1. Banking and Financial Institutions
Guy Hargreaves
ACF-104

2. Recap of yesterday
Review of maturity transformation, aggregation and risk transformation
Review of credit creation multiplier
Understand how commercial banking improves the efficiency of an economy
Appreciate the role commercial banking has in driving economic growth
Understand the role commercial banks play within financial markets

3. The general structure of commercial banks

4. Today’s goals
Overview of structure of different types of commercial banking enterprises
Understand the different departments and roles of those departments within a typical commercial bank
Overview of units within a typical investment banking business

5. Typical commercial bank units
Board of Directors
Management Office
Financial Control
Risk Management
Legal and Compliance
Operations
Human Resources
Information Technology
Financial Markets
Wholesale Banking
Retail Banking

6. Typical investment bank units
Board of Directors
Management Office
Financial Control
Risk Management
Legal and Compliance
Operations
Human Resources
Information Technology
Financial and Capital Markets
Mergers and Acquisitions
Research

7. Bancassurance All commercial banking units +:
Insurance
Funds management
For this course we are not focused on Bancassurance nor Universal banking models
Bancassurance models now tends to hold non-deposit taking businesses in separate companies under a holding company structure

8. Typical Board of Directors
Structure varies a lot!
Chairman – non-operational, strategic role
CEO – executive and board member
CFO - executive and board member
CRO - executive and board member
CTO - executive and board member
Non-Executive Director (NED) x 2?
Approves strategy of bank’s management team
Appoints CEO, CRO, CFO, CTO etc
Approves financial statements, compensation etc

9. Typical Management Office
Structure varies a lot!
CEO – heads up and runs the bank
CFO – heads up finance function
CRO – heads up risk function
CTO – heads up IT function
COO – heads up operations function
Head of Markets
Heads of Retail/Wholesale banking
Develops bank strategy, and following Board approval executes this strategy

10. Financial Control Management reporting
Financial accounts (quarterly / semi / annual)
Regulatory reporting
Tax and transfer pricing
Daily P&L
Audit (often standalone department)

11. Risk Management Credit risk Market risk Liquidity risk Country risk
Operation risk
Reputational risk
Special Asset Management

12. Legal and Compliance
Group legal
Front Office legal
Compliance

13. Operations Cash settlements Securities settlements “Middle Office”
Financial Markets
Corporate loan management
Property management
General logistics

14. Human Resources
Bank staff are commercial banking’s most valuable asset
Hiring, firing, training, team building
Some commercial banks have aggressive firing policies
Compensation policy critical for “good banking”

15. Information Technology
Front Office, Middle Office, Back Office computer systems
Commercial banks traditionally have used technology to support operations rather than a competitive weapon
Many banks in 2015 stuck with legacy, outdated systems – big problem!

16. Financial Markets Salesperson Trader Structurer
Quant (so-called “rocket scientists”)
Treasury management

17. Wholesale Banking Corporate Banking Project Finance Trade Finance
Leasing
Relationship management
Cash management

18. Retail Banking Deposit products Mortgage department “Cards”
Consumer loans
Branches and infrastructure

19. Capital Markets Investment banking business Originations Execution
Syndicate
Logistics

20. M&A Advisory business within investment banking Originations Execution
Research

21. Research Investment banking business Securities / new issue research
Stock markets coverage
Relative value research
Economic research