Banking and Insurance • Course Outline • Careers in Banking • Introduction to Banking – Role in an economy, developments etc. • Study of Bank financials • Asset Liability Management in banks • Risk Management • Treasury Management • Management of NPAs • Regulatory role of RBI and Monetary policy • Consolidation of the Indian Banking structure • Introduction to Insurance – types, Role in India • Regulation, reforms, challenges, Fund management in Insurance • Projects in various Banking related topics 1
Transcript
Banking and Insurance
• Course Outline• Careers in Banking• Introduction to Banking – Role in an economy,
developments etc.• Study of Bank financials• Asset Liability Management in banks• Risk Management• Treasury Management• Management of NPAs• Regulatory role of RBI and Monetary policy• Consolidation of the Indian Banking structure• Introduction to Insurance – types, Role in India• Regulation, reforms, challenges, Fund
management in Insurance• Projects in various Banking related topics
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Banking as a Whole
Clients
Includes Auto Finance, Consumer Banking, Home Finance, Insurance and Small Business Banking
Provides mutual fund, insurance & home finance and workplace banking products to consumers and small businesses
One of the world’s leading investment banks
Services provided: Advice on corporate strategy and structure, raising and placing capital, making markets in financial instruments and offering sophisticated risk management services
Provides investment & wealth management services to institutional investors, high net worth individuals & retail customers
Provides personalized advice and solutions to wealthy individuals
Global leader in transaction processing and information services to wholesale clients
Three Businesses: Institutional Trust Services, Investor Services(WSS) and Treasury Services
Major provider of financial services including corporate finance, cash management, & credit
Comprises of five national business segments: Middle Market Banking, Mid-Corporate Banking, Commercial Real Estate, Asset Based Lending and Commercial Leasing
Delivers credit card and other related payment products to cardholders and merchant outlets
Aims to be the preferred payment card in existing customers wallets and to increase access to new customers
Investment Bank
Treasury and Securities Services
Card Services
Asset and
wealth Management
Retail Financial Services
CommercialBanking
Business segmentation
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Organisation structure
• Most commercial banks have the following structure• Head office• Head office departments• Regional offices• Branches• The Head office departments are
Credit Central treasury HRD Finance Legal Risk management Internal Control and Compliance Audit Investment Banking Merchant banking
• Most branches have the following sections Front office Deposits Loans Clearing Ancillary Services Consultancy Services Trade Finance Corporate banking Government Business MIS
Main functions
• Retail banking• Corporate banking• Trade Finance• Correspondent Banking• Treasury• Government business• Rural development Banking• Banking needs of Small scale sector
Entry modes
• Public Sector – Through bank related exams IBPS
• SBI and RBI conduct their own exams• Entry level Probationary officers –
Trained and posted to the various departments and then make their way up the organisational ladder
• Private sector and Foreign Banks have their own system of recruitment and they generally have Front office – Relationship managers – one
point contact for the customers Mid office - IT, Risk management, Audit Operations jobs- servicing of loans, deposits,
clearing, and other day to day jobs
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Investment Banking
• THE NATURE OF INVESTMENT BANKING Investment Banks help companies and governments issue securities, help investors purchase securities, manage financial assets, trade securities and provide financial advice
• Brief history Glass-Stegall act 1930 Securities Act and Exchange Act 1933 The "conspiracy arguments" of 1950-51 Elimination of fixed commission structure (1975)
• Three major types of firms national full-line investment banks that service retail and
corporate customers (e.g., Merrill Lynch) national full-line firms that specialize more in corporate
finance (e.g., Goldman Sachs) the remainder of the industry and includes four classes
• specialized investment bank subsidiaries of commercial banks
• Securities firms and investment banks engage in as many as seven key activity areas Investing Investment Banking Market Making Trading Cash Management Mergers and Acquisitions Other Service Functions
• Investing Involves managing pools of assets such as mutual funds Compete with commercial banks, life insurance
companies, and pension funds Manage funds either as agents for other investors or as
principals Objective is to select asset portfolios to beat some
return-risk performance benchmark such as the S&P 500
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Investment Banking contd.
• Investment Banking Refers to activities related to underwriting and
distributing new issues of debt and equity securities Industry is dominated by a small number of underwriting
firms Securities underwriting can be undertaken through either
public or private offerings• Private placement - securities issue placed with one of a
few large institutional investors• Public placement - may be underwritten on a best efforts or
firm commitment basis and offered to the public Market Making
• Involves the creation of a secondary market in an asset by a securities firm or investment bank
• Either agency or principal transactions– Agency transactions - two-way transactions on behalf of
customers– Principal transactions - the market maker seeks to profit on
the price movements of securities and takes long or short inventory positions for its own account
Cash Management• Securities firms and investment banks offer bank
deposit-like cash management accounts (CMAs) to individual investors
– money market mutual fund sold by investment banks that offer check-writing privileges
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Investment Banking contd.
• Trading Closely related to market-making activities Six types of trading
• Position trading - purchases of large blocks on expectation of favorable price move
• Pure Arbitrage - buying an asset in one market and selling it immediately in another market at a higher price
• Risk Arbitrage - buying securities in anticipation of some information release
• Program Trading - simultaneous buying and selling using a computer program to initiate such trades
• Stock Brokerage - trading of securities on behalf of individuals• Electronic Brokerage - offered by major brokers, direct access via
internet to trading floor• Mergers and Acquisitions
Frequently provide advice on, and assistance in, mergers and acquisitions
• assist in finding merger partners• underwrite any new securities• asses the value of target firms• recommend terms of the merger agreement• assist target firms in preventing a merger
• Other Service Functions Custody and escrow services Clearance and settlement services Research and advisory services
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Investment Banking contd.
• Nature of business according to functional activities Investment bankers as market makers
• Objectives– Provide market liquidity– Provide price continuity
• Types of market making– Brokered trading– Dealer trading– Market making
Investment bankers as underwriters• Nature of business according to revenue-generating activities
Pure investment banking activities• Public offerings of securities
• Financial advisory services Principal transactions (Fixed Income, Equity, FEX and
Commission and Brokerage • Fixed income • Equities • Derivatives• Merchant banking and money management
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Investment Banking contd.
• PUBLIC OFFERINGS OF SECURITIES (UNDERWRITING) Contract type (firm commitment / best efforts) Structure of the Offering (Negotiated / Competitive/ Shelf 415) Spreads or underwriter discount Common Stock offerings
• IPOs• Seasoned offerings• Private placements of Equity• International/ Global offerings
Stock price effects and offering dilution Over-allotment option and stabilization procedures
• ADVISORY SERVICES AND OTHER ACTIVITIES M&A Securitization Money management
• COMPETITION AND INDUSTRY STRUCTURE Structure Competition Reorganizations Trends
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Investment Banking contd.
• The Goldman Sachs Equities division assists institutions, corporations, and governments with their investing and trading strategies by providing market and trading information, perspective and guidance.
• Institutional clients include portfolio managers, mutual funds, money management firms, insurance companies, and other institutions that participate in the equity markets.
• Goldman Sachs is recognized as a leader worldwide for their work, including: executing block trades of equity securities facilitating portfolio hedging and restructuring providing information and guidance on equity markets, individual
companies and industries acting as advisor and lead manager for corporations going public
or issuing equity in global capital markets and assisting companies in raising capital in private equity markets
advising governments and government-related entities in major industrial and emerging-market countries on privatization programs and other equity markets related initiatives
developing innovative products and strategies that broaden opportunities for clients
assisting investors in planning and implementing strategies making markets developing trading models and algorithms
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Investment Banking Activities
• Examples of investment banking activities in India Financial and business restructuring Company acquisition by a MNC Lead manage structured credit issues Power sector privatization Private sector issue of long term (100 Year)
Bonds IT industry advisory transactions Capital market securitization transaction Initial public offerings Preferential equity offerings
Careers in insurance
• Insurance companies will have openings in the following departments Investing Marketing Distribution Actuarial Underwriting
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Insurance Functions
• Insurance companies will have openings in the following functions Accounts Audit and risk management Actuarial Administration Business research and planning Channel Development Customer service Claims Group sales HR IT Legal and compliance
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Insurance Functions contd.
Medical Marketing Operations Process Management Sales Retail/Alternate channel/Direct Training Underwriting Quality
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Job Description
• Actuaries help design plans and evaluates risks
• Underwriters assess proposals and determine terms and costs of a policy before deciding whether to insure a customer
• Claims staff settle claims
• Loss assessors assess loss caused due to burglaries, fire, car accidents and natural calamities . They work out the loss covered by the insurance policy and report the details and circumstances to the insurer
• Insurance agents work on behalf of the insurance companies. They sell policies, collect premiums and meet sales target on commission basis
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Job description contd.
• Insurance brokers are independent business people or those who work for brokerage firms to find the best policy for their client
• Risk managers assess the companies risks advising about insurance and investment strategies
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Public sector insurance jobs
• Administrative officer and assistant administrative officer – entry level in LIC or GIC
• Posted to following departments Administration
• Handle– Policy Making
– Policy Claims
– Checking policy clauses and details
– MIS ie. Filing various returns and statements
Development• Deal with
– Marketing and procurement of business
– Promoting policies
– Getting contracts
Accounts• Manage funds including income and expenses
• Development Officers In charge of a territory for development of policies. They
handle• Recruitment of agents
• Train them for procurement and servicing of policies
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Private sector jobs
• Sales and distribution Agents Advisors Relationship managers
• Channels of distribution Direct sales – reports to branch manager and
responsible for sales targets Indirect or alternate – Comprises of
distributors. Normally not part of branch sales targets.
• Actuarial• Underwriting• Marketing and distribution• Operations• Investments
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Career path in Private Insurance Sector
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Sub sectors in Insurance for employment opportunities
