Why Are Banks Embracing Mobile Banking Eagerly?

Introduction

Looks like banks were waiting for an opportunity of this sort to come by. The good part is that even state run banks in developing economies, with their cobwebbed style of functioning are enticed to pull this rabbit out of their hats. What are we talking about? It’s Mobile banking!

How about empowering yourself with banking on your palms? Read this article to let you know how.

How banking became mobile

Prior to embracing mobility, banks had invested hugely into computerizing their infrastructure, in tune with times. The arrival of internet prompted banks to set up websites and offer some over-the-counter services like account balance enquiry, cheque requests, money deposit status, enhancements to account and so on. Banks were keeping their customers informed via the Short Messaging Service utility in mobiles. Notifications of money in their account or transaction alerts were communicated via SMS. These do exist even now. All that the customer had to do was register his/her mobile phone number with the bank. After completing a few verification steps, the customer was brought into the bank’s information service system.

But the customer yearned to do more than just receive alerts. Questions, provoking capability like “I want to transfer money to a friend’s account but I’m stuck in this highway “, “I want to check my tax credits,”, “I want to pay my utility bills” and such umpteen questions made their way into the strategy rooms of banks. Given the stiff competition in today’s financial services industry, banks were looking for ways to extend their web based services to other, perhaps nimble domains. The introduction of wireless application protocol for mobile web aptly enabled banks to steamroll services into mobiles, thus heralding the era of banking mobile apps.

Why are Software Companies Salivating?

Banking and insurance constitute the largest chunk of any software developing company’s revenues. They had already developed the web versions for services which were well received. Now the prospects of turning these services into mobile format meant another huge opportunity.

But all of them cannot replicate the web model to mobile platform as it is a different ball game. That is why banks started courting niche mobile application development companies developing dedicated banking apps. App developers in these firms use the mobile enterprise application platform to develop apps offering a familiar feel of the interface and ease of navigation to the customers.

Banking via mobile has brought about empowerment to even the rural populace that can afford a mobile. Customers can check their account balance, transfer funds, place requests for services, halt fraudulent transactions, view tax credits and so on, while being mobile. Mobility companies indulge in the following mobile banking app developments:

· Android application development

· Windows phone application development

· iPhone application development

· iPad application development

· Blackberry application development

These platforms provide scalable opportunities to develop and enhance banking related apps.

What is the future of mobile banking?

Banking is set to undergo further changes in the coming years. Tablets and phablets, also mobile devices, offer another opportunity to develop customized banking apps because of their larger screen size and navigation patterns. The features and safety offered are expected to increase, requiring rework of architecture to keep the app light, robust and fast.

Mobile banking is here to stay. Its metamorphosis in the coming decades would be a trend worth following.

Why Individuals Opt For Online Banking Services

Being financially stable is important for individuals. Of course, it is essential to have sufficient finances in case that you want to invest in items that can improve your lifestyle such as a house or a car. With this, more and more individuals save a part of their salary in banking institutions.

This is the most convenient way to secure your finances. However, going to banks can sometimes be very stressful. Fortunately, reputable banking institutions now provide an easier way to accomplish banking tasks with the help of online banking services. Listed below are some of the advantages of online banking.

Convenience

One of the best features of online banking is convenience. Rather than spending time going to banks, you can simply accomplish banking tasks right in your mobile phones or computers. The need to wait in lines when going to banking institutions is also eliminated. Not to mention, there is no need to spend money for fares or gas to go to banks. Hence, you can manage your time easily and efficiently.

Availability

When it comes to availability, individuals can make use of the mobile phones and laptops. During the past, individuals need to go to banking institutions in order to check their savings. With the use of online banking services, you can easily check your bank accounts with just some clicks of a button.

Safer and more secured

One of the dangers when going to financing institutions is the threat of theft or simply of losing your money. As a result, online banking institutions have reliable security services that offer a safer banking experience. To accomplish banking tasks safely, it is best to opt for online banking.

However, there are is still a threat with online banking. Therefore, you need to make sure that you make use of personal gadgets and ensure that you don’t share your password or login details to anybody when doing bank transactions to be sure that your personal information is safe and secured.

Enjoy amazing features

Most of the time, online banking is used to view or check your account. Luckily, financing institutions have added features in their online services. As of today, individuals can also pay their bills online. They can also transfer funds to other bank accounts easily. And, individuals can set up recurring bill payments. As a result, individuals can accomplish banking tasks easily and efficiently. Other banking tasks like ordering cheques can also be made online to help you get checks immediately.

With these features, individuals are rest assured that their banking needs are properly accommodated, which can help make their lifestyle better and more stable.

Is Banking Account Online Really Safe?

The history of banking dates back to the ancient times; in fact, the earliest banks were the ancient religious temples. People then stored their golds and other precious belongings in the temples because these places were strongly built, were always guarded, and most of all, were sacred. In ancient Greece, financial transactions were also done in temples and credit notes were already being used to reduce risks in carrying and carting money from one place to another.

Since those times, banking evolved in many aspects. Banking regulations were formulated, additional services such as lending became part of banking and things such as adding interest to loans became common bank practices. Now with the emergence of the latest technologies and the Internet, banking has taken a new face. People can now access bank account online and transact business with the bank with greater convenience and security through the Internet.

Online Banking

Performing bank transactions through the Internet is generally referred to as online banking or Internet banking. This form of banking allows consumers to directly access their bank account online (usually savings account) and obtain any information about their account. This direct-to-consumer system is faster and more convenient for consumers compared to traditional banking systems. Especially if you are to withdraw money after banking hours, this banking system may be your easiest and sole solution. You just have to connect to the Internet trough your personal computer and access your bank account in an instant.

Online-only banks

Many popular banks offer online banking as one of their services; however there are also some banks that transact businesses solely online, so you have no other choice but to access your bank account online and avail of other bank services through the Internet. The latter are referred to as online-only banks. These banks virtually exist yet they provide services traditional banks offer, only that they are done through the Internet.

Benefits

Today as more and more time are consumed by people in using the Internet in several activities, including getting access to their bank account online, online-only banks proved to be more convenient and beneficial. Aside from the fast transactions, one may also benefit from the bank’s high interest rates and budget-friendly transaction fees considering that online-only banks operate only online. Cost of processing bank transactions are relatively lower so the bank can afford to give consumers high interest rates on savings account.

Online Banking Industry

Although a lot are using the Internet, online-only banking industry began to grow only sometime in 2000 when a popular online bank devised much simpler and more convenient banking transactions online and paid consumers high interest rates. Earlier banks that tried this form of banking did not succeed because of their expensive transaction fees and lower interest rates. Moreover, procedures in getting access to bank accounts online were more complicated and consumers were afraid of Internet fraud. The industry eventually grew bigger and more stable beginning 2003 as the use of the Internet got more commonplace, prevalent and secure.

Everyday Banking – Easier, Faster, Safer

The everyday banking is all about the online banking system. It is not everyday that you can afford to stand in the queues in your bank to perform various banking transactions. This is where the online banking system comes at your rescue. Now, you can easily access your bank account and monitor its activities right from the comfort and privacy of your homes. All you need is a computer with Internet connection to perform the various everyday banking activities.

Futures Of Everyday Banking

Following are some of the exciting features of everyday banking.

o The banking system allows you to get your bank statement right in the inbox of your email account. You can even use this electronic format of bank statement with the various personal account software programs. Such things will specially be beneficial for businesspersons who do not have time to go to bank to get their bank statement.

o The facility to transfer funds electronically from one account to another in the same bank or in any other bank is one of the greatest features that everyday banking has to offer.

o It is a very cost effective way to perform various banking transactions.

o With the latest innovations and the advent of new advanced technologies, everyday banking has now become much faster as well.

Everyday Banking: Is It safe?

Many people, especially those who do not have much knowledge regarding the latest innovations in Internet, do not consider the everyday banking system safe. However, security is now not much of an issue with most of the online banking systems. You can perform the various banking transaction without worry, but it is important for you to keep your personal information private and secure, such as your login ID and password. The only threat to the everyday banking system is where you share your id or password with a third party. Otherwise, the latest Internet technologies ensure that such an online banking system is hundred-percent safe.

This way, we see that the everyday banking system simplifies your banking experience. It has made the financial life much easier than ever before. Again, since it makes the procedure easier and much faster, you get more time to devote for other productive things. However, it is important for you to make sure that the online bank where you want to get your account opened is a legitimate and established one. In order to earn a safe and pleasant everyday banking experience, it is important for you to be aware of your rights as a consumer.

The Public Option in Banking – How We Can Beat Wall Street at Its Own Game

In Wall Street’s latest affront to the public trust, the nine mega-banks graced with $125 billion in taxpayer bailout money under the Troubled Asset Relief Program (TARP) were reported on July 30, 2009, to be paying out billions of dollars in bonuses to their executives. At least 4,793 bankers and traders received more than $1 million each in bonus payments, although it was one of Wall Street’s worst years on record. After months of investigating banker compensation, New York Attorney General Andrew Cuomo said, “The repeated explanation from bank executives that bonuses are tied to performance in a manner designed to promote (national economic) growth does not appear to be accurate.”

To say that it was an understatement would be an understatement. The bonuses paid to executives not only were not tied to national economic growth but were not even tied to some reasonable percentage of company profits. In fact they were generally greater than the net income of the banks. Morgan Stanley, for example, had $1.7 billion in earnings and paid $4.475 billion in bonuses. Goldman Sachs had $2.3 billion in earnings and paid $4.8 billion in bonuses. JP Morgan Chase had $5.6 billion in earnings and paid $8.69 billion in bonuses. JP Morgan’s largesse involved showering 1,626 of its favorite execs and traders with bonuses of $1 million or more. For most people, a “bonus” is a few hundred dollars at Christmastime. A million dollars is what you work a lifetime to try to save, and few people reach that goal. Even Citigroup and Merrill Lynch, which have been called zombie banks, paid $5.33 billion and $3.6 billion in bonuses, respectively — although they lost more than $27 billion each in earnings. The bar for merit is apparently so low that you’re entitled to a bonus if your zombie bank simply keeps breathing!

These blatantly inflated bonuses are just the last in a litany of abuses by those same profligate banks that nearly destroyed our economic system. If the derivatives on their books were “marked to market” (valued at what they would fetch on the market), the banks would be bankrupt, and their employees would be out of a job. Instead, they have been allowed to inflate the value of their “toxic” assets – and sell them to the U.S. government at the inflated value. Then they have taken the money they got from the government at these inflated prices and paid back the TARP money they received – allowing them to post inflated earnings and reward themselves with inflated bonuses! Many people feel that these bankers are thieves stealing from the public till who should be looking at jail time. But who is there to stop their parade of outrages? No one in Congress, the White House, or the news media is calling them on the carpet for it. As Senator Dick Durbin said recently, Wall Street owns Congress; and that is also true of the major media.

We may not be able to stop them, but we can join them. We the people need to play the bankers’ game ourselves. Even corporate giants such as General Motors and WalMart have now gotten into the banking game and are easing their credit problems by forming their own banks. The U.S. public sector is late to the party. States, counties, public universities could take the lucrative system the private banking industry has created for itself and turn it to productive use in the public interest.

KEEPING THE BANKS HONEST WITH SOME PUBLIC COMPETITION

In President Obama’s July 17 weekly address, he repeated his call for a public option in health care, in order to “increase competition and keep insurance companies honest” and to “put an end to the worst practices of the insurance industry.” The same call needs to be made for a public option in banking. In some countries, publicly-owned banks have operated alongside privately-owned banks for decades; and in those countries, the current crisis has served to show that public banks generally do a better job of serving the people and protecting their interests than their private counterparts.

In Canada, the trendsetter in public banking is the province of Alberta. Alberta’s publicly-owned banking system, called Alberta Treasury Branches or ATB, was initiated during the Great Depression to give the private banks a run for the public’s money. According to a government publication titled “These Are the Facts: An Authentic Record of Alberta’s Progress, 1935-1948”:

“The Treasury Branch system enables the people to pool their financial resources and to use these resources for their mutual benefit thereby enabling them to progressively free themselves from the stranglehold of the existing financial monopoly. These Treasury Branches provide effective competition for chartered banks thereby ensuring banking services at reasonable rates.”

From 1929 to 1933, the average annual income in Alberta had fallen from $548 to $212, a staggering 61 percent drop. Interest payments continued to bleed the farmers of cash, and taxes had increased. In 1935, Albertans decided they wanted a change and swept the Alberta Social Credit Party into power. In 1938, the system of Alberta Treasury Branches was set up literally as a branch of the provincial government. The stated goal of the ATB was to “provide the people with alternative facilities for gaining access to their credit resources.” Bankers initially scoffed at Alberta’s attempts to establish a competing economic system, but Albertans had high hopes and rushed to deposit their meager savings in the Treasury Branches. The government invested in the ATB only once, contributing $200,000 in 1938. That was all that was necessary, as the system was self-funding after that. By 1946, the ATB was turning an annual profit of $65,000. According to a booklet titled “Albertans Investing in Alberta 1938-1998,” by 1998 the ATB had remitted $68 million to the provincial government.

In India, public sector banks also operate alongside private sector banks. Privatization has made significant inroads into India’s banking system, but fully 80 percent of the country’s banks are still government-owned. Before the current crisis, neoliberals criticized India’s public banks for being oriented more toward serving the customer than turning a profit; but studies showed that the public sector banks were out-performing the private sector banks in terms of customer satisfaction. Today, when the credit crisis has hit the aggressive private international banks particularly hard, customers are fleeing into the safety of India’s public sector banks, which have emerged largely unscathed from the credit debacle. The public banks have been credited with keeping the country’s financial industry robust at a time when the private international banks are suffering their worst crisis since the 1930s.

In China, private-sector banking has also made some inroads; but state-owned banks still predominate. In a June 2009 article titled “The Chinese Puzzle: Why Is China Growing When Other Export Powerhouses Aren’t?”, Brad Setser noted that nearly all countries relying heavily on exports for growth have experienced major downturns and remain in the doldrums — except for China. When China’s external markets fell off, the government turned its credit machine inward to domestic development. Its state-owned banks engaged in a huge increase in lending, with local governments and state enterprises borrowing on a large scale. The result was to create a real fiscal stimulus that put workers to work and got money circulating again in the economy.

In the United States, the trendsetter in public banking is the state of North Dakota, which has owned its own bank for nearly a century. North Dakota is one of only two states (along with Montana) that are currently not facing budget shortfalls. Ever since 1919, North Dakota’s revenues have been deposited in the state-owned Bank of North Dakota (BND). Under the “fractional reserve” lending scheme open to all banks, these deposits are then available for leveraging many times over as loans. Other banks in the state do not see the BND as a threat because it partners with them and backstops them, serving as a sort of central bank for the state. BND’s loans are not insured by the Federal Deposit Insurance Corporation (FDIC) but are guaranteed by the state. North Dakota has plenty of money for student loans, makes low-interest loans to startup farms, has the lowest unemployment rate in the country, and is generally not feeling the pinch of the credit crisis at all.

THEORY AND PRACTICE: THE PROOF IS IN THE PUDDING

A bank charter brings with it the privilege of creating “credit” simply as an accounting entry on the bank’s books. The flaw in the private banking scheme is that banks create the principal portion of their loans but not the interest, which is continually drawn off the top as profit. New borrowers must continually be found to take out new loans to create this extra profit, making private banking effectively a pyramid scheme; and like any pyramid scheme, it has mathematical limits. Today, those limits appear to have been reached. Personal and national debts have gotten so large relative to incomes that it is no longer possible to maintain the fiction of solvency. We soon won’t have the money even to pay the interest on our existing debts, let alone to incur new ones. Public banking does not suffer from that flaw, because interest is not drawn out of the system but is returned to the public coffers. Public banking is thus mathematically sound and sustainable.

That is the theory, but there is nothing so persuasive as putting it to the test. Like with the public option in health care, we need to pit the public banking option against the private banking option and see which works best. My money is on the public option.

For citations, see the author’s website below.

Is Your Bank in Immediate Danger of Failure?

As the Dow dips below 10,000, it’s not just your investments that might be at risk.

Your bank could be, too.

Let’s face it: The global economy is still rough. The European debt debacle continues to spread from one country to the next, with no one sure where it will end. Here at home, the recovery is soft at best.

The best way to evaluate the economy is to ignore the mishmash of indicators that are released each day and focus on the one metric that really matters. It’s not reported like chain-store sales or the unemployment rate, but it’s nevertheless the best gauge of how the economy is doing.

This indicator is called the “net charge-off rate.” It is the amount of bank loans that borrowers can’t repay, and I think it’s the most telling way to measure the nation’s actual financial health. Say unemployment drops from 10% to 5%. If people still can’t afford to pay back their loans, then the country really hasn’t grown stronger, has it?

The charge-off rate is 1.94%, and it has, astonishingly, grown fivefold since the beginning of 2007. In a typical year, a bank should expect to lose about 32 cents for every $100 it lends. Right now, however, banks are losing $1.94 on $100 in loans.

This problem is made worse by bank’s deteriorating financial condition. At the beginning at 2007, banks had $1.80 in cash reserves for every dollar of loans that were past due. So even if all those loans went belly up — and not all past-due loans will — the banks were more than covered. Today, banks have only about 80 cents for every dollar of problem loans.

Don’t kid yourself into thinking that the worst of the financial crisis has passed. For some banks, it’s just beginning. Eating all those bad loans is hurting all banks, and many more are going to fail. The Federal Deposit Insurance Corp. (FDIC) says 77% of banks are profitable. But that leaves 23% that are bleeding cash.

The FDIC currently has 775 banks on its “Problem Bank” list. So far this year, 83 banks have failed, about half of which did so in the second quarter. That’s a truly frightening number by historical standards: About a third of the banks that have failed since 2000 have done so in the first 5 months of 2010.

The FDIC does not release its problem loans list, it only says how many banks are on it. But using a special ratio that measures a bank’s problem loans (the precursor to the loans that are eventually charged off), investors can determine with a high degree of accuracy whether their bank is safe.

It’s called the “Texas ratio.” It was developed by a financial wizard at RBC Capital Markets named Gerard Cassidy, who used it to correctly predict bank failures in Texas during the 1980s recession, and again in New England in the recession of the early 1990s.

The Texas ratio is determined by dividing the bank’s non-performing assets by its tangible common equity and loan-loss reserves. Tangible common is equity capital less goodwill and intangibles. As the ratio approaches 1.0, the bank’s risk of failure rises.

Every bank that has failed in the second quarter has had a Texas ratio of greater than 0.90. In fact the average was about 5.0.

Bank failures are announced on Friday afternoons, after the close of the week’s business. On June 5, Bloomberg news reported that three banks had failed: TierOne Bank in Nebraska, Arcola Homestead Savings Bank in Illinois and First National of Rosedale, Mississippi. On June 11, it was reported that another bank, Washington First International Bank, was seized. And June 18, it was Nevada Security Bank.

Frankly, none of these failures should have come as a surprise. After all, Rosedale had the highest Texas ratio of any bank in the country, at 15.78. TierOne’s ratio was 4.05, and Arcola’s was 0.91.

Investors simply cannot afford not to know if their bank is one of the ten banks I’ve identified as being in grave danger of failing. It’s crucial that all investors view the list of banks to ensure that their money is safe. And if your bank has a high or even a higher-than-average Texas ratio, then for heaven’s sake go in tomorrow and close your accounts. It’s always best to get out of Dodge ahead of the posse.

Using this highly accurate barometer of bank health, I’ve not only reassured myself that my own bank — the highly excellent Amarillo National — is safe and sound, I’ve also made a list of the top ten banks most likely to fail. If you bank at one of these institutions or have friends or loved ones who do, please pass this information along to them:

The Top Ten Banks in Danger of Failure as of June 9, 2010 are:

1. USA Bank, Port Chester, NY

2. First Commerce Community Bank, Douglasville, GA

3. SouthWestUSA Bank, Las Vegas, NV

4. High Desert State Bank, Albuquerque, NM

5. Bank of Ellijay, Ellijay, CA

6. Eastern Savings Bank, Hunt Valley, MD

7. ISN Bank, Cherry Hill, NJ

8. Habersham Bank, Clarksville, GA

9. Ravenswood Bank, Chicago, IL

10. First National, Savannah, GA

I don’t want to see any bank go under. But the fact is many have and many more will as the financial system works through its mountain of bad loans. The best way to predict which banks are in hot water is to use the Texas ratio.

One bit of good news is that the 20 publicly traded banks in the S&P 500 have low Texas ratios.

Institution – Ticker – Texas Ratio
Northern Trust – NTRS – 0.04
Peoples United – PBCT – 0.11
Hudson City Bancorp – HCBK – 0.15
Comerica – CMA – 0.20
Fifth Third – FITB – 0.23
Citigroup – C – 0.25
Keybank – KEY – 0.27
M&T – MT – 0.29
First Horizon – FHN – 0.32
Marshall & Isley – MI – 0.37
Regions Financial – RF – 0.37
Zion Bancorp – ZION – 0.42
J.P. Morgan Chase – JPM – 0.45
PNC Financial – PNC – 0.45
BB&T – BBT – 0.45
Huntington – HBAN – 0.48
Suntrust – STI – 0.54
Bank of America – BAC – 0.55
US Bank – USB – 0.60
Wells Fargo – WFC – 0.64

And again, if you have friends or loved ones who bank at one of the listed institutions, please pass this information along to them promptly.

The 10 Commandments of Good Governance in Banks

Due to the banking crisis of 2008, the question of how banks can protect themselves against future failures has attracted the attention of regulators, banking experts and business media. An important area is the need for better transparency, mainly regarding remuneration in the banking sector, and how boards of banks should improve their corporate governance practices to reduce the chances of a repeat of the credit crunch.

The recent publication of Central Bank of Egypt draft Code of Corporate Governance for banks marks a significant step in this process. Banks together with their respective boards should pay close attention to the corporate governance guidelines.

There are several tips and recommendations for good governance available for the board of banks. Yet, I consider the following `10 commandments` are central in establishing a sound governance regime:

1-Set the right tone at the top.

The main concerns for the board should include guiding, approving and overseeing the bank’s strategic objectives, corporate values and policies. This could be achieved by developing a code of conduct for the bank employees, management, and board members. Likewise, the board should clearly define areas of responsibility, authority levels and reporting lines within the bank.

2-Adequate qualifications of board members

The board should have adequate knowledge and experience relevant to each of the material financial activities the bank intends to pursue to enable effective governance and oversight of the bank.

To ensure that non-executive directors have the knowledge and understanding of the business, the board should provide thematic business awareness sessions on a regular basis and each director should be provided with a tailored induction, training and development to be reviewed annually with the chairman. Similarly, suitable arrangements should be made for executive board members in business areas other than those for which they have direct responsibility.

Non-executive directors are encouraged to spend more time in the business to ensure that they can participate effectively to strategy and other board decisions.

3-Appoint independent non-executive directors

To foster an independent element within the board, banks must consider that independent directors should constitute a significant membership of the board, and that the board should have at least three independent, non-executives directors. Larger banks may have a higher proportion of non-executive directors.

Non-executives directors should be able to devote sufficient time to the role in order to assess risk and ask tough questions about strategy.

In UK, there are recommendations for banks to appoint a senior independent director (SID) whose role is to provide a sounding board for the chairman and serve as a trusted intermediary for the non-executive directors, when necessary.

4-Establish board-risk governance

Banks should establish a board risk committee to work in tandem with existing audit committee. The risk committee would concentrate on risk strategy and management, free from any conflict with demands placed on audit committees. The risk committee would report regularly (as part of the annual report) on risk strategy and risk management. The risk committee has authority to seek external advice to test its risk management assumptions, particularly in the context of risk related to significant banking transactions.

Given the importance of an independent risk management function, banks should appoint a chief risk officer (CRO) with sufficient authority, stature, independence, resources and access to the board. This executive should be reporting to both the risk committee and internally to the CEO. Removal of the CRO should be subject to board discussion and public disclosure.

5-Expand scope of the remuneration committee

The scope of the remuneration committee should be expanded to cover all aspects of remuneration policy on a bank-wide basis with particular focus on the risk dimension. The remuneration committee is responsible to review the compensation philosophy and major compensation programs.

In order to reduce the perceived excessive risk-taking within banks, this committee will also be expected to approve the links between performance targets and pay or bonus schemes. At least half of bonuses should be paid in the form of a long-term incentive scheme.

6-Develop Information Technology (IT) governance

IT governance provides the structure that links IT processes, resources and information to the bank’s strategies and objectives, enhances effective board decision-making and creates greater transparency and accountability. IT governance ensures that related risks are properly identified and managed. The board needs to approve IT expenditures and provide adequate oversight over all aspects of IT governance, including procurement, outsourcing, the efficiency of systems and procedures, IT security, customer data protection and adequacy of anti-fraud and anti-money laundering systems.

7-Improve efficiency through board evaluation

The board and board committees should be subject to a formal and rigorous performance evaluation with external facilitation of the process every three years. The evaluation statement should either be included as a dedicated section of the chairman’s statement or as a separate section of the annual report, signed by the chairman. Where an external facilitator is used, this should be indicated in the statement, together with their name and other meaningful details for the shareholders.

8-Manage conflicts of interest effectively

Banks should establish information barriers (“Chinese walls”) between the different departments so that decisions by staff in one department are made in ignorance of confidential information available to staff in other departments which might affect their decision. Conflicts by board members or senior executives should be disclosed to the banks’ compliance officer. A good corporate governance practice is to put in place and disclose a conflicts of interest policy.

9-Monitor the governance of banks’ clients

It is important for banks that their clients apply the principles of good governance. Banks may consider that it is in their own best interest to check the governance framework and practices of their corporate borrowers. Even in circumstances where a bank cannot directly influence the governance practices of their borrowers, it can have an important influence by “leading by example”.

10-Track potential governance failures

Banks should have in place a policy setting out adequate procedures for employees with concerns about the integrity of the bank’s operations or its staff (so called whistle blowing policy). Employees should be able to communicate their concerns with corporate protection from retaliation from the management. The procedure should facilitate the flow of confidential and direct or indirect communication to the board (or Audit Committee) outside the internal “chain of command”. The establishment of proper communication channels would allow bank staff to discuss their concerns in confidence without fear of retaliatory action.

Conclusion

Good corporate governance is crucial for today’s complex and dynamic banking environment to ensure long-term sustainability and trust of stakeholders including regulators, investors, clients and employees. Therefore, it should be cultivated and practiced regularly within banks at board and executive management levels. Remember; Corporate governance is like a muscle, should be exercised or it will atrophy!

Charting the Waters at Cordell Bank

Until 1978, no diver had explored the Cordell Bank. This extraordinary place is now a National Marine Sanctuary. There’s an interesting history behind how this part of the ocean off the coast of California, northwest of San Francisco became a sanctuary.

The bank was discovered by George Davidson while conducting surveys along California’s north coast in 1853. Sixteen years later, in 1869, a more extensive survey was conducted by Edward Cordell, after whom the bank was named. What follows is some of the experiences shared by the first divers to view the bank.

At 150 feet, air bubbles slide out of my regulator sounding like gravel being poured from a metal bucket. We are 20 miles from the nearest shore on a ridgetop of a large Pacific seamount named the Cordell Bank and the scene below is incredibly bright. Anemone, hydrocoral, sponges, and algae cover everything in sight, in many places growing on top of each other.

While collecting some of these organisms, we are suddenly flushed with a euphoric giddiness. We try to smile, but numb lips and the regulator make the effort that much sillier. Struggling to control the narcosis, we keep collecting and exploring. All too soon, however, my buddy waves a thumbs-up in front of my mask. Now, where’s the ascent line? A flashing strobe catches my eye and I swim toward it. The line’s there, so we follow our bubbles – but not to the surface. At 10 feet, we both grab the regulators of full scuba tanks. The decompression wait seems eternal as we can hardly wait to tell the others about our dive to where no one has been before.

These experiences were shared with the author from Robert Schmeider, Ph.D., of Walnut Creek, California, who was obsessed with the exploration of Cordell Bank. In 1977, while studying a chart of northern California’s coastline, this atomic physicist became intrigued by Cordell Bank, which is 20 miles (32 km) due west of Point Reyes and to the northwest of San Francisco. The chart showed there was at least one shallow place with a depth of 20 fathoms or 120 feet (37 meters). It could be dived using regular scuba tanks, so Schmeider assumed it had been. But when he asked a few diving friends if they had ever been there, he discovered none had. So he talked to people with the Coast Guard, the Navy, the California Academy of Sciences, the University of California at Berkeley, the Department Fish and Game, the Geological Survey, the National Oceanic and Atmospheric Administration (NOAA) and others. After a couple of months, Bob realized to his amazement, no one knew much about the bank at all. The idea of exploring Cordell Bank soon became a serious goal.

But Bob expected many dangers. Deep-diving can always be dangerous, especially with compressed air scuba diving due to the possibility of nitrogen narcosis and decompression problems. Additionally, he knew the water was cold, and a fairly stiff current of one or two knots ran in the area. Two knots is nearly impossible to do any work in. To make matters even worse he expected to encounter lots of sharks, including great whites since Cordell Bank lies about midway between Tomales Bay and the Farallon Islands, both places where great whites are known to congregate.

The fisherman in Bodega Bay knew the Bank well as an excellent fishing area, so Bob lined up a boat and skipper from there. After extensive discussions with several of his regular diving partners, he announced his plan to divers in the Sierra Club’s Loma Prieta chapter from the San Francisco Bay area in October of 1977. He knew exploring the bank would require a large support group. At an organizational meeting held in the U.S. Geological Survey chambers in Menlo Park, the group elected a divemaster and all but one of the 40 people attending pitched in $40 a piece to kick off Cordell Bank Expeditions.

After a few practice dives at Monterey and at the Farallon Islands, Bob felt his group was ready to go to Cordell Bank. Unfortunately, he ran into numerous difficulties. Most importantly, a number of divers had dropped out of the group, so Bob had trouble gathering enough divers for a trip. Finally, on October 20, 1978, with just five divers, Bob made it to Cordell Bank.

As Bob recalls, “What we saw on that day absolutely astonished us. We were totally unprepared for the light level. Not only was it not dark, it was incredibly light. After I made the first dive with a buddy, I told the other drivers not to take their lights, as they simply would not need them. It was so light you could almost read. And we had been to a depth of close to 150 feet.”

“There were enormous aggregates of 12-inch (30 cm) fish swimming around above the pinnacle. To us, it seemed an incredible snowstorm of fish. When we finally broke through the fish on our way down, our entire field of vision was just filled with this miraculous sight. We could see colors – reds and oranges and yellows – and the rocks were covered, just inundated, with organisms. Sponges, especially Corynactics (Strawberry anemone), pink hydrocoral, hydroids, and a lot of large-bladed algae. It looked as if someone had landscaped it. We were just overwhelmed.”

On the first dive, they collected nearly 50 species, including at least one new genus of algae and one new species. By working closely with a number of professional biologists at the University of California at Berkeley, the California Academy of Sciences, the Los Angeles County Museum, the Geological Survey, the Smithsonian, and other institutions, they sorted and identified their new collections until the list included more than 400 species.

After that first dive, made possible by the Sierra Club divers and by grants from such organizations as the San Francisco Foundation and the National Geographic Society, the Cordell Bank Expeditions evolved into a member-supported, systematic, data-gathering organization that bought its own research vessel, the Cordell Explorer, which was retired in 2014. They bought a LORAN-C receiver and carried out depth surveys back and forth across certain areas, measuring depths and recording positions. From that data, they were able to generate their own set of charts. Those charts became a major help in carrying out more successful dives, as they could more reliably find the pinnacles and ridges they wanted to dive. In the summer of 1985, Bob and a colleague were able to obtain state-of-the-art hydrographic survey data on the Bank as a result of a project conducted by the National Oceanic and Atmospheric Administration (NOAA) and the U.S. Geological Survey (USGS). That survey covered the 200-mile Exclusive Economic Zone (EEZ) off the coast that the U.S. claims control over. Cordell Bank may well be the best-surveyed feature off the coast of North America.

Aside from collecting specimens and surveying, the expedition also used 35-millimeter photography, plus Super 8-millimeter, 16-millimeter, and videotape cinematography. Some of their photographs have been useful in identifying species that didn’t show up in their collections and in showing physical features the divers may not have noticed during their dives.

They have found this seamount is roughly elliptical and, at the 50-fathom depth, it is 9-1/2 miles long by 4-½ miles wide (15.3 x 7.25 km). It lies right on the edge of the continental shelf and is the northernmost such shallow place all the way to Canada. The bank is a distinct plateau with its flat top rising to the 30- to 35-fathom depth. Atop this plateau, at least four cliffy ridge systems, two in the north and two in the south, and several pinnacles reach to diveable depths. In fact, the shallowest point the expedition has found is about 19 fathoms (114 feet or 35 meters) and is part of a ridge system in the northeast. Geologically, it is considered a piece of the ancient Sierra Nevada that was sheared off by the Pacific Plate, thus explaining its granite composition.

Growing on this 19-fathom peak is a dense, whitish cap of barnacles and red algae. Below this, from 20 to 25 fathoms (36.6 to 45.7 meters), the sessile community grades to nearly foot-thick piles of sponges, anemones, including the common Strawberry Anemone Corynactis californica, California Hydrocoral Allopora californica, hydroids, and tunicates. Space is the limiting factor. The organisms are very brightly colored with reds, yellow, white, and pinks. At 30 fathoms (55 meters), the community thins to a few large, widely spaced creatures, mainly sponges, urchins, and anemone. By 35 fathoms (64 meters), bare rock dominates the scene. Around 200 feet in various places, brilliant white sediments of almost a hundred percent shell fragments accumulate.

The Cordell Bank community is very healthy showing little evidence of disease or death because the California Current brings clean, clear, cold (50 to 55 degrees F. or 10 to 13 degrees C.) water, with a high nutrient content, upwelling to the relatively shallow bank. When the disruptive El Niño current occurs off California’s coast, the water temperatures at the bank rise to over 60 degrees F. or 15.6 degrees C. The sun’s rays penetrate this water so deeply divers can take photographs using available light at 150 feet (46 meters). Visibility is sometimes as good as 100 feet (30.5 meters). Because of the water’s clarity and nutrient load, photosynthesizing organisms support a vast and complex food chain up to large fish, birds, and mammals.

Cordell Bank has long been known as a superb fishing area. Groups of rockfish congregate around the pinnacles, sometimes so thickly, divers report whiteout conditions. Besides rockfish, sport fishermen regularly catch lingcod, yellowtail, salmon, albacore, and shark. Oddly enough, the divers have yet to see great white sharks, in spite of the fact that the great white’s favorite prey, seals and sea lions, are at the bank. They have, however, seen blue and mako sharks.

Like rockfish, seabirds often congregate around the pinnacles, and it was just such gatherings that enabled the expedition to initially home in on shallow points to dive. On surveying and diving trips since 1978, volunteer observers from the California Marine Mammal Center and San Francisco State University have recorded many sightings of seabirds and mammals at or near Cordell Bank. They’ve seen 33 species of seabirds including black-footed albatross, northern fulmar, surf scoter, south polar skua, common murre, pigeon guillemot, tufted puffin, and brown pelican. The previously endangered brown pelican was particularly noteworthy because it was sighted on about two-thirds of the trips.

The observers also recorded fourteen kinds of marine mammals. Of special interest were two endangered cetaceans, the humpback and blue whales. Both species feed at the bank. The team’s most exciting encounter with blues occurred on October 10, 1982, when a pair approached from off the port bow, surfaced 30 yards away, visibly swam under the ship, and surfaced again several hundred yards astern. Marc Webber and Steven Cooper, reporting for the group, felt the number of blue whale sightings “represents a substantial number of records for this species over the continental shelf in the Cordell Bank area, and along with probable observation of feeding suggest this area is an important autumn habitat for this species.” Also of particular interest were sightings of northern elephant seals whose pelagic habits have only recently become better understood. Other observed mammal species were Minke whale, Dall’s porpoise, harbor porpoise, orca, Pacific white-sided dolphin, Risso’s dolphin, Northern right whale dolphin, California sea lion, Steller sea lion, northern fur seal, and harbor seal. These have all been autumnal observations. The expedition has restricted their trips to the autumn because the weather is most predictable at that time and because the California and Davidson currents more or less cancel each other out, which makes diving more practical.

The greatest mysteries Bob and his divers have encountered are a number of large, cylindrical holes that lie right on the sharpest, highest parts of the region. Some holes appear to be man-made, but others look natural. Hearsay has it the holes were made by the U.S. Navy during the 1960’s in a project related to submarine detection. Bob’s expedition was once followed for nearly an hour by an unidentified submarine. In spite of his security clearance, Bob has been totally unsuccessful in learning anything from the Navy about any of this.

Cordell Bank is now a national marine sanctuary. The Sanctuary Programs Division (SPD) of NOAA, which is in charge of the sanctuaries program held its first informational hearing on the bank in San Francisco on April 25, 1984, and published a draft Environmental Impact Statement and other documents.

Bob is optimistic about Cordell Bank’s future. He believes, “It’s incumbent upon those of us who wish to preserve certain areas of our environment like museums, to set up the legislation to protect those areas. We don’t give any thought whatsoever to commercially developing Yosemite because it’s become part of our national environment, our cultural heritage. And our marine sanctuaries will become the same way. I hope and believe that 50 or 100 years from now, areas like Cordell Bank, which had long since been designated marine sanctuaries, will be part of our national heritage and will be considered inviolate.”

Creating a Marine Sanctuary

The federal marine sanctuaries program was established by Title III of the Marine Protection, Research, and Sanctuaries Act of 1972. This law provides that areas in the ocean as far out as the edge of the continental shelf and in the Great Lakes may be protected.

During its first 5 years, the program crawled slowly along, because no funds were appropriated. By 1977, only two marine sanctuaries had been designated. The first was a six square mile site off Cape Hatteras, North Carolina, to protect the wreck of the U.S.S. Monitor, and the second was Key Largo Coral Reef Marine Sanctuary adjacent to John Pennekamp Coral Reef State Park in the Florida Keys, which covers 100 square miles. In that year, 1977, President Carter, in an environmental message to Congress, expressed support for the program and boosted funding. In contrast to the law’s original intent, Carter was trying to protect areas threatened, in this case, by offshore oil development. As it turned out, one of Carter’s last official acts was the designation of three new sanctuaries: Looe Key in Florida, Gray’s Reef in Georgia, and the Gulf of the Farallones off California. (Cordell Bank neighbors this sanctuary.) Once again, the program was slowed by restricted funding under the Reagan Administration.

The slowness of the marine sanctuaries program was especially disheartening because all the land is under state or federal control already and doesn’t require acquisition funds. Money was needed only for evaluating potential sites, managing a site after it becomes a sanctuary, and enforcing the protective laws.

The marine sanctuaries program works in the following way. Any organization or member of the public may send nominations to the Sanctuary Programs Division (SPD) in the Commerce Department’s National Oceanic and Atmospheric Administration (NOAA) for consideration. The idea of nominating a place need not be intimidating. As Bob Schmeider found out, “the nomination itself doesn’t need to be very specific at all. Of course, if the (SPD) already knows about a site, which they had already known about Cordell Bank from information I had given them well before the nomination, (then) the actual nominating step was simply a letter from me to them saying I would like to nominate Cordell Bank. If a site is totally unknown and you’re preparing a nomination, then you need to include some details and some information, so that they will have some knowledge of it. That’s all.”

Formerly, a nomination was automatically placed on a List of Recommended Areas, but this has been replaced by a Site Evaluation List (SEL) that includes nominated sites meeting certain preliminary criteria. After review by the SPD staff, the SPD can promote the area to active candidacy. At that point, they’ll produce draft documents, including a management plan, environmental impact statement (EIS), and a designation document. These will be circulated among interested individuals, organizations, and governmental agencies. They’ll also schedule public hearings in the communities nearest the candidate site to get additional input. From that, they’ll produce final documents and circulate those and hold more hearings. Congress has the opportunity to review a site’s candidacy and hold their own hearings. Cordell Bank was the first marine sanctuary candidate to receive such scrutiny. If the site is within state jurisdiction, then that state’s governor may veto the designation, but this won’t necessarily cancel a site’s candidacy altogether. (Cordell Bank wasn’t in state waters.) After all of these steps, the Secretary of Commerce can sign the designation document and the site will become a national marine sanctuary.

Cordell Bank was established as a marine sanctuary in 1989 and expanded in 2015 to cover 1286 square miles.

The official government website for Cordell Bank is at: http://www.cordellbank.noaa.gov, while the Cordell Bank Expeditions web site is at: http://www.cordell.org.

Internet Banking: Relevance in a Changing World

Surprising, but true – Internet-based activity is not the preserve of the young “digital native” generation alone. A 2008 survey says that Generation X (those born between 1965 and 1976) uses Internet banking significantly more than any other demographic segment, with two thirds of Internet users in this age group banking online.

Gen X users have also professed their preference for applications such as Facebook, to share, connect and be part of a larger community.

This is some irony in this, since online banking, as we know it today, offers minimal interactivity. Unlike in a branch, where the comfort of two way interaction facilitates the consummation of a variety of transactions, the one way street of e-banking has only managed to enable the more routine tasks, such as balance enquiry or funds transfer.

It’s not hard to put two and two together. A clear opportunity exists for banks that can transform today’s passive Internet banking offering into one that provides a more widespread and interactive customer experience.

It is therefore imperative that banks transform their online offering, such that it matches the new expectations of customers. Moreover, Internet banking must journey to popular online customer hangouts, rather than wait for customers to come to it.

There are clear indications that the shift towards a “next generation” online banking environment has already been set in motion. It is only a matter of time before these trends become the norm.

Leveraging of Social Networks

Forward thinking banks are leveraging existing social networks on external sites to increase their visibility among interested groups. They are also deploying social software technology on their own sites to engage the same communities in two way discussions. Thus, their Internet banking has assumed a more pervasive persona – customers are engaging with the bank, along with its products and services even when they’re not actually transacting online.

Heightened visibility apart, banks can gain tremendous customer insight from such unstructured, informal interactions. For example, a discussion on the uncertain financial future among a group of 18 to 25 year olds could be a signal to banks to offer long term investment products to a segment that was previously not considered a target. Going one step further, a positive buzz around a newly launched service can create valuable word-of-mouth advertising for the business.

Collaborating through Web 2.0

The collaborative aspect of Web 2.0 applications has enabled banks to draw customers inside their fold more than ever before. Traditional methods such as focus group discussions or market research suffer from the disadvantages of high cost, limited scope and potential to introduce bias. Feedback forms merely serve as a post-mortem. In contrast, Web 2.0 has the ability to carry a vast audience along right from the start, and continue to do so perpetually. Thus, an interested community of prospects and customers participate in co-creating products and services which can fulfil their expectations.

The pervasiveness of Web 2.0 enables delivery of e-banking across multiple online locations and web-based gadgets such as Yahoo!Widgets, Windows Live or the iPhone. This means next generation online banking customers will enjoy heightened access and convenience

A New York based firm of analysts found that 15% of the 70 banks tracked by them had adopted Web 2.0, a number of them having done so within the last 12 months.

Standard Chartered Bank employees connect with their colleagues through Facebook and use the platform to share knowledge, clarify questions and participate in discussions on ongoing company activities.

Bank of America, Wachovia Bank and Commonwealth Credit Union have built a presence within interactive media to create awareness and keep up a dialogue with interested communities. They have employed a variety of methods, ranging from creating YouTube communities to launching campaigns on Current TV, a channel in which viewers determine content.

Personalisation of Online Banking

Vanilla e-banking divides customers into very large, heterogeneous groups – typically, corporate, retail or SME, with one type of Internet banking page for each. That’s in sharp contradiction to how banking organisations would like to view their clientele. Banks are moving towards customer-specificity, almost viewing each client as a “segment of one”, across other channels, and online banking is set to follow suit. For instance, a specific home page for home loan customers and another for private banking clients could well be a possibility in future.

Interestingly, National Bank of Kuwait had the foresight to do this several years ago – they enabled customers to determine which products they would view and access, and were rewarded with a dramatic increase in online transactions.

Money Monitor from Yes Bank allows customers to choose their landing page – for example, they can set “all transactions”, “net worth” or “portfolio” as their default view. Other features include the ability to categorise transactions as per customers’ convenience and the printing of custom reports.

Empowerment Online

Beyond doubt, Internet banking has created a more informed, empowered class of customers. This is set to climb to the next level once customers are allowed to proactively participate in many more transaction-related processes. The Internet has already made it possible for customers to compare product loan offerings, simulate financial scenarios and design custom retirement portfolios. Going forward, they would be able to consummate related transactions – which means, after comparing interest rates, they could originate a loan online, and once secured, they can begin to repay it online as well.

Portalisation

The emergence of Web 2.0 technology coupled with banks’ desire to personalise their e-banking to the highest degree is likely to result in “portalisation” of Internet banking. The idea of banking customers being able to create their own spaces online, filled with all that is relevant to them, is not that far-fetched. Customers can personalise their Internet banking page to reflect the positions of multiple accounts across different banks; they could include their credit card information, subscribe to their favourite financial news, consolidate their physical assets position, share their experiences with a group and do more – all from one “place”.

Money Monitor enables customers to add multiple “accounts” (from a choice of 9,000) to their page. Accounts could be savings or loan accounts with major Indian banks, or those with utilities providers, credit card companies, brokerage firms and even frequent flyer programs. Users can customise their pages as described earlier.

As banks seek to develop their Internet banking vision for the future, in parallel, they will also need to address the key issues of security and “due defence”. While it is every marketer’s dream to have customers work as ambassadors, adequate precaution must be taken to prevent the proliferation of malicious or spurious publicity. Therefore, before an individual is allowed to participate in a networking forum, he or she must have built up a favorable track record with the bank. The individual must be a recognized customer of the bank, having used a minimum number of products over a reasonable length of time. Qualitative information about the person’s interaction with the bank’s support staff (for example frequency and type of calls made to their call centre, outcome of such interaction and so on) may be invaluable in profiling the “right” type of customer who can be recruited as a possible advocate.

Collaborative Web 2.0 applications may necessitate opening up banks’ websites to outside technology and information exchange with third party sites, raising the spectre of data and infrastructure security. A robust mechanism of checks and balances must be built to ensure that the third party sites are secure, appropriately certified and pose no threat to the home banks’ sites. Likewise, before a third party widget is allowed to be brought on to a site, it must have passed through stringent security control.

Due diligence must be exercised before permitting users to place a link to another site to guard against the possibility of inadvertent download of malicious software, which could, in the worst case, even result in phishing originating from the banks’ sites.

It is equally important for a bank to guard its customers against invasion of privacy, data theft or misuse. The concept of portalisation envisages deploying technology to bring information from other banks’ or financial service providers’ websites into the home bank’s site. The home bank must ensure that its customers’ personal or transaction related information, which may be shared with the other providers, is not susceptible to leakage or outright misuse.

Banks will do well to partner with an Internet banking solution provider which has not only the expertise to translate their vision into a cutting edge e-banking experience for the user, but also the foresight to define boundaries for safety. With security concerns adequately addressed, next generation Internet banking is full of exciting possibilities. Banks that seize the opportunity may find that Internet banking can become a means of differentiating themselves from competitors, rather than a mere cost cutting tool. Clearly, providing a more powerful and interactive e-banking experience, is the way forward.

Understanding Your Banking Options: Traditional, Credit Unions, Online Banks

Consumers have a lot of options to choose from when it comes to their banking needs. It can be confusing to sort through the benefits and drawbacks of each. Here, we take a look at the main options: Traditional banks, credit unions, and online banks.

Traditional banks

Most people have at least one account in a traditional “brick and mortar” bank. These include national and multinational institutions, such as Wells Fargo, HSBC or Deutsche Bank.

Banks offer services such as checking and savings accounts, retirement accounts and investment options. You access your money at a physical location such as a branch or ATM or through online services. Banks also offer lending services for consumer credit, mortgages, and other loans.

While traditional banks offer the most services and flexibility in terms of access, many accounts require service fees and banking plans, which can be costly.

Credit unions

A credit union is a financial cooperative. As a co-op, they are owned by its members, the account holders. As a result, fees and service charges are often lower than what is charged by traditional banks.

Credit unions generally offer the same services as a traditional bank, but attempt to differentiate themselves by being more community and customer oriented. In surveys, credit unions often outperform traditional banks in terms of customer satisfaction.

But due to their roots in the community, many credit unions do not maintain nation-wide locations or ATMs. As a result, it can be costly to access your money outside of your community. However, some credit unions try to avoid this issue by partnering with other institutions to allow their members to access their money from a wider range of service providers.

Online banks

As a relatively new addition to the financial industry, online banks have a the smallest overall market share in terms of customers and deposits. However, they are steadily growing in popularity.

Major online banks such as ING provide all of the core services that customers expect from a bank, such as checking and savings accounts, investment options and mortgages. However, interest rates and fees for account services are often better since online banks do not have the overhead cost of maintaining physical branches and staff. Some online banks even offer free checking accounts!

But like credit unions, online banks have the disadvantage of lacking a comprehensive physical presence. While many offer debit cards for their customers, you may have to transfer it to a physical branch if you want to do more than make a retail purchase.

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Depending on your needs, a traditional bank, credit union or an online bank might be the best fit. Each has it’s own set of advantages and disadvantages. Before trusting an institution with your money, take the time to figure out which services and options are most important to you.