BK10 - MANA130107 Bank Management 1 Lecture Ten Liability

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Unformatted text preview: MANA130107 Bank Management 1 Lecture Ten Liability Management—Nondeposit Liabilities (chap 13 ) Topics in Commercial Bank Management MANA130107 Bank Management 2 Liability Management--Nondeposit ¡ Topics covered in this lecture ¢ Customer Relationship Doctrine ¢ Nondeposit Fund Sources ¢ Funding Decision Making MANA130107 Bank Management 3 Conditional Pricing ¡ Schedule widely used in competing for transaction deposits ¢ Fees conditional on how the account was used ¢ Fees are low or waived IF balance above Minimum level ¢ Fees are high IF balance fall below the Minimum level ¡ Normal constrain factors used ¢ Number of transactions passing through the account ¢ Average balance in the account during the Period ¢ Maturity of the deposit ¡ Customers choose … ¢ Lowest fee and/or highest yield, given normal use of account MANA130107 Bank Management 4 Conditional Pricing ¡ For check account ¢ Flat-rate pricing- Fixed price for each transactions ¢ Free pricing- NO maintenance fee and per transaction charge- Lower yield as implicit opportunity cost- Not profitable, attracting small and active deposits ¢ Conditionally free pricing- Favors large deposits given minimum balance- Attract large and less active deposits ¡ Customers choose favorable plan ¢ Self-selection as market signaling MANA130107 Bank Management 5 Some specific idea ¡ Where and who are A and B ’ s customers? ¡ A prefers large deposit and B likes less active deposit ¢ A may locates in CBD and B may locates in residential area ¢ Both customer type and costs of bank matter in pricing Regular Check Account Condition Charge Condition Charge (1) Minimum openning balance $100 $100 >=$600 Fee Free >=$500 Fee Free $300-$599 $5 p.m <$500 $3.5 p.m <$300 $10 p.m (2)Monthly Balance >=$1,500 Fee Free >=$500 Fee Free (3) Transaction Limits NO Fee Free <=10 Fee Free >10 $0.15 p.d Regular Saving Account (1) Minimum openning balance $100 $100 <$200 $3. p.m <$100 $2 p.m >=$200 Fee Free >=$100 Fee Free (2) Transaction Limits >2 $2 p.m >3 $2 p.m Bank A Bank B MANA130107 Bank Management 6 Relationship Based Pricing ¡ Target the best customers for special treatment ¢ Number of services the customer uses ¢ Sell more services to increase dependence ¡ Relationship pricing ¢ Promote customer loyalty ¢ Make customer less sensitive to price and service plan ¢ Household customers are most loyal (1/3 never change) ¡ Factors affecting the choice of bank ¢ Rates and fees are NOT the only issues ¢ Check account: convenience, availability, safety, fee, rate ¢ Saving account: familiarity, rate, convenience, location, fee ¢ Business customers: financial health, reliable credit, quality of staff, price, quality of advisory, cash management MANA130107 Bank Management 7 Basic or Lifeline Banking ¡ Should low-income customers access banking?...
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This note was uploaded on 10/17/2011 for the course FINANCE CFA 201 taught by Professor Leo during the Spring '09 term at Fudan University.

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BK10 - MANA130107 Bank Management 1 Lecture Ten Liability

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