You’ve probably been searching the web for a complete explanation of the term “bank management”. But the few sources you checked out didn’t give you want you really want.
You’ve come to the right place.
Here, you’re going to learn everything you need to know about bank management. Not only that, a breakdown of the terms will also be provided.
But first and foremost, let’s first understand banking before delving into the topic proper.
What is Banking?
To put it simply, banking is an activity performed by a financial institution to serve as an intermediary between you and other businesses during transactions.
Such transactions could be payment services, loans, savings, investments and others. A banking system helps make business transactions smooth, easy and fast.
Now that we have an understanding of what banking is, let’s look at bank management.
What is Bank Management?
To ensure a smooth running of the banking system, it must be properly managed. So banking management takes care of all banking activities including risk management, planning and policy formulation, profit monitoring and other relevant roles.
A bank management system ensures proper supervision of the processes of banking to maximize profit.
When we discuss bank management, some relevant topics are often considered. In other words, what are the most important topics of bank management?
Principles of bank management
There are four main parts of bank management. These are as follows-
- Liquidity management:
Managing financial obligations through liquidity or cash money
- Asset management:
Assent management relates to trying to obtain high-interest rates from borrowers and reducing the risks of those loans.
- Liability management:
Liability management is about trying to find cheap funds and use them as a loan.
- Capital adequacy management
Capital adequacy management is maintaining a minimum level of capital adequacy in the bank. Available capital should not be too little or too high.
The objective of bank management:
The main objective of bank management is to maximize the profit of the bank maintaining proper management of liquidity, asset, liability and capital adequacy. For achieving this, banks must strictly follow some standards and organized system.
Other objectives of bank management include
- To meet the challenges of the changing environment
- To improve customer service
- To introduce a new scheme
- To improve housekeeping
- To cope up with new technology for bank
- To modernize office equipment
- To train employees on a regular basis
- To improve work ethics
- To improve the overall health of the bank
- To improve organizational culture and value system
- To improve corporate social responsibility.
- To improve productivity through participative management
- To improve inspection and special audit
- To follow the instructions and stick to rules and guidelines
- To improve the human resources of the bank.
Functions of bank management:
Following are the major functions of bank management
- Deposit mobilization
- Financial management
- Project evaluation
- Credit management
- Credit planning
- Liquidity management
- Investment management
- Organizational management
- Marketing management
- Office management
- Maintainance management
- Information management
- Legal management
- Portfolio management
- Assets management
Relevant Topics in Bank Management
If you’re interested in the topics of bank management, you can’t but talk about…
- Loan recovery
- Treasury management
- Asset liability matching
- Risk management
- New products roll out
- Managing digital models
- Credit loss management
- Branch supervision
- Revenue streams management
Knowing the topics on bank management isn’t enough, you should also have an idea of its importance.
Importance of Bank Management
The following are the reasons bank management is important:
- It involves the regulation of service fees and charges
- It manages approval and disapproval of bank loan operations
- It manages bank reserve
- It supervises the recruitment of directors
- It controls the issuance of deposits
- It identifies a suitable location for bank operations
- It ensures capital adequacy
1. Regulation of service charges
One of the aspects of banking is the management ensuring that bank fees and charges across boards are unified. It is also concerned with setting up reasonable market prices for banking products and services. It is important that this regulation meets the demands of customers. That way, the bank is able to track performance and monitor sales volume.
2. Approval and disapproval of loan request
In banking, part of the core responsibilities of the bank managers is to supervise the request for the loan. They monitor the processing of loan requests. As loan operation is a crucial matter in banking, it is important there is an adequate assessment of who is given loan and for what purpose.
3. Bank reserve management
The reserves of any bank are their cash holdings, which majorly from the deposits held in the bank accounts with the central bank. This also falls into one of the aspects of banking that is duly managed.
4. Supervision of directors recruitment
Another significant aspect of banking management is the supervision of recruitment of the directors. To ensure the smooth running of the bank, the hiring of the directors is an essential process in the management system.
5. Controls Issuance of Deposits
One of the core functions of the banking sector is that it controls the issuance of deposits.
6. Suitable environment for bank operation
Among the many aspects of managing a bank is finding the best location for the branching. In order to achieve this, the bank has to put several factors into consideration.
7. Capital Adequacy
Is a bank capital adequate? This is a revenant question especially when it is considering serving your teeming customers seamlessly. Effective management of banking would include a look into the capital adequacy.
Having looked at the importance of bank management, let’s quickly check out the advantages and the disadvantages of the banking system.
Advantages and Disadvantages of the Banking System
As every aspect of human activity has its advantages and disadvantages, so does banking. The following are the advantages and disadvantages of the banking system.
Advantages of Banking System
The banking system helps to…
- Deposit money safely
- Get loans for investment and business growth
- Regulate cash flow in the economy
- Secure your assets
- Invest easily and safely
- Reduce unemployment
- Ensure community development through corporate social responsibility
- Curb financial irregularities and fraud with their sophisticated management system
- Enjoy easy access to financial transaction systems
- Encourage SMEs through loans and microfinance services
Disadvantages of Banking System
The banking system…
- Sometimes rips you off with excessive bank charges and service fees
- Charges high-interest rates
- Gives very tough conditions for loan requests, thereby crippling startups
- Sometimes engages in unhealthy competitions among bank branches which often affects you the customer
- Is also prone to hacking and system failure
- Also gives a customer a lot of headache due to slow decision making
- Sometimes mandates customers to go to their office for the solution to transaction issues
The above explanation of the merits and demerits of banking could help you make an informed decision with the type of bank you deal with. Besides knowing why the banking system operates as it does, you can also exercise caution as you deal in important bank transactions.
Having said that, let’s now discuss the person behind the management of the banking system – the bank manager.
The question you want to ask is, who is a bank manager? What do bank managers do and how can I become a bank manager?
The Role of a Bank Manager
A qualified professional charged with the responsibility of seeing that a banking system is properly coordinated is the bank manager.
This person performs several banking management functions among which are:
- He is in charge of the branch office of a bank
- Formulating and Analyzing banking decisions as they relate to customer satisfaction and profit maximization
- Preparing and analyzing the branch’s financial statements
- Documenting and interpreting financial information for the bank’s clients
- Ensuring professional customer service and satisfaction
- Interviewing, vetting and recruiting qualified employees
- Seeing to accurate budget reports and analysis
- Rendering relevant advice for best procedures and financial management
- Overseeing financial reports bothering on taxes and other regulatory agencies
- Marketing branch to the community to attract business opportunities
How to Become a Branch Manager
To qualify as a bank manager, ensure you meet the following criteria:
- Have a bachelor’s or Master’s degree in either Finance, Business Management, Accounting or Economics
- Have a flair for Mathematics and calculations
- Have exceptional knowledge of accounting, finance, budgeting and cost control
- Have strong analytical and customer service skills
- Be a strong team player
- Have effective decision making and multitasking skills
- Be creative and manage time well
- Pay attention to details and a fast learner
- Have exceptional oral and written communication skills
- Be an experienced user of financial programs and software
But, to be candid, the best thing to do if you’re looking to become a manager is developing yourself. If you look at the above criteria, you’d see that you need ample time to develop and master them.
When you consider the definition of a bank, you’d realize that everything that revolves around it is rooted in arithmetic. So, if there’s any skill you’d need to master very well if you’re looking to become a bank manager, it is that having sound knowledge of numbers is essential.
Having analyzed some of the core components of bank management, it’s equally important to look ahead. By looking ahead, we mean the likely changes that may affect the banking system in the future.
In other words, a look into the future of banking is also relevant. That’d give us an idea of what to expect. So that when the changes start to manifest, we’d not be caught unawares.
The Future of Bank Management
In the nearest future, how will the banking system be managed? Below are the different ways in which the banking industry will be revolutionized:
1. The emergence of fintech
The increasingly consistent way in which the banking sector is being changed by financial technologies leaves us with many questions. Will the traditional banking system be able to withstand this? In the future, there probably will be no need to go into a banking hall for any transaction.
2. The evolution of mobile banking
With a vast number of the world population having access to a smartphone, nearly everything that has to do with banking activities will completely be taken off the desk of a bank building. Who needs to go to the bank when you could just press a button on your phone and your problem is solved?
3. Change In customer behaviour management
With a technology that allows the bank to track customer behaviour based on past action and location, managing products and services in a way that they fit customer’s wants has never been easier.
- With the availability of such sophisticated technologies as Artificial intelligence (AI), bank management will no longer involve in “selling”. Instead, it will be a platform people come together to create banking solutions.
- Unlike what we currently have as customer service with its human errors and other limitations, the future of banking will have the most customer-friendly and user-centred care service system with instant solutions.
The banking system is a solution-based one. From its management to its benefits and what it takes to become a bank manager, bank management is total and thorough. But, in the future, we cannot but wait for a complete way of engaging in bank transactions.