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1、 246 CHAPTER 18 CREATING AND MANAGING SERVICE OUTLETS:NEW CHARTERS,BRANCHES,AND ELECTRONIC FACILITIES Goal of This Chapter:The purpose of this chapter is to learn how new banks are chartered by state and federal authorities in the United States,to determine what makes a good site for a new branch of
2、fice,to recognize how the role of branch offices is changing,and to explore the advantages and disadvantages of automated banking facilities.Key Topics in This Chapter Chartering New Financial Service Institutions Performance of New Banks Establishing Full Service Branches In-Store Branching Establi
3、shing Limited Service Facilities The Internet and Online Banking Chapter Outline I.Introduction A.The Importance of Convenience and Timely Access to Customers B.Service Options Available Today 1.Chartering New Financial Institutions 2.Establishing New Full-Service Branches 3.Setting Up Limited-Servi
4、ce Facilities II.Chartering a New Bank or Other Financial Service Institutions III.The Bank Chartering Process in the United States A.The Chartering Authorities in the U.S.B.Key Role of the FDIC C.Organizing Groups D.The Choice Between Federal and State Charters:Advantages and Disadvantages IV.Quest
5、ions Regulators Usually Ask the Organizers of a New Bank V.Factors Weighing on the Decision to Seek a New Bank Charter A.External Factors 1.Level of Economic Activity 2.Growth of Local Economic Activity 3.The Need for a New Bank 4.Strength and Character of Local Competition in Supplying Financial Se
6、rvices B.Internal Factors 1.Qualifications and Contacts of the Organizers 2.Management Quality 247 3.Pledging of Capital and Funds to Cover the Cost of Filing a Charter Application and Getting Underway VI.Volume and Characteristics of New Bank Charters A.Bank Chartering as a Capital Budgeting Decisi
7、on B.Characteristics of New Charter Markets VII.How Well Do New Banks Perform?A.New Bank Financial Performance B.Pro-Competitive Effects on Service Offerings and Service Pricing VIII.Establishing Full-Service Branch Offices:Choosing Locations and Designing New Branches A.Advantages of Full-Service B
8、ranches B.Trends in the Design of New Branches C.Desirable Sites for New Branches D.Expected Rate of Return E.Geographic Diversification F.Branch Regulation G.The Changing Role of Branches H.In-Store Branching IX.Establishing and Monitoring Limited-Service Facilities A.Point-of-Sale Terminals B.Auto
9、mated Tellers(ATMs)1.History of ATMs 2.Customer Services Offered Through ATMs 2.Fee Structures for ATM Usage 3.Customer Service Limitations of ATMs 4.Example of the ATM Capital-Budgeting Decision C.Automated Loan Machines D.Self Service Terminals D.Home and Office Online Banking E.Financial Service
10、Facilities of the Future X.Summary of the Chapter Concept Checks 18-1.Why is the physical location or physical presence of a bank still important to many bank customers despite recent advances in long-distance communications technology?Many customers still prefer the personal attention and personal
11、service that contact with bank employees provides.Moreover,for those services where problems can arise that require detailed information and explanation-for example,when a checking account is overdrawn and checks begin to bounce-the customer needs quick access and,often,the personal attention to his
12、 or her problem on the part of one or more employees.18-2.Why is the creation(chartering)of new banks closely regulated?What about nonblank financial firms?248 The creation of new banks is regulated to insure the safety and soundness of existing banks and to avoid excessive numbers of bank failures.
13、The same arguments are usually made for non-bank financial firms.18-3.What do you see as the principal benefits and costs of government regulation of the number of financial service charters issued?While control over the entry of new banks may reduce the number of failures,it also limits competition
14、,so that the public may receive a smaller volume or lower quality of services at excessive prices.18-4.Who charters new banks in the United States?New thrift institutions?New banks are chartered by the banking commissions of the individual states or,at the federal level,by the Comptroller of the Cur
15、rency.Thrift institutions are chartered by the states or at the federal level by the Office of Thrift Supervision.18-5.What key role does the FDIC play in the chartering process?The FDIC exercises some control over state bank charter activity as well as federal charters because most states insist th
16、at their new banks qualify for federal deposit insurance before they can open for business.18-6.What are the advantages of having a national bank charter?A state bank charter?The benefits of a national charter are:a.)It brings prestige due to stricter regulations and may help attract more customers
17、b.)In times of trouble the technical assistance given may be better ensuring a better chance of long run survival The benefits of a state charter are:a.)It may be easier and less costly to get a state charter b.)The bank does not have to join the Federal Reserve and therefore avoids buying and holdi
18、ng low yield stock of the Federal Reserve c.)Many states let a bank lend more to one borrower d.)State chartered banks may be able to make types of loans that a nationally chartered bank cannot 18-7.What kinds of information must the organizers of new national banks provide the Comptroller of the Cu
19、rrency in order to get a charter?Why could this information be important?The Comptroller of the Currency asks for information on the number of competing banks and bank-like institutions in the service area of the proposed bank.More competitive market situations limit the profit potential and perhaps
20、 the growth potential of a new bank.Also requested is information about shopping centers,retail and wholesale business activity,recent population growth,traffic counts,and personal income levels-all viewed as indicators of potential demand 249 for banking services in the service area of the proposed
21、 new bank.Applicants must also provide background information on the organizers and proposed management of a new bank so the Comptroller can decide if these people are qualified,law-abiding,and trustworthy to manage the publics funds as well as their own.18-8.What is the meaning of public need as it
22、 applies to the chartering of new banks?Why is the public need aspect of a charter application less important today than in the past?The term public need refers to the obligation of bank regulatory authorities in the United States to insure that sufficient banks are chartered and remain viable in or
23、der to provide the public with convenient sources of banking services at competitive prices.With the level of competition in the financial services sector and new technologies it would be very difficult for any institution to establish public need for a new charter.18-9.What are the key factors the
24、organizers of a new bank should consider before deciding to seek a charter?While a variety of factors are examined by different business people interested in establishing a new bank,most look at some or all of the following factors.1.External Factors a.The level of local economic activity.b.Growth o
25、f local economic activity.c.The need for a new bank.d.The strength and character of local competition in supplying financial services.2.Internal Factors a.Qualifications and contacts of the new banks organizers.b.Management quality.c.Pledging of capital and funds to cover the cost of filing a charte
26、r application and begin operations.18-10.Where are most new banks chartered in the United States?New charters tend to be concentrated in rapidly growing local markets where the long-run expected internal rate of return is high or where the prospects for growth in funds sources and service revenues a
27、re the greatest.18-11.How well do most new banks perform for the public and for their owners?Most new banks succeed,especially those whose organizers can bring in new deposits and loan accounts during the first year of the banks operation.Many,however,grow less rapidly than projected,indicating that
28、 their organizers possessed overly optimistic expectations.In addition,250 there is evidence that the failure rate of new banks has accelerated recently.Close to half of all new banks seem to disappear within 10 years due to failures or mergers.Moreover,the profitability of new banks appears to be m
29、ore unstable today than it was in the past.18-12.Why is the establishment of new branch offices usually favored over the chartering of new banks and other financial firms as a vehicle for delivering financial services?The chartering of a new financing corporation is normally a lengthy and expensive
30、process,requiring the completion of elaborate federal or state application forms,while the branch application process is normally far simpler and less costly.Moreover,with the increase in the number of failures in recent years regulatory-imposed capital requirements for new charters have increased s
31、ubstantially,while new branch offices usually carry significantly lower capital requirements.Moreover,branch offices themselves are often much less elaborate and costly to build and maintain than are the headquarters facility of a new institution where some duplicate facilities can be eliminated(for
32、 example,checking processing,credit analysis,and records departments).18-13.What factors are often considered in evaluating possible sites for new branch offices?Bankers first need to decide the goals and objectives of a new facility.Often this means assessing whether the proposed new branch is aime
33、d at selling one or more particular services,such as deposits or loans,and also deciding how closely correlated cash flows and returns from the new branch office may be with cash flows and returns from the other facilities operated by the bank.If returns or cash flows through the proposed new instit
34、ution are negatively correlated or display low positive correlation with the institutions other facilities,they may be able to lower the variance of its returns or cash flows by proceeding to establish the new office.Other considerations revolve around the economic strength of the proposed branch of
35、fice site-whether there is adequate traffic volume,large numbers of stores and shops,older or younger age populations who often require slightly different menus of services,recent area population growth,density and income,the occupational and residential makeup of the proposed new branch area,a larg
36、e enough population to generate enough customers to breakeven and the number and size of facilities operated by competitors.Generally,for branches designed to attract and hold deposits key factors to consider usually revolve around individual and family incomes,concentrations of retail stores and sh
37、ops,older-than-average residents,and homeowners rather than renters.For branch facilities emphasizing credit services residential areas with substantial new construction activity,heavy traffic flow,and high concentrations of stores and shopping centers are typically desirable for consumer and retail
38、 loan demand,while central city office locations are often chosen as locations for commercial loan facilities.18-14.What changes are occurring in the design of,and the roles played by,bank branch offices?Please explain why these changes are occurring.Bank branches are increasingly becoming selling p
39、latforms in which more and more fee-based services are attractively and prominently advertised in order to maximize the fee-income generating potential of each branch.Moreover,branches are becoming increasingly automated to 251 reduce personnel and other operating costs and improve speed,efficiency,
40、and accuracy in handling a growing service volume.Branch design has come to reflect these trends with automated facilities placed at easy access points,along with information booths to speedily direct customers to the service areas they need.Human tellers may be placed deeper inside branch facilitie
41、s so that customers must pass by other service departments and conspicuous advertising in order to encourage customers to become aware of and avail themselves of other bank services.18-15.What laws and regulations affect the creation of new bank and thrift branches and the closing of existing branch
42、es?What advantages and what problems can the closing of a bank or thrift branch office create?The opening of new branch offices must be approved by a banks or thrifts principal federal or state supervisor.Closing a branch office has become much more complicated in recent years as the result of sever
43、al new laws and regulations.For example,the FDIC Improvement Act requires 90 days advance notice of branch closings to both customers and the principal supervisory agency and a posting on the branch site at least 30 days prior to closing.Banks and thrifts must also make an affirmative effort to reac
44、h all segments of their communities without discrimination under the terms of the Community Reinvestment Act which raises the danger of customer protests against closings if it appears the bank is under-serving certain groups of customers.Finally,the Community Reinvestment Act can be used as a vehic
45、le to prevent U.S.banks and thrifts from branching expansion when they have a poor record of serving all segments of their communities.Closing selected branch offices can reduce operating costs and divert resources from less profitable to more profitable uses.However,they risk alienating good custom
46、er relationships unless it can serve those same customers with its remaining facilities.18-16.What new and innovative sites have been selected for new branch offices in recent years?Why have these sites been chosen by many financial firms?Do you have any ideas about other new branch sites that you b
47、elieve should be considered?Rapid increases in new branches located in grocery stores,shopping centers,and inside other businesses and facilities where the public frequently gathers have helped to reduce branch construction costs and promote cross-selling of goods and financial services.Other branch
48、es have been opened in apartment complexes,senior citizen centers,and other customer-convenient locations as bankers come to realize they must adjust their service locations and service hours to conform to customer needs in an intensely competitive financial-services environment.18-17.What are POS t
49、erminals and where are they usually located?Point-of-sale terminals are set up to accommodate customer purchases of goods and services.These computer terminals normally are located in retail stores,gasoline stations,and similar places with a link to the banks own computer records.When a customer of
50、the bank makes a purchase,the amount of the transaction is deducted from the customers deposit account and added to the stores account.Because the customer immediately loses funds many bank customers have been hesitant to use the service as opposed to paying by check or credit card where payment is