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COVER
STORY
Italian
Banks - Progress through Privatization
-- Katuri Nageswara Rao
Italian
banks have successfully progressed through the decade 1990-2000.
Banks have undergone consolidation, radically reducing their
number but their branches have increased due to the geographically
competitive pressure. Privatization has reached unprecedented
heights, covering 90% of the country's assets. Italian banks
generally conform to international standards with respect
to capital adequacy and governance. The degree of automation,
however, is not very high. Nonetheless, profitability in banks
has improved recently.
© 2004 IUP. All Rights Reserved.
BANK
STRATEGY
Japanese
Banks: Working on their Business Models
-- D Satish
After
more than a decade in trouble, Japanese banks have done well
this year. One major reason for this good show is that these
banks have shed their traditional look and embraced new business
models not only to adjust to the new realties but also to
compete effectively.
© 2004 IUP. All Rights Reserved.
TECHNOLOGY
IT
in Banks: The International Scenario
-- Katuri Nageswara Rao
Technology
has transformed the banking scene radically. While new delivery
channels have developed, branch banking continues to occupy
a place of primacy. Therefore, the present-day banker is not
yet totally faceless.
Banks are seen to be implementing CRM to live up to the expectations
of the customers. Novel products like retail banking and innovative
payment systems are essentially IT driven. So is online banking.
While Business Process Outsourcing (BPO) has become a strategic
issue for the banks, opinions differ on its advantages between
the US and Europe. IT has become essential in the new payment
and settlement systems along with efficient risk management
functions.
© 2004 IUP. All Rights Reserved.
INVESTMENT
BANKING
M&A
Success in Banking - Enhancing Value with BrandDueDiligence
-- David Haigh and Unni Krishnan
While
buying a bank what a buyer sees is mostly the NPAs, geography
and the overall cost, not the brand values, integration and
synergy value of the brands in its own portfolio. But the
value of a brand as an intangible asset can play an important
role in the selection or rejection of the target. In the recent
acquisition of GTB by OBC, the brand value of GTB's high degree
of commitment to the customer and products has been ignored
to a large extent. The major reason is the lack of information
provided by the company. Citigroup and HSBC are the two globally
recognized brands who continuously enhance the brand values
by systematically acquiring and integrating many targets into
their portfolios.
© The Hindu Business Line, October 6, 2004. Reprinted with
permission.
INVESTMENT
BANKING
Venturing
into a Bigger League
-- Surajeet Das Gupta
The
success story of investment strategy in retailing and software
is helping ICICI Bank to make bold expansion plans. It has
plans to make a whopping investment in real estate, management
buyout and mezzanine funding. While these are popular areas
and provide good returns, there are international institutions
like Warburg and Temasek, who already have big plans in these
areas and can make the competition tough for ICICI. Also,
there is a huge risk involved in these investments.
To reduce the risk and gain international expertise in these
areas, ICICI is exploring the possibility of an international
partnership.
© Business Standard, September 25-26, 2004. Reprinted with
permission.
RISK
MANAGEMENT
Basel
II: Capital for Market Risk
-- SK Kar
Basel
II has proposed a different treatment for the assessment of
capital for market risk and for investment securities in both
trading and banking books. Indian banks hold more than 75%
of the investment in government or semi-government securities,
and assigning specific risk weight according to Basel II is
a major challenge. Though they might need more capital they
have sufficient cushion as they hold around 1.8% as investment
fluctuation reserve and 2.5% as additional capital charge
for market risk.
But before adopting Basel II they need to develop an advanced
skill set as a bank's internal system is the principal tool
for the measurement of interest rate risk in the banking book
and in the supervisory response.
© 2004 IUP. All Rights Reserved.
BANKING
REGULATION
Running
for Cover
-- Raghu Mohan
Even
after five years of Capoor Committee's recommendation to revamp
the DICGC (Deposit Insurance and Credit Guarantee Corporation),
the regulator has taken no action, which may prove costly
for the corporation and system at large.
The major recommendations are to separate the insurance funds
for the commercial and cooperative banks, risk-based premiums
etc. Implementing the risk-based premium is a challenge for
the RBI. Also, there is a need for widening the scope of the
DICGC, which makes the system more reliable and stable.
© Business India, August 30 - September 12, 2004. Reprinted
with permission.
RECOVERY
MANAGEMENT
Securitization
Act: A Toothless Tiger
-- Dr. SB Kamashetty
Risk
is an important element of banking activity and will always
remain so. Risk is inherent in any business, but has to be
managed by adopting the various risk mitigating methods. Almost
all the PSBs are loaded with bad debts. The Government of
India has initiated several measures to address this problem
but none of them have been successful. However, the Securitization
and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 (Sarfaesi) appears to have more
flaws than strengths.
© 2004 IUP. All Rights Reserved.
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