERFORMANCE OVER THE ENTIRE PERIOD