Bank Management PDF

BANK MANAGEMENT * A bank is formed as a corporate entity. Hence, the stockholders who are the part owners of the business have to delegate their power of management to a board of directors. By virtue of the stockholders’ right to vote, they elect the members of the board in a general meeting s...

BANK MANAGEMENT * A bank is formed as a corporate entity. Hence, the stockholders who are the part owners of the business have to delegate their power of management to a board of directors. By virtue of the stockholders’ right to vote, they elect the members of the board in a general meeting set for this purpose. The board in turn will either elect from among themselves the officers of the bank or appoint them. Some powers of the board are also delegated to the officers. THE BOARD OF DIRECTORS - The BOD will be composed of a number agreed upon as contained in the by-laws, but it should not exceed the number allowed by law. - It is headed by a chairman whose duty is to preside over the meetings of the board. - In small banks, the chairman of the board and the president may only be one person in order to achieve harmony, efficiency, and economy. QUALIFICATIONS OF BOARD MEMBERS 1. Must own at least one (1) share of the capital stock of the corporation of which he is a director. The board may provide for additional qualifications of a director such as, but not limited to the following: a. Educational attainment b. Adequate competency and understanding of business c. Age requirement d. Integrity/probity, and e. assiduousness 2. At least two-thirds of the members of the BOD of any commercial bank shall be Filipino citizens. - Majority of the members of the BOD of any thrift bank shall be Filipino citizens - All members of the BOD of a rural bank shall be Filipino citizens. 3. The proposed directors of a bank shall be subject to qualifications and other requirements of existing laws, rules and regulations of the Bangko Sentral. To gain the greatest amount of efficient management, the board also creates standing or special committees to which it delegates some of its functions. 1. The Executive Committee- deals with administrative matters. It often meets to prepare the groundwork for board meetings. It acts as an advisory body to the board. Some of the policies it prepares are eventually approved by the board. 2. The Loans and Discount Committee- all matters pertaining to loans and discounts, to lines of credit, and others related to the loaning function of a bank are deliberated on by this committee. 3. The Investment Committee- concerns itself with the bank’s investment portfolio. It passes judgment on what securities the bank should purchase in what amounts, how to diversify investments and related matters. 4. The Trust Committee- the fiduciary function of a bank will be the main concern of this committee. It will thresh out how the trust funds shall be invested, how much to charge clients, how to administer trust agreements, and others. 5. The Examination Committee- in order that the bank will always be in shipshape condition regarding its operations, the internal examination and audit of its accounts is an essential feature of good management. It is the duty of this committee to improvise methods to conduct such internal examination and supervision. BANK OFFICERS 1. President- becomes the chief executive or the general manager of the bank. He implements the policies formulated by the board. He is the court of last resort when the board is in session. The president represents the bank in cases of litigation. 2. The Vice-President- assists the president when the latter is present. However, when the president is absent or incapacitated, the vice-president takes over his duties and responsibilities. 3. The Cashier- often doubles up as the chief clerk, the secretary, and the treasurer of the bank 4. Other Officers- may be the comptroller and the auditor. The former tales care of all the accounting and statistical work of a bank while the latter verifies the accounts resulting from banking operations * The officers of the bank are also responsible for the efficient and harmonious administration of their duties. BANK OPERATION In implementing the policies of the board, through the president and other officers, the operational activities of management involve three distinct functions: 1. The Executive Function- policy-making and establishing relations with customers in order to get business, with gathering facts and figures about the depositors and debtors, with recruiting personnel to do the minor operations, and with similar duties involving the caliber of an executive. 2. The Teller Function- accepts deposits, changes checks for cash, changes big bills with smaller denominations, releases the checks or cash representing loans, receives payments for loans, and other teller functions. 3. The Bookkeeping Function- keeps a faithful record of the events and accounts passing through his hands, the banker must record the figures and sometimes the facts. PERSONAL AND EDUCATIONAL QUALITIES OF A BANKER: -A POTENTIALLY EFFICIENT BANKER MUST POSSESS A CHARACTER ABOVE SUSPICION AND INTEGRITY OF THE HIGHEST ORDER. -HE SHOULD BE PATIENT, UNDERSTANDING, CORDIAL, AND RESPECTFUL. - HE SHOULD BE WELL-VERSED IN BANKING PRINCIPLES AND PRACTICES. - HE SHOULD HAVE A GOOD COMMAND OF THE MEDIUM OF COMMUNICATION - HE SHOULD HAVE A WORKING KNOWLEDGE OF LAW, ECONOMICS, ACCOUNTING, MANAGEMENT, PUBLIC RELATIONS, AND BUSINESS PSYCHOLOGY  In a nutshell, besides the personal qualities, a banker must be “ a jack of all trades; master of all.” BANK SUPERVISION AND EXAMINATION - The bank examination and supervision is done internally and externally. This is undertaken in order to ensure the safe and efficient operations of any bank. EXTERNAL SUPERVISION- comes from agencies of the government and is not in any way connected with the bank management. INTERNAL CONTROLS- are performed by persons within the bank’s management. * The constant surveillance and surprise visits keep the bank officers and personnel on their toes, and see to it that their banks are in order. PURPOSE OF EXAMINATION AND SUPERVISION 1. Examination is undertaken to find out whether banks are doing business in conformity with the banking laws and that of the rules and regulations of the central bank and other governmental agencies. Any violation on the part of the banks would lead to their eventual closure or at least reprimand from the supervisory agencies. 2. To determine how sound the bank is financially. * The examination is more of discovering the unsound and unsafe practices and to offer remedies or solutions for such practices. INTERNAL CONTROLS A committee on examination and supervision is usually created to effect internal controls. The embezzlements, defalcations, and frauds cannot be entirely eradicated since the business of banks is in the hands of human beings of diverse natures. But they can be minimized by proper safeguards and it is the purpose of internal audit and controls to shield the weak from being tempted, to prevent the strong from opportunism, and to protect the innocent from being involved. PROGRAMMING OF CONTROLS 1. embezzlement- means the taking of funds that belongs to depositors and customers. 2. Defalcation- refers to misappropriation of funds which belong to stockholders such as interest income, fees and commissions, or through the use of fictitious notes, or fraudulent expense vouchers. 3. Peculation- would mean all kinds of embezzlement, defalcation,, or misappropriation of funds. Hence, a person committing anyone of these is dubbed a “peculator.” 4. Examination- refers to the review and analysis of the assets and liabilities of a bank to determine their existence, values and true ownership, and to ascertain that everything in regard to said assets and liabilities is in order. CAUSES OF PECULATION 1. Gambling 2. Pride and Envy 3. Liiving beyond one’s income 4. Unsound salary policies 5. Poor employee relations 6. Immorality  Thank you….