DANH SÁCH THÀNH VIÊN NHÓM 4

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1 Đỗ Nguyễn Đức Huy 31211024314 huydo.31211024314@st.ueh.edu.vn

2 Lê Minh Khoa (nhóm trưởng) 31211025876 khoale.31211025876@st.ueh.edu.vn

3 Đoàn Thảo Linh 31211025934 linhdoan.31211025934@st.ueh.edu.vn

4 Vũ Ngọc Nguyễn Phương 31211026810 phuongvu.31211026810@st.ueh.edu.vn

5 Nguyễn Đan Vi 31211026447 vinguyen.31211026447@st.ueh.edu.vn

I. EOC Chapter 3

1. What trends are affecting the way banks and their competitors are organized
today?
The Changing Organization and Structure of Banking’s Principal Competitors:
+ Banking’s principal competitors - credit unions, savings associations, finance companies,
insurance firms, security dealers, hedge funds, and other financial firms.
+ All are affected by powerful forces such as rising operating costs and rapidly changing
technology.
+ A notable exception until very recently has been hedge funds.
+ All financial firms are starting to look alike, especially in the menu of services offered.
 Convergence.
 Great structural and organizational changes have “spilled over” into one
financial-service industry after another.
The tendency in recent years has been for most financial institutions to become more
complex organizations over time. When a financial firm begins to grow, it usually adds new
services and new facilities. With them come new departments and new divisions to help
management more effectively control the firm's resources.
Another significant factor influencing financial organizations today is the changing makeup
of the skills financial-service providers need to function effectively. For example, with the
global spread of government deregulation and the resultant increase in the number of
competitors in major markets, more and more financial firms are market driven and sales
oriented, alert to the changing demands of their customers and to the challenges competitors
pose.
These newer activities require the appointment of management and staff who can devote
more time to surveying customer needs, developing new services, and modifying old service
offerings to reflect changing customer demands. Similarly, as the technology of financial
services production and delivery has shifted toward computer-based systems and the
Internet, financial firms have needed growing numbers of people with computer skills and
the electronic equipment they work with. Call centers have grown in the industry to sell
profitable services and respond to customer problems. At the same time, automated
bookkeeping has reduced the time managers spend in routine operations, thus allowing
greater opportunity for planning and thinking creatively about how to better serve
customers.

2. What trend in branch banking has been prominent in the United States in recent
years?
In recent years, new full-service bank branch office expansion appears to have slowed
somewhat because the cost of brick-and-mortar buildings has soared. Moreover, electronic
access media have taken over many routine financial transactions and there may be less
need for extensive full-service branch offices. The trend that is prominent and grow faster
today is electronic branches which include:
+ Internet banking services
+ Automated teller machines (ATMs)
+ ATM networks dispensing cash and accepting deposits
+ Point-of-sale (POS) terminals in stores and shopping centers to facilitate payment for
goods and services
+ Personal computers and call-center systems connecting the customer to his or her
financial institution
The reason why electronic branches become prominent in the US is that operating costs are
far lower than conventional brick-and-mortar branch offices. A deposit made through the
Internet may be 10 times cheaper than the same deposit made through a nearby ATM drive-
up facility. Besides that, through many computer- and telephone-based delivery systems,
customers can check account balances, set up new accounts, move funds, pay bills, request
loans, and invest funds at any time. Also, if individuals owned an electronic account, they
do not need to change financial institutions when they move.

3. What is a bank holding company?

A bank holding company is simply a corporation chartered for the purpose of holding the
stock of at least one bank, often along with other businesses.
Many holding companies hold only a small minority of the outstanding shares of one or
more banks, thereby escaping government regulation. However, if a holding company seeks
to control a U.S. bank, it must seek approval from the Federal Reserve Board to become a
registered bank holding company. Under terms of the Bank Holding Company Act, control
is assumed to exist if the holding company acquires 25 percent or more of the outstanding
equity shares of at least one bank or can elect at least two directors of at least one bank.
Once registered, the company must submit to periodic examinations by the Federal Reserve
Board and receive approval from the Fed when it reaches out to acquire other businesses.

4. Are there any significant advantages or disadvantages for holding companies or the
public if these companies acquire banks or non-bank business ventures?
Advantages:
Access to capital markets in raising funds
+ Ability to use higher leverage (more debt relative to equity)
+ Tax advantages
+ Ability to expand into businesses outside banking by reducing competition
+ Be more profitable than banking organization that do not form holding companies
+ Diversifying sources of revenue and profits and reducing risk exposure
+ The failure rate for holding company banks appears to be below that of comparable-size
independent banks
Disadvantages:
+ Overcharging customers, for ignoring the credit needs of smaller communities, and for
accepting too much risk
+ Be required to claim greater efficiency, more services, lower probability of organizational
failure, and higher and more stable profits.
+ Multi-bank holding companies may drain scarce capital from some communities and
sometimes weaken smaller towns and rural areas
+ The rapid turnover of bank personnel, the lack of personalized service, and delays in
service when local office managers are forced to refer questions to the company's home
office

5. Can you see any advantages to allowing interstate banking? What about potential
disadvantages?
About the disadvantages of allowing interstate banking:
+ Interstate banking poses a danger to further consolidate financial resources in the United
States, particularly among larger banks located across the country. If the antitrust rules are
not effectively enforced, more concentration could result in higher pricing and poorer
service.
On the other hand, interstate banking can bring about positive abnormal returns for bank
stock:
+ It generates positive abnormal returns of bank stock. In addition, these banks are not tied
to one local economic area and appear to be less subject to failure.
+ Moreover, it may also bring greater stability by allowing individual banking organizations
to further diversify their operations across different markets, offsetting losses.

6. What relationship appears to exist between bank size, efficiency, and operating costs
per unit of service produced and delivered?
There are two possible sources of cost savings due to growth in the size of financial firms.
Economies of scale mean that doubling output of any one service or package of services
will result in less than a doubling of production costs because of greater efficiencies in using
the firm's resources to produce multiple units of the same service or service package.
Economies of scope imply that a financial-service provider can save on operating costs
when it expands the mix of its output because some resources, such as management and
plant and equipment, are more efficiently used in jointly producing multiple services rather
than just turning out one service. Fixed costs can be spread over a greater number of service
outputs. For example, with financial firms increasingly producing services via computers
and telephones, operating costs have fallen substantially. At the same time new laws and
regulations have made it possible for financial-service providers to establish smaller
branches inside retail stores, gain access to the Internet, and branch out more easily across
the nation. Besides, pursuing minimum operating costs and maximum efficiency makes
some sense for financial firms that seek maximum earnings for their owners. However, for
those financial firms wanting minimum risk exposure or the biggest market share, cost
control and efficiency would appear to have a lower priority.

II. EOC Chapter 4

1. Why is the physical presence of a bank still important to many customers despite
recent advances in long-distance communications technology?
- The physical presence of a bank is still important to many customers despite recent
enhancements in the long - distance communication technology and other internet
progressions because looking at the middle - aged generation of customers, the word
“convenience” has always referred to as location and they are not yet completely ready to
accept that on time and immediate access is the new definition of convenience.
- Nevertheless, several financial services are such that were and shall always remain reliable
only when the customer has access to them physically and not over internet which
somewhere bothers them about misuse of their data, which actually may or may not be a
real issue. For instance, keeping an eye on small savings deposits, accounts, small business
loans etc.
- The customers prefer physical access to the bank particularly when they happen to face a
problem with their service accounts, say in case, they believe they have been trapped into a
theft, their funds seem to be overdrawn, their estimation of account balance does not
reconcile with what it actually is, unusual bank charges are observed or frequent bouncing
of cheques etc.

2. Who charters new banks in the United States?

Only the banking commissions in each of the 50 states, the Office of the Comptroller of the
Currency (OCC) - a division of the Treasury Department and the state banking authorities -
can issue a charter of incorporation to start a new U.S. bank.

3. What are the advantages of having a national bank charter? A state bank charter?
Benefits of Applying for a Federal (National) Charter:
+ It brings added prestige due to stricter regulatory standards that may attract larger
deposits.
+ In times of trouble the technical assistance supplied to a struggling institution by national
authorities may be of better quality, giving the troubled bank a better chance to survive.
+ Federal rules can pre-empt state laws.
Benefits of Applying for a State Charter:
+ It is generally easier and less costly to secure a state charter and supervisory fees are
usually lower.
+ The bank need not join the Federal Reserve System.
+ Some states allow a bank to lend a higher percentage of its capital to a single borrower.
+ State-chartered banks may be able to offer certain services (e.g., real estate brokerage)
that national banks may not be able to offer.

4. What kinds of information must the organizers of new national banks provide the
Comptroller of the Currency in order to get a charter? Why might this required
information be important?
These kinds of information below are required for the organizers of new national banks to
the Comptroller of the Currency in order to get a charter and the reasons why those are
important:
+ Population and geographic boundaries information of the primary service area (PSA): The
PSA must have enough businesses and households to ensure an adequate customer base for
the new institution.
+ The amount of competing banks, credit unions, finance companies, and other competitors
are located within the service area. Their services, hours of operation, and distances: The
more intense competition is, the more difficult it is for a new financial firm to attract
sufficient customers.
+ The number, types, and sizes of businesses in the area: Information about demand of
businesses in the local area. - The traffic patterns in the area, adequacy of roads, and
geographic barriers to the flow of traffic: For choosing a suitable location.
+ Population growth, incomes, types of occupations represented, educational levels, and the
age distribution of residents in the proposed service area: The presence of well-educated
residents implies higher incomes and greater use of financial services. - Financial history of
the community served, the frequency with which new financial firms have appeared and
their track record: The proposed new institution might also become profitable and
experience growth.
+ Who is to own any stock issued? What amount of stock will be held by the organizers,
directors, and officers? New institutions can raise adequate capital to support its future
growth and protect the public.
+ How experienced are the organizers, management, and board of directors of the new
institution? Successful business people on the board and staff will help attract new accounts.
+ Organizers’ projections for deposits, loans, revenues, operating expenses, and net income
for the first few years: The quality of these projections may shed light on how much the
organizers of a proposed new financial firm know about the business.

5. What are the key factors the organizers of a new financial firm should consider
before deciding to seek a charter?
External factors the organizers should consider include:
+ The level and growth of economic activity. Is it high enough to generate sufficient service
demand? Often measured by the volume of retail sales, personal income, bank debits (i.e.,
check volume), and number of households and businesses in the service area.
+ The need for a new financial firm. Has the population grown or moved into new areas not
currently receiving convenient financial services? Often measured by population per
banking office, recent earnings and deposit growth, and the number and size of new
residential construction projects.
+ The strength and character of competition in supplying financial services. How many
competing financial institutions are there, and how aggressive are they in advertising their
services? This is often measured by the number of offices relative to area population and the
number of other financial institutions offering transaction accounts, savings plans, and
business and household credit.
Internal factors the organizers should consider include:
+ Qualifications and contacts of the organizers. Do the organizers have adequate depth of
experience? Is their reputation strong enough to attract customers?
+ Management quality. Have the organizers been able to find a chief executive officer with
adequate training and management experience? Will the organizing group be able to find
and pay competent management to fill the new institution’s key posts?
+ Pledging of capital to cover the cost of filing a charter application and getting underway.
Is the net worth position of the organizers strong enough to meet the initial capitalization
requirements imposed by regulation and cover consulting and legal fees? Because the
chartering process often covers months and may wind up in court if competitors file suits
before the new firm is allowed to open, do the organizers have sufficient financial strength
to see the project through to completion?

6. What are POS terminals, and where are they usually located?
+ Computer facilities in stores that permit a customer to instantly pay for goods and services
electronically by deducting the cost of each purchase directly from his or her account are
known as point-of-sale (POS) terminals.
+ POS terminals are increasing rapidly all over the world. In the United States the number
of POS terminals climbed during the 1990s from 50,000 to well over 100,000 as the 21st
century opened. The majority of the recently installed POS terminals have appeared in
gasoline stations and supermarkets. Among the market leaders in this field are MasterCard
and Visa, which sell their point-of-sale systems under the trade names MAESTRO and
INTERLINK.

7. What services do ATMs provide? What are the principal limitations of ATMs as a
service provider? Should ATMs carry fees? Why?
ATM’s services:
+ Providing customers with cash and accepting deposits and bill payments.
+ Issuing bus and train tickets, selling postage stamps, providing passes to athletic events
and other forms of entertainment, and selling gift certificates.
+ Making payments for purchases made at selected retail stores.
The principal limitations of ATM:
+ Do not rank high among those customers interested in personalized service (particularly
older customers).
+ Do not rank high in their ability to sell peripheral services, such as enticing customers to
take out a car loan or purchase a retirement plan.
+ Sharply diminishes depository institutions’ ability to sell other services. Less safe due to
the frequent incidence of crime, robbery and even murder of customers.
⇒ ATMs should not carry fees. Because the widening use of surcharge fees for ATM use
may cause some customers to reduce their usage of these machines in favor of human
tellers, pushing up operating costs.