《银行管理(第六版)教师手册Chapter_11_IM_updates.pdf》由会员分享，可在线阅读，更多相关《银行管理(第六版)教师手册Chapter_11_IM_updates.pdf（10页珍藏版）》请在taowenge.com淘文阁网|工程机械CAD图纸|机械工程制图|CAD装配图下载|SolidWorks_CaTia_CAD_UG_PROE_设计图分享下载上搜索。
1、 161 CHAPTER 11 MANAGING AND PRICING DEPOSIT SERVICES Goal of This Chapter:This chapter has multiple goals.One of the most important is to learn about the different types of deposits banks and their competitors offer and,from the perspective of a manager,to discover which types of deposits are among
2、 the most profitable to offer their customers.We also want to explore how an institutions cost of funding can be determined and examine the different methods open to institutions to price the deposits and deposit-related services they sell to the public.Key Topics in This Chapter Types of Deposit Ac
3、counts Offered The Changing Mix of Deposits and Deposit Costs Pricing Deposit Services and Deposit Interest Rates Conditional Deposit Pricing Disclosure of Deposit Terms Lifeline Banking Chapter Outline I.Introduction:The Importance of Deposits and the Challenge of Managing Deposits II.Types of Depo
4、sits Offered by Banks and Other Depository Institutions A.Transaction(Payments)Deposits 1.Noninterest-Bearing Demand Deposits 2.Interest-Bearing Demand Deposits a.NOW Accounts b.Money Market Deposit Accounts(MMDAs)c.Super NOWs B.Nontransaction(Savings or Thrift)Deposits 1.Passbook Savings Deposits 2
5、.Statement Savings Deposits 3.Time Deposits 4.Individual Retirement Accounts(IRAs)5.Keogh Plans 6.Roth IRAs Ill.Interest Rates Offered on Different Types of Deposits IV.The Composition of Bank Deposits A.Trend Toward Interest-Bearing and Nontransaction Deposits B.The Importance of Core Deposits C.Ch
6、anges in the Relative Importance of Other Types of Deposits V.The Functional Cost Analysis of Different Deposit Accounts VI.Pricing Deposit-Related Services A.Pricing Deposits at Cost Plus Profit Margin 162 1.Estimating Average Deposit Service Costs 2.An Example of Pooled Funds Costing B.Using Margi
7、nal Cost to Set Interest Rates on Deposits C.Conditional Pricing D.Pricing Deposits Based on the Total Customer Relationship E.The Role That Deposit Pricing and Other Factors Play When Customers Choose a Bank or Thrift Institution to Hold Their Deposit Accounts VII.Basic(Lifeline)Banking:Key Service
8、s for Low-Income Customers VIII.Summary of the Chapter Concept Checks 11-1.What are the major types of deposit plans banks and other depository institutions offer today?Deposit plans can be divided broadly into transaction deposits,thrift or nontransaction deposits,and hybrid deposits.The primary fu
9、nction of transaction deposits is to make payments and these deposits include regular checking accounts and NOW accounts.The principal function of thrift deposits is to serve as accumulated savings and include passbook and statement savings accounts,CDs,and other time deposit accounts.Hybrid deposit
10、s combine transactions and thrift features and include money-market deposit accounts and Super NOWs.11-2.What are core deposits and why are they so important today?Core deposits are the most stable components of a depositary institutions funding base and usually include smaller-denomination savings
11、and third-party payments accounts.They are characterized by relatively low interest-rate elasticity.Holding a substantial proportion of core deposits has an advantage in having access to a stable and cheaper source of funding with relatively low interest-rate risk.11-3.How has the composition of dep
12、osits changed in recent years?There has been a shift in the publics holdings of deposits toward greater relative proportions of the highest-yielding time deposits and toward hybrid accounts that maximize depositor returns,while still giving them access to deposited funds to make payments.11-4.What a
13、re the consequences for the management and performance resulting from recent changes in deposit composition?While depository institutions would prefer to sell only the cheapest deposits to the public,it is predominately public preference that determines which types of deposits will be created.Instit
14、utions that do not wish to conform to customer preferences will simply be outbid for deposits by those who do.Managers who fail to stay abreast of changes in their competitors deposit pricing and marketing programs stand to lose both customers and profits.11-5.Which deposits are the least costly for
15、 banks and other depositories?The most costly?163 Commercial checkable deposits,particularly regular noninterest bearing demand deposits,are usually the least costly.The most costly deposits are passbook savings accounts having substantial deposit and withdrawal activity and higher interest-rate tim
16、e deposits.11-6.First State Bank of Pine is considering a change of marketing strategy in an effort to lower its cost of funding and maximize the banks profitability.The new strategy calls for aggressive advertising of new commercial checking accounts and interest-bearing household checkable deposit
17、s and de-emphasizes regular and special checking accounts.What are the possible advantages and possible weaknesses of this new marketing strategy?The Functional Cost data presented in the text suggest that certain kinds of checkable deposits are often among the least-cost deposits a bank can sell(es
18、pecially because of low or nonexistent interest rates paid)so First State Bank may be able to achieve some of its profit and cost goals with the proposed new strategy.Moreover,adjusted for revenues generated through the use of deposited funds,interest-bearing checking accounts appear to be more prof
19、itable than regular(noninterest-bearing)accounts and commercial checking services more profitable than retail(personal)checking services.However,the deposit services that First State Bank wants to pursue more aggressively tend to be more interest-sensitive and less loyal to a bank and,thus First Sta
20、te Bank may be adding to its liquidity problem with the new strategy.11-7.Describe the essential differences between the following deposit pricing methods in use today:cost-plus pricing,conditional pricing,and relationship pricing?Cost-plus deposit pricing encourages banks to determine what costs th
21、ey are incurring in labor and management time,materials,etc.,in offering each deposit service.Cost-plus pricing generally calls for a bank to charge deposit service fees adequate to cover all the costs of offering the service plus a small margin for profit.Conditional pricing is used today as a tool
22、 by banks to attract the kinds of depositors they want to have as customers.With this pricing technique a bank will post a schedule of offered interest rates or fees assessed for deposits of varying sizes and based on account activity.Generally larger volume deposits carry higher interest returns to
23、 the depositor or are assessed lower service charges,encouraging customers to hold a high average deposit balance which gives the bank more funds to invest in earning assets.Finally,relationship pricing involves basing fees charged a customer on the number of services and the intensity of use of ser
24、vices the customer purchases from a bank.11-8.A bank determines from an analysis of its cost-accounting figures that for each$500 minimum-balance checking account it sells account processing and other operating costs will average$4.87 per month and overhead expenses will run an average of$1.21 per m
25、onth.The bank hopes to achieve a profit margin over these particular costs of 10 percent of total monthly costs.What monthly fee should the bank charge a customer who opens one of these checking accounts?The relevant formula is:Unit Price Operating Overhead Planned Charged=Expense+Expense+Profit Mar
26、gin 164 per Month Per Unit Per Unit Per Unit In this case:Unit Price Charged Per Month=$4.87+$1.21+0.10 x($4.87+$1.21)=$6.69 11-9.To price deposits successfully,service providers must know their costs.How are these costs determined using the historical average cost approach?The marginal cost of fund
27、s approach?What are the advantages and disadvantages of each approach?The historical average cost approach looks at the past.It asks the following question:what funds has the bank raised to date and what did they cost?The marginal cost deposit-pricing method focuses upon the weighted average cost of
28、 new funds raised from all of the different sources of funds the bank draws upon or plans to draw upon in the current period.11-10.How can the historical average cost and marginal cost of funds approaches be used to help select assets(such as loans)that a depository institution might wish to acquire
29、?The historical average cost rate is called break even because the institution must earn at least this rate on its earning assets(primarily loans and securities)just to meet the total operating costs of raising borrowed funds and the stockholders required rate of return.Therefore,the institution wil
30、l know the lowest rate of return that it can afford to earn on assets it might wish to acquire.The marginal cost of funds approach can be used as a guide to select loans and other assets because the institution interested in profit maximizing would want to be sure to cover its fund-raising costs.11-
31、11.What is meant by the statement,Deposits are quasi-fixed factors of production for banks and other depository institutions?Does this statement have any bearing on how deposit services are marketed?Deposits can be quasi-fixed production factors because the process of choosing a depository instituti
32、on is often costly for a customer and the cost of moving a deposit(particularly a transaction deposit)also can be very costly.This statement impacts marketing deposit services in that attracting a deposit is usually more difficult than retaining a deposit,especially for transaction accounts.11-12.Wh
33、at factors do household depositors rank most highly in choosing a bank or thrift institution for their checking account?Their savings account?What about business firms?Studies cited in this chapter indicate that households(individuals and families)appear to consider,in rank order,the following facto
34、rs in choosing an institution to hold their checking account:convenient location,availability of other services,safety,low fees and low minimum balances,and high deposit interest rates.In selecting an institution to hold their savings account households appear to consider,in rank order:familiarity,i
35、nterest rate paid,transactional convenience,location,availability of payroll deduction,and any fees charged.Business firms,on the other hand,seem to consider such factors as the financial health of the lending institution,whether the institution will be a reliable source of credit in the future,the
36、quality of managers,whether loans are competitively 165 priced,the quality of financial advice given,and whether cash management and operations services are provided.11-13.What does the 1991 Truth in Savings Act require financial firms selling deposits inside the United States to tell their customer
37、s?The Truth in Savings Act requires financial firms to fully inform their deposit customers on the terms offered each depositor.The customer must be told when a new account is opened or if a deposit is renewed,what annual percentage yield(APY)is being offered and what minimum balance is required to
38、receive that yield.Moreover,the depositor must be informed about any penalties or service fees which could reduce his or her expected yield.If the terms of a deposit are changed in a way that would reduce the depositors return advance notice must be given to the account holder.11-14.Using the APY fo
39、rmula required by the Truth in Savings Act for the following calculation.Suppose that a customer holds a savings deposit for a year.The balance in the account stood at$2,000 for 180 days and$100 for the remaining days of the year.If the Savings bank paid this depositor$88.50 in interest earnings for
40、 the year,what APY did this customer receive?The correct formula is:1-)BalanceAccount AverageEarnedInterest (1 100 APYPeriodin Days365 In this instance,1 -)$1036.99$88.50 (1 100 APY365365 or APY=8.53 percent,where the average account balance is:$1036.99 days 365days 185 x$100 days 180 x$2000 11-15.W
41、hat is lifeline banking?What pressures does it impose on the managers of banks and other financial institutions?Lifeline banking consists of basic service packages offered by banks to customers not generally able to afford conventional bank service offerings.The essence of these services is that the
42、y carry low service fees and usually do not offer all of the features of banking services carrying full service fees.The pressure on managers to offer basic or lifeline services has aroused a big controversy.From a profit motive point of view banks should not offer unprofitable services.On the other
43、 hand,166 financial institutions are partially subsidized by government in the form of low-interest loans and deposit insurance and,therefore,have some public-service responsibilities which may include providing certain basic services to all potential customers,regardless of their income or social s
44、tatus.11-16.What does the Expedited Funds Availability Act require U.S.depository institutions to do?The Expedited Funds Availability Act mandates a time schedule that sets maximum delays for the receipt of deposit credit that depository institutions can use,and it requires them to inform their cust
45、omers about their policies for making funds available for customer use.Problems 11-1.Exeter National Bank has a funding mix to support its assets as follows:Core deposits/Assets =8.33%Large Negotiable CDs/Assets =25.00%Brokered Deposits/Assets =10.83%Other Deposits/Assets =23.33%Money Market Liabili
46、ties/Assets=15.83%Other Liabilities/Assets =11.67%Equity Capital/Assets =5.00%A.The proportion of core deposits at Exeter is exceptionally low,while large CDs and other money-market borrowings make up more than 40 percent of the banks total funding sources.This funding mix tends to subject the bank
47、to excessive vulnerability to quick withdrawal of funds and high interest-rate risk exposure.Exeter also appears to be excessively dependent on brokered deposits which are highly volatile and interest-sensitive.Adding in these brokered deposits,more than half of Exeters assets are funded with highly
48、 interest-sensitive deposits and money-market borrowings.Management needs to expand the banks core deposits and other more stable funds sources.B.If interest rates rise,Exeter will experience higher interest costs immediately or within hours or a few days on at least 50 percent of its funding source
49、s.Unfortunately all but$65 million of its$600 million in total assets are longer-term,inflexible assets whose interest yields cannot be adjusted as rapidly as the interest rates to be paid out on the banks liabilities.Other factors held equal,the banks earnings will be squeezed.Management needs to d
50、o some serious restructuring work on both sides of the banks balance sheet in moving toward more flexible-return assets and more flexible-cost liabilities,and to move toward greater use of interest-rate hedging techniques.11-2.Kalewood Savings Bank has experienced recent changes in the composition o