The future is not that hard to see when it comes to the international banking sector. Traditional banks have long started to implement a transformation plan, driven by the advancements in information and communication technology, which has been accelerated by the worldwide recession. Now, Governments are pushing for more rigid regulations and prudent examinations to protect their populations.Heavy financial regulations reforms are being discussed and assessed. There will be an increase in the legal requirement amounts to operate a bank (deposit-taking institution), held by the regulators, a percentage of total deposits held in the bank. There will also be increase penalty for failing to comply with the regulators. The one that has so far gained the widest acceptance is to separate investment banking from the conventional banking services, the aim is to restrict the use of depositors’ funds and the bank’s trusted name and track record in high risk investments.
With increase operating cost eroding the profits that the bank’s investors have become accustom too, many long-term investors are expected to sell the bank shares, having recently experience share value losses mostly due to the financial crisis and have lost faith in the current business model. Hence, banks are selling assets, branches and in some cases, the entire bank, to meet its obligations to employees, bondholders and taxpayers. Those banks that can raise cash are transforming themselves into separate investment houses and merchant bankers.
As populations become more and more financially savvy, investment accounts returning an appropriate rate, will replace the customary bank’s savings account with its low interest rate on cash balance. Depositors will no longer allow a few well-informed individuals to profit from the use of their money. Broker’s accounts, Investment clubs and Mutual funds type of operations with low overheads will conservatively offer better returns, while consumer operations, credit unions and co-operatives, also with low expenditure, will lend at lower rates.
The migration to investment accounts by low wage earners has been driven by the Mutual fund industry, design and managing funds to match the investor’s risk and stress levels. The Mutual fund industry caters for all sizes of investment, virtually killing the banks’ Cash Deposits business, opening investment accounts to small savers and paying them the same rates of returns as the large depositors while educating the public via word-of-mouth, that their saving of any size can generate a better return. The Mutual fund industry reported via statements to individual investors, previously bank book savers, where their money was invested, in which public company trading on which stock exchange and in which Treasury bill and Government or Corporate bond.
The traditional bank’s consumer lending business was challenge by large consumer operators, such as vehicle and appliance manufacturers, airlines and other membership club card-based business, but the banks won using the widely accepted Visa and MasterCard. Now with this card company and the issuing banks’ charge rates, fees and penalties under question, the credit unions’ soft loans and employers’ salary advances are again becoming popular. The banks can however depend on it merchant banking, as lending to business and Governments’ projects increases.
The New Bank model is an online portal with dispensing cash machines.
Rationale
T.A.J & Associates Company Limited uses this occasion to comment on topics that have been covered, both academically and by the mainstream media, to add its opinion and point out investment opportunity, not to invoke any social action.
