COVER STORY
UK Banking: Strong Foreign Presence
-- Katuri Nageswara Rao
UK Banking is the third largest in the world and the first in the European Union. It has predominant foreign presence with foreign banks accounting for over 52% of the banking assets. During the 1990s, it has witnessed large scale consolidation through Mergers and Acquisitions (M&A). While the number of branches has been reduced, branch banking continues to be an important channel of delivery. Other channels like ATMs, Internet banking, corporate electronic banking, interactive TV and mobile telephone banking have been growing rapidly. UK banks are strong, stable and well diversified, while profitability is under pressure due to thinning margins. As and when UK chooses to join European Monetary Union, there are going to be major changes and challenges for the banking system.
© 2004 IUP. All Rights Reserved.
ECONOMY
Bank Collapses and the Role of Central Banks
-- Dr. YG Sivaram
Banking system is the crucial part of any economy. The social costs of bank collapses are heavy and the government pays a heavy price for such failures. Bank collapses could be caused due to various factors like asset price bubble and collapses, legal and prudential weaknesses etc. The central bank can reduce such failures by effectively using the monetary tools and instruments besides stringent regulatory control. The Basel II Accord is also very effective in plugging the loopholes in the system.
© 2004 IUP. All Rights Reserved.
BANKING SCENARIO
Branching Out But Not Taking Root Yet
-- Sugata Ghosh
Foreign banks are allowed to take the 100% subsidiary route, however, the absence of administrative guidelines from central banks may delay the decision. Foreign banks had it in the bag but are now keeping their fingers crossed. The hope is that the new regime will not frown upon the proposal to convert Indian branches into wholly-owned subsidiaries. However, the going may not be smooth.
© The Economic Times, May 26, 2004. Reprinted with permission.
HRM IN BANKS
Hi! Manager, Be Assertive!
-- GRK Murty
Branch managers often feel that no one in the higher management is listening to them or, if they are listening, they did not act on what they said. Managers also feel that on many occasions they are saying "yes" where they would prefer to say "no". And at other times, they have greater difficulty in getting the attention of their bosses. The list of such tiring moments could be numerous. If some of these and related issues are bothering you, perhaps it is time for you to be more assertive. If you desire the extra edge in your day-to-day interactions with others, you need to understand more about `assertive behavior' and that is what this article talks about.
© 2004 IUP. All Rights Reserved.
BANK STRATEGY
State-Owned Financial Institutions and the Reform Process
-- Aditya Narain
What does the future hold for state-owned financial institutions? Some urge privatization; others suggest that the wiser, more realistic course is improve to their management and supervision. Neither side won the day at the 6th Annual Financial Markets and Development Conference in Washington DC, April 26-27, but both sides used the eventjointly sponsored by the IMF, the World Bank, and the Brookings Institutionto wrestle with the substantial challenges associated with state-owned financial institutions, review recent research and country experiences, and weigh future options.
© International Monetory Fund. (www.imf.org). Originally published as "Financial Markets and Development Conference: Should State-owned Financial Institutions be Privatized or Reformed?" Excerpts of survey report by IMF published in June 2004. All Rights Reserved.
BANKING REGULATION
Indian Banks and Basel II
-- Ajaya Kumar Mohanty
Indian banking sector is undergoing radical changes. It is evolving in terms of technological upgradation, reduced NPAs, adoption of international standards, and becoming globally competitive. Through successful adoption of the Basel I norm it has increased its capital base and is now preparing itself for Basel II, which has three pillars, namely minimum capital requirement, supervisory review process and market discipline. Basel II is more sophisticated and calls for heavy investment in technology.
© 2004 IUP. All Rights Reserved.
BANK TECHNOLOGY
Biometric ATMs No ATM CardNo PIN Only You
-- Y Srinivas
The advantages of ATMs (Automated Teller Machines) like anytime money, wider reach, easy to use etc., make them popular among the customers. But there are some disadvantages too, like stolen card being used by someone, card deblocking and PIN (Permanent Identification Number) being cracked. Biometric technology can provide new age ATMs that will be free from these impediments and will enhance the security and comfort in the use of ATMs. However, this technology is also not free from evils.
© 2004 IUP. All Rights Reserved.
MONETARY MANAGEMENT
First Hike of Interest Rates When it Happens
-- Yash Paul Pahuja
The world environment is showing hardening of interest rates. While Indian scenario is not the same as other developed countries and as economies are integrating, it cannot de-link itself from international developments. It remains to be seen when the interest rates will start moving upward.
© 2004 IUP. All Rights Reserved.
INVESTMENT BANKING
Consolidation in Banking Sector: Does Size Matter?
-- Vinod Sharma
While expanding the operations, banks must look into the various aspects like rational size, in-house expansion or cross-border expansion, organic or inorganic growth. There have been ases where too large a size created complex problems for a bank, which resulted in failure or heavy losses and even endangered its very existence. Inorganic growth can help in immediate expansion but cultural differences can cost the shareholders dearly.
© 2004 IUP. All Rights Reserved.
INVESTMENT BANKING
Can Bad Debt Be a Good Buy?
-- Shishir Prasad and Avinash Celest
Investors, who want to buy Indian distressed assets, are seeking hefty returns i.e. at least 20%. But the banks are not ready to sell good distressed assets. As the banks are member of ARCs, they are reluctant to sell good assets to ARCIL because first they know which asset is profitable and second they are not being paid cash by ARCs. While the ARCs can raise money from members, they can borrow through ECB route also but this may not be easy. FIIs want to participate in the game, but they have sector specific cap. Another reason for reluctance of investors is lack of turnaround leaders, if they takeover the management control of the company
© Businessworld, May 31, 2004. Reprinted with permission.
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