Sunday, November 16, 2008

What should the banks do next? Part 1


Based on Wikipedia, the free encyclopedia, A banker or bank is a financial institution whose primary activity is to act as a payment agent for customers and to borrow and lend money.

Of course, there is the treasury (investment) function which in recent years is the Cash Cow of most banks.

For many years, banks have been growing at break-neck speed. The tremendous growth has produced redundancies and inefficiencies. It was not a priority to be dealt with at that time. They were more concern with more growth, riding on unprecedented economic prosperity.

A series of U.S. legislative moves in the 1980s made subprime lending possible. Mortgage securitization made the banking scene more complex than ever. Eventually the bubble burst, the subprime-led financial tsunami swept through the world affecting the real economy.

What should the banks do next?

The banking institutions should go back to the basics and take this time to increase steady revenue (interest and non-interest income), reduce cost, increase efficiency and improve service quality.

*to be continued in part 2*

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