Bank Management & Financial Services 9th Edition by Peter Rose solution manual

 
1-2.   Under U.S. law what must a corporation do to qualify and be regulated as a commercial bank?
 
Under U.S. law, commercial banks must offer two essential services to qualify as banks for purposes of regulation and taxation, demand (checkable) deposits and grant commercial loans. More recently, Congress defined a bank as any institution that could qualify for deposit insurance administered by the Federal Deposit Insurance Corporation.
 
1-3.   Why are some banks reaching out to become one-stop  financial-service conglomerates? Is this a good idea, in your opinion?
 
Banks and various financial institutions are converging in terms of the services they offer and embracing each other’s innovations. There are two reasons that banks are increasingly becoming one-stop financial service conglomerates. The first reason is the increased competition from other types of financial institutions and the second reason is the erosion of the bank’s market share for providing traditional services. Due to these reasons, the banks demanded for a relief from traditional rules and lobbying for an expanded authority to reach new markets around globe. This has led the United States Congress to pass the Financial Services Modernization Act which has allowed banks to expand their role to be full service providers. It is a beneficial step as it has led the U.S. banks to stay in the competition and increase the market share by entering into various new industries like the securities and insurance industries.
 
1-4.   Which businesses are banking’s closest and toughest competitors? What services do they offer that compete directly with banks’ services?
 
Among a bank’s closest competitors are savings associations, credit unions, fringe banks, money market funds, mutual funds, hedge funds, security brokers and dealers, investment banks, finance companies, financial holding companies, and life and property/casualty insurance companies. All of these financial service providers are converging and embracing each other’s innovations. The

Financial Services Modernization Act has allowed many of these financial service providers to offer the public one-stop shopping for financial services.
 
1-5.   What is happening to banking’s share of the financial marketplace and why? What kind of  banking and financial system do you foresee for the future if present trends continue?
 
The Financial Services Modernization Act of 1999 allowed many of the banks’ closest competitors to offer a wide array of financial services thereby taking away market share from “traditional” banks.
 
Because of the relatively liberal government regulations, banks with quality management and adequate capital can become conglomerate financial-service providers. The same will become true for security firms, insurers, and other financially oriented companies that wish to acquire bank affiliates.
 
Hence, the banks and their closest competitors are converging into one-stop shopping for financial services and this trend should continue in the future.
 
1-6.   What different kinds of services do banks offer the public today? What services do their closest competitors offer?
 
Banks offer the widest range of services of any financial institution. They offer thrift deposits to encourage saving and checkable (demand) deposits to provide a means of payment for purchases of goods and services. They also provide credit through direct loans, by discounting the notes that business customers hold, and by issuing credit guarantees. Additionally, they make loans to consumers for purchases of durable goods, such as automobiles, and for home improvements, etc. Banks also manage the property of customers under trust agreements and manage the cash positions of their business customers. They purchase and lease equipment to customers as an alternative to direct loans. Many banks also assist their customers with selling insurance policies and also buying and selling securities through security brokerage services, the acquisition and sale of foreign currencies, the supplying of venture capital to start new businesses, and the purchase of annuities to supply future funding at retirement or for other long-term savings plans like annuities or mutual funds. They also offer merchant banking services to large corporations and risk management and hedging services to help their customers combat risk exposure. All of these services are also offered by their financial-service competitors. Banks and their closest competitors are converging and becoming the financial department stores of the modern era.
 
1-7.   What is a financial department store? A universal bank? Why do you think these institutions have become so important in the modern financial system?