banking 5

Surely we don’t have many activities to centralise? We already have a central hub for processing operations! We heard that from a fair section of our client organisation. They initially had operations spread across their branches. Some years ago, they had established a central hub and many regional hubs. Yet, Only a few prominent operations were centralised. Others were just regionalised. Regionalisation was inconsistent. Some branches still did these at their own premises. Branches still did the bulk of the work. We made a list of activities, surveyed all their branches and hubs, and got a good sense of which activities were happening at branches vs regionally vs centrally. ...

I was working with the treasury of a bank. They were trying to estimate how much money could flow out of their savings account in a day, worst case. I took their total savings account balance at the end of each day and found the standard deviation. I took thrice the standard deviation, and said, “You can be 99.7% sure that your daily loss won’t be more than 1.5% of the balance.” ...

Banks install ATMs to lower their branch costs, and to attract new customers. When working out the economics of ATMs, we found that lowering branch costs alone could not be a viable reason to install an ATM. The bank argued as follows: “Every time someone withdraws money from an ATM, they avoid going to the branch. With enough people going to the ATM, I can afford not to increase my branch size, and that saves me money. Since it costs me Rs 20 every time a person withdraws cash (in terms of salary, rent, etc.) and an ATM costs about Rs 2,200 a day, I’ll break even if there are 110 cash withdrawals from the ATM.” ...

Now, if you earn dollars, you can keep the dollars. Interesting that this move comes at just the time when the dollar is falling.

A neat banking & finance portal by Northern Light. Covers mergers, reforms, technology, regulations, country-specific info, etc.