Bank Management Goals and Structure
Name:
Instructor
Course
Date
In essence, management in any business set up is the act of getting people together with an aim of accomplishing desired objectives and goals using the available resources effectively and efficiently. With this in mind, bank management comprises of organizing, planning, leading staffing and controlling bank institutions. It is essential noting that, bank management ensures that the banking institution is managed effectively with goals along with effective structures. With this regard, this paper seeks to analyze the banking management in addition, examines how the overall structure manages various challenges.
Goals and Structure of Bank Management
In facts, the overall goal of bank management is to establish the performance and the developmental goals that align with the visions and the strategy of the entire organization. According to Kennedy (1958), the chief goal of bank management is to improve the organizational alignment through cascading employees to align with the organizational strategies thus ensuring effective work performance. In addition, bank management consistently develops successful work performance through monitoring as well reporting on the progress and any are that require improvement. As a result, it establishes automated workflows thus, having a guarantee of progress. In conjunction with this, bank management recruit and hires people that meet qualifications in order to perform effective work performance.
In facts, the bank management list includes the board of directors, executive committee, corporate governance and other layers. In this regard, Kennedy (1958) raises a contentious issue that, banks may use the functional strategy through separate divisions that a bank engages.. Typically, banks have a formal structure that result in more bureaucracy than other companies in that, banks encounter assessment from government regulators. It is with no doubt; the bank management structure enables companies to create well-defined responsibilities through delegating duties.
Role of a Bank’s Board of Directors
In essence, board of directors is appointed by shareholders to supervise and govern the bank operation thus, safeguarding shareholders investment. It is with no doubt; the duties and responsibilities of the board of directors are numerous. The foremost duty of the board of directors is to select the overall management. In this regard, Kennedy (1958) argues that, the board selects and appoints the top bank executives officers. The board of directors review work performance and in cases when the executive officers work is unsatisfactory they recruit other people.
Secondly, the boards of directors are responsible for formulating strategies and goals for the bank. With this in mind, the board assists in setting priorities for the bank thus, guarantee progress. It is important noting that, not only does the board of directors set out goals but; assist in managing risk. With this in mind, the main duty is to limit the exposure of the excessive risks which in this case include legal, financial along with the reputation. Through managing risk thoughtfully, they maintain the balance between caution and enterprise.
In addition, board directors allocate resources in the sense of taking money from people that want to save; to people that want to be lend. In this case, deciding on whom to lend is the foremost responsibility of the board of directors. In conjunction with this, Mac Donald and Koch (2009) argue that, boards of directors assist in resolving conflicts. It is a mandatory for the board of directors to step in resolving conflicts because; if not resolved they can collapse the entire banking institution. It is borne in mind; the bank board of directors helps to protect stockholders in the sense that, many banks ensures board members own company stock in order to oversee the in success running of the bank. Subsequently, board of director’s conduct periodic audits of the bank, which as result, shows the progress of the bank. The audits are both structural and financial in nature. They examine the bank’s books along with management practices.
How Banks Manage Liquidity
According to Mac Donald and Koch (2009), banks carefully manage their liquidity risk through monitoring the relationship of their short-term liabilities as opposed to short-term assets. It is with no doubt; the management of risk is accomplished through applying stress tests to all liquidity components thereby, determining what would happen if circumstances were to vary. In this regard, many banks issue balance sheet liabilities which represent assurance of the money been paid by the third part beneficiary if loans or other debts are not paid. Nevertheless, during economic turmoil periods, the notational liabilities are utilized being paid by the bank. With this regard, the banks account for these incidences in cases when the liquidity risk arrangement is initiated.
In conjunction with this, bank regulators maintain the periodic stock analysis, which as a result, assist the bank management to determine the effects of various events. For instance, when the short-term assets of banks are cut in half because of the revaluation of securities and bonds held. For this reason, other short term assets are replaced with the devaluation. Additionally, the bank borrows funds from the Federal Reserve Bank via discount window.
How banks manage credit and interest rate risk
It is a well-documented fact; bank manage credit and interest rate risks through matching assets with liabilities, corresponding assets considerations and ensures interest rate of balance works. Under Matching Assets Consideration, banks continually adjust outstanding of liabilities with maturity structure of the new loans made daily. Certificates of saving and deposits accounts are interest rate, which banks prepare to offer competitive rates. With this regard, the issue of the structure maturity of liabilities is essential in that; it ensures the instantaneous line of commitment. With this in mind, banks hold meetings with businesses and individuals to prearrange lending if required. These agreements are written are usually written for a fee and one year time frame.
Under assets matching reflections, the bank determines how much loan is funded. On this basis, banks determine hard estimates of the aptitude to pay. Infrequently, loans are accounted short of maturity in order to benefit from liabilities and assets. In conjunction with this, banks ensure interest rate balance works. The fundamental aspect of this is that, balance of assets impact bank earnings. With this in mind, banks ensure they meet regulatory issues over loan diversification, loan making and liquidity.
In conclusion, it is important noting that, bank management play fundamental roles in organizing, planning, leading staffing and controlling bank institutions. With this in mind, the bank management structure enables companies to create well-defined responsibilities through delegating duties. This implies that, for any transaction to be effective it requires to be monitored by the structure of banking management. With this and more, this paper has analyzed the banking management in addition, examined the overall structure in managing various challenges.
References
Kennedy, W. (1958). Bank management. California: Bankers Pub
Mac Donald, S.S and Koch,T.W. (2009). Bank Management. New York: Cengage Learning
Use the order calculator below and get started! Contact our live support team for any assistance or inquiry.
[order_calculator]