Group Assignment (20%)
Students are to divide themselves into groups of FOUR members. Each group is supposed to choose one local or foreign bank and each group must choose a different bank. The purpose of this group assignment is to explore the liquidity management issues faced by financial institutions when they establish branch offices. The group assignment is due on Friday, 12th March, 2010 (Week 8) with No Exceptions.
When an established financial institution wishes to enter new markets or when its valued customers move, an important vehicle for market entry in the modern era has been the creation of new branch offices, offering many, if not all, the services also available from the main office. Branches are usually much cheaper to establish than chartering whole new financial-service corporations. Less capital is required, the application for new branch offices is less detailed than usually required for a new corporate charter, and there is usually much less duplication of staff because a new branch doesn’t normally require a full slate of officers and operations personnel as would a whole new corporation.
The location, design, and services offered by a branch office depend, first, upon the preferences of customers and, secondly, on the preferences of management and employees. Marketing research suggests that most customers rate an atmosphere of confidentiality, homeliness, and privacy in carrying out their personal transactions as the most important features of new branch offices. And customers and employees seem also to rank efficiency high in describing the arrangement of an ideal branch office. Among the most desirable sites for full-service branch offices today are those with at least some of the following characteristics: heavy traffic count, large number of retail shops and stores, above average age of local populations, area contains substantial number of managers, business owners and professionals, steady or declining number of service facilities operated by competitors, above average population growth, above average population density, relatively high target population per branch, and above average levels of household income.
The larger size and different configuration of operations will change its liquidity management. In fact, it has become essential that the main office for a branch network to work closely with the branch managers on their liquidity needs and sources. Each branch office normally has a different market niche and liquidity needs and sources. You are the Treasurer of the bank you have chosen and your Vice President of Operations is requesting a strategic report on liquidity management issues that would address each of the following questions.
1. How is liquidity defined? (4m)
2. How is liquidity measured at the branch office level in relation to the bank organization as a whole? (6m)
3. How does the branching structure change liquidity risks for the main office? (10m)
4. How does the branching structure affect the liquidity risks of each individual branch office? (10m)
5. Does it make sense to evaluate the liquidity of the consolidated branching organization or should liquidity analyses focus on each operating branch as well as the main office? (10m)
6. How can the bank communicate its liquidity strengths to outside observers who only can obtain data on the consolidated bank organization? (10m)
-Bank selected = J.P. Morgan Chase Bank Berhad
