Bank Fund Management System

Course : Managerial Finance Lecture : Marc Credit Hours : 3 Credits Semester Sessions : 3 Semester, 2021/2022 Session Prepared By : Kenzo LECTURE NOTES Bank Fund Management System The Management System referred to in this discussion is a bank's procedures for managing various operational patterns banking activities. This pattern is closely related to the centralized system decentralized management or system. There are four types of systems what we need to know, namely 1. Unit Banking System This system states that operational patterns apply banking within the scope of that unit alone, stands alone and has authority that covers limited activities The bank itself. In this system (UBS=Unit Bank System) Bank not open branches outside the district or province or limited to certain states such as the United States.for example. In the USA, banks in the state of Ohio cannot operates in Alabama, and vice versa. So, the Bank can only operate within its state or province just. An example in Indonesia is the Regional Development Bank (BPD). For example, BPD South Sumatra cannot operate in Lampung or BPD Lampung cannot operate in Jakarta, West Java or North Sumatra; because in every province, there are Separate Regional Development Bank. However, there aren't any.Head Office (Head Office) of all BPDs in Indonesia. Every BPDs have the right to autonomy in their respective regions and they have no structural relationship to each other. Every BPD is owned by each regional government. The main characteristics of banks that adhere to internal banking units the management system is: a. The organization is small b. Its operational scope is limited c. There is very little delegation of authority d. Credit decisions can be faster because the procedures are not complicated and directly handled by the Board of Directors e. Because the system is unitary (unitarism), then power can be collected in one hand. Sometimes things like this gives rise to certain weaknesses. 2. Branch Banking System Giant banks based in the United States adhere to this system. Also Banks in the state of California, specifically adhere to this system. The biggest and strongest banks in the world such as Citi Bank, Bank of America, Chase Manhattan N. A., American Express Bank, Hannover Trust Bank, and etc. have a work network (network banking business) in all corners of the world. In all national capitals, in fact major cities throughout mainland Europe and Australia has operational branches. Like for example Citibank and Bank of America, as well as Cha Manhattan Bank and American Express Bank, their branch in Jakarta is included Class III branch. The second class branches they were in Singapore, Hong Kong, Manila, Bombay & Bangkok. In Asia, Their class I branch is only in Tokyo, while the cities The other major ones are class III branches. Branches class I they are widely spread across mainland Europe, in several cities Middle East and Australia; while their branches in Latin America all have class II branch status. Banks This world giant is based in New York, the world's largest city and a major center of international finance and trade. Branch Banking System, where there is a Central Office and several branches in other cities with a Management system modern integrated, planning and decentralized authority These funds and credits initially developed in England beginning of the last century. This system has several advantages, but it also contains some weaknesses. Below, we reveal them one by one. Advantages: a. Large organization with extensive operational network b. The Central Headquarters can think about development planning.Banks in the long term perspective, while Branches branches and regional offices can think about plans short-term. c. Determination of line and staff organizational systems with insight area can be furth developed d. There is a clearer and more stable delegation of authority, especially in the authority to grant credit based on branch status, for example - Class three branches authorized up to IDR 25 million - Class two branches are authorized up to IDR 50 million - First class branches authorized up to IDR 100 million - Regional Head has authority up to IDR 200 million (above that amount of course to the Head Office) e. The business fields financed by the Bank can be more varied because it concerns various regions, even outside country. Weaknesses a. For large amounts of credit (eg up to the Board of Directors) It takes quite a long time because you have to go through levels status, for example to the branch above it and the Regional Office. b. Often uneven managerial and technical skills in branches, resulting in delays in know the immediate consequences of a change economy or trade that has a broad impact for fund and credit management.