When Ghana’s Central Bank Cracked the Whip Amidst An Unstable Sector With Too Many Banks

Ghana’s Central Bank continues in its effort to sanitize the banking sector. Notably, among some obvious sanctions it has carried out has been the mandatory takeover of two private-owned banks: Capital bank and UT bank back by the state-own Ghana Commercial Bank under the authorization of the Bank of Ghana in 2017. Other activities have been carried out by Ghana’s Central Bank yet, the sector still needs some stability. Currently, Ghana’s banking sector is unstable though its prospect looks good in the not too distant future should major regulations and activities are carried out by the Central bank.

The sector still nursing it wounds over last year sanctions on the 2 banks, yet another bank has experienced the central bank direct sanctions, thus, Unibank, (It was adjudged the 6th best performing company in Ghana at the Ghana Club 100 awards in 2017). Currently, the country`s Central Bank has announced that as at 20th, March 2017, it has mandated and authorized the Management of Unibank, ( privately owned bank) be dissolved and taken over by KPMG. Interestingly!

Now, Bank of Ghana itself needs some house cleaning. It is very unacceptable to superintend over a sector from which a player is adjudged 6th best only for it to be said to have been withholding some important data. The Central Bank, however, has its defense for the action against Unibank that the bank has persistently maintained capital adequacy level ratio close to zero which agreeably could practically mean Unibank is insolvent. Reports from the Central bank stated that it directed Unibank to desist from granting any additional new loans to customers, however, the Bank failed to comply with the directive and continued granting new loans. Also, Unibank was directed to desist from incurring any additional capital expenditures which they (Unibank) didn’t adhere to thereby, breaching section 105 of Act 930.

Admittedly, Unibank has been a creative bank if one should observe their banking activities over the years from a distance, as such, the Central bank and KPMG guide to the bank should be one that will not dissolve their positive employee-customer culture which is readily seen to be “vibrating” among their customers and bank. Unibank has some very loyal customers, with large numbers being traders. Bank of Ghana, therefore, should guide Unibank, taking into consideration the brand that exists and finding the obvious ways to revive the bank.

Having said this, the number of Universal banks is way too many for Ghana. The number should be capped as having close to 40 banks for a population of 26 million is obviously much. What needs to be done is to build the capacity of existing banks to “branch out” to customers. This can be done in two ways: expanding physical infrastructure to reaching closer to customers and expanding digital (Online/Mobile banking) infrastructure. Already existing banks should be keen on improving their service experience, getting closer to people, expanding digital means of banking and improving on banking security.

Making it clear, however, I am not in any way against the registration of banks, In fact, my position is the direct opposite as I am not oblivious of the importance of financial services to individuals and the economy as a whole. My position will pass for the opposite. My views clearly are that instead of registering new banks that with some of them operates a few branches with no superior services or infrastructures, it would be better to resource existing banks to improve their capabilities.

Finally, some of these financial institutions will have to consider merging should there be any possibility of staying profitable in business and serving customers at standards as the sector begins to become more competitive in the coming years and also especially now that the minimum capital requirement has been increased by the Central Bank to 400 million Ghana Cedis for banks, which will take effect from December 2018.

Bank On It

With more than twenty years experience as a Bank Teller and Customer, I have grown accustomed to the ins and outs of retail or commercial banking. You rarely get advice how to shop for banking services. We see advertisements in the media about rates and features but seldom see the benefits. I will share a few important facts on how to choose the right bank for your personal or financial goals. Once you are enlightened, you will be able to make wiser banking decisions. Let’s go to the Bank!

One of the most important factors in choosing where to open your bank account is finding a convenient location that suits your needs. Rates are not the issue since most banks have competitive interest rates.

The main focus is convenience and this does not necessarily mean close in proximity to work or home since banking is now more automated and we can bank anywhere using the ATM (Automated Teller Machine), telephone and online services. Your bank must be accessible twenty-four hours per day whether offline or online.

Here is a caution: not all transactions can be conducted remotely. For routine services, we don’t have to go to the location where we opened our account but finding a convenient location is always good. Be prepared to visit the bank to carry out the following transactions;

• Security update
• Signature update
• Cashing large sums of money
• Adding individuals or opening a new account
• Closing account

Know Your Bank

It is important to know what products are offered by your bank. Don’t rely on cross-selling opportunities by the Teller or Customer Service Representative. You need to determine your most important banking needs when conducting commercial banking. While it is the bank’s responsibility to provide information about other products and services it offers, it is your responsibility to know which ones will provide you value, so you will not pay for products you do not need.

Here are few facilities that are offered by Banks nationwide:

ATM or ABM (Automated Teller/Banking Machine)

Depending on the machine used, there are fees charged to access funds. If you use your own bank’s ATM you might not be charged for using the machine. If you do otherwise, you may be charged a minimum fee per transaction.

Machines with the ‘Plus’, ‘Visa’ and ‘Master card’ signs are generally international brands that facilitate international transactions. This means that you can access funds outside the home country of your bank. One of the most discomforting things about some ATM’s primarily in the United States is that they only pay out a minimum $20 denomination. I would imagine that any bank that pays out lower denominations especially $10 and $5 notes, would grab a greater percentage of the teller machine market.

Money Transfer Facilities

Money transfer facilities are courier services that work in tandem with financial institutions to remit funds on their behalf between remote locations, whether international or intra-country. Customers are charged by their domicile remittance couriers (their own institution) whenever funds are sent. The most recent funds transfer service is sending money through email and Paypal. The banks have even tightened their grips on this SUPER convenient remittance service as unscrupulous individuals seek ways to rob unsuspected consumers.

Night Depository

Another convenient deposit service in commercial banking is Night Depository. This offers depositors the convenience of depositing their money outside of regular banking hours. A depository vault with lock is attached to the wall of the bank where customers have unlimited access 24 hours a day. There is usually a charge to utilize this facility, however, some banks may offer this service free to preferred customers. This product is normally geared to businesses who manage large sums of cash on a daily basis.

Similar to this is the Safety Deposit Box but the minor difference is that it allows you to store personal effect in a vault on the bank’s premises, for your own security. This may also attract a monthly or annual charge. This facility is accessed inside bank.

Assurance and Insurance

Bank assurance or insurance banking is also a profitable business niche for banks and Insurance companies. The banks saw it fit to compete with the Insurance companies when they embarked on this operation some years ago. Now it is one of the biggest markets in the financial sector, as wise investors and consumers save funds for retirement and unforeseen future events.

Foreign Exchange Trading

Foreign exchange trading is extremely volatile which means the stock market can appreciate (go up) or depreciate (go down) by the second as a result of irregular trends in the market. This fluctuation (change in value) is dependent on foreign market investors who depend on foreign exchange in their international business trading.

The Bloomberg Stock Money Market and the Jamaica Stock Exchange draw nationwide and worldwide attention on a daily basis as millions of dollars of foreign exchange passes through this medium. Private bankers most times act as brokers to find the right market for larger or riskier investors. On a smaller scale, commercial banking opportunities provide foreign exchange trading within their branches for their customers’ business and personal needs.

Saturday And Sunday Banking

One super convenience is weekend banking but there is a race between the banks. Some have scaled down operations to facilitate this as this is an expensive operation, while others have flexible opening hours to facilitate later or earlier transactions.

Credit Card And Commercial Paper

Commercial banking offers short-term lending through Credit Cards and Commercial papers. Credit cards allow users to spend now and pay later but be careful how you spend, as this unpaid balance attracts high rates of interest and is charged to your card.

Commercial paper is a promissory note issued to you by the bank in the form of credit. This could be a refinancing opportunity for any debt that you might currently have. However, the rule of thumb is; always remember that a debt is never complete until it is paid off in full and there will always be charges for the use of the facility.

A loan is also a well-known product on everybody’s lips. One of the ways that commercial banking earn funding is through interest charged on issuing loans. The interest that is calculated from the principal borrowed, is used to finance further lending and growth for the institution.

There are two ways in which interest is calculated; straight line and reducing balance method. Most banks now have amortized their loan facility. This means that payments are fixed each month. The monthly figure is shared by paying the interest on the loan, while the rest reduces the principal borrowed over the life of the loan.

Another form of a loan could be an overdraft facility. This type of credit facility is similar to the credit card as the bank offers an opportunity to exceed your balance in your checking or savings account. Most times this additional credit is secured, which means that the bank hypothecates (hold) funds or assets in similar value against the amount overdrawn.

Fixed and Ordinary Deposit
Fixed or ordinary deposits is another source of income for commercial banking. Fixed deposit means that a certain amount is deposited at an agreed rate, while an ordinary deposit is a regular saving account that you manage on a normal basis. These funds are reinvested by the bank at a higher rate and a portion of the proceeds from the return is paid over to the customer as interest.

Currently, these rates range from as low as 0.5 percent to 1 percent or higher (USA) and.085 to 3.75, percent (JAM) depending on how it is tiered (split). The amount of money you deposit and the length of time it is held by the bank will determine the rate of interest that you will receive from your bank. An ordinary savings account doesn’t receive much interest but it could certainly offset the charges from the tax that is levied (charged) against the account.

Bank On Your Bank

These are few products and services offered through commercial banking. The Bank should be your friend and not your enemy. Know your bank and allow your bank to know you. On the other side of the counter, monies that are deposited in our financial institutions help our country to operate effectively on a macro level or larger scale.

We are the ones who controls or determine the country’s inflation as monies are circulated daily through banking. The central bank also forms the center or nucleus of all the financial operations related commercial banking.

Once we develop a good rapport and relationship with our trusted financial adviser, we can always bank on our banks!

Mortgage Loans and Foreclosure Banking Process

In the past week, I have watched hundreds of videos talking about Notes, Mortgages, and Foreclosures and how alleged mortgage bank loans are processed on the world market. Bankers and banks convert the notes into securities, negotiable instruments that are monetized by your signature and are bundled with thousands of other note securities and sold on the open market. The real problem with this process is:

(1) The banks never loaned the borrower money for a mortgage loan;

(2) The mortgage borrower’s promissory note is the money. You, the actual Creditor, loaned the Lender the first loan that was given back to you as a loan with interest from your Money Changer Lender. Your note was deposited into an account, in your name and the bank’s name as the beneficiary, and the amount was taken out by the bank to pay off the seller’s equity and escrow closing agent, and others involved;

(3) Once the note was in the possession of the bank or lender, the bankers, through their back room activities SOLD the mortgage loan, Note and Mortgage Contract, to Freddie Mac, Fannie Mae, or another bank through a commercial Trust and were Paid-In-Full as per your note and mortgage contract; thus completing your contract with the Lender; and

(4) Once your note and mortgage are sold into the Trust, Freddie, Fannie, and/or the bank then EXCHANGE or CONVERT the note for US Bonds or Stocks. These certificates are then sold on the open market to countries like China, France, Russia, Japan, etc. as Mortgage Backed Securities. At the same time, your note, mortgage contract, and closing paperwork is CONVERTED into an electronic format, PDF, for future foreclosure if you do not pay the bogus principle and interest on the ALLEGED mortgage loan.

The Federal Reserve Bank of Chicago states in the Modern Money Mechanics Banking Manual “a note is considered cash at face value:in Modern Money Mechanics, a Workbook on Bank Reserve and Deposit Expansion, published by the Federal Reserve Bank of Chicago, “What is Money?” pp 2.1. explains; and next we see on the next page it is explained that the bank does not actually loan its money to the borrower. “… bankers discovered that they could make loans by giving their promise to pay, or bank notes, to borrowers to sign and the bank then creates money (out of thin air based on the borrower’s signature).” Who creates money? on pp 3.10, then in paragraph 11 it states “it was a small step from printing notes to making book entries crediting DEPOSITS of borrowers, which the borrowers could in turn “spend” by writing checks, thereby “printing” their own money.” Notes are money. A check is a note. Finally on page 6 it is explained in detail how the borrower creates hi/her own funds through the loan process by signing the bank’s promissory note and that the NOTE is a security instrument, money, deposited into the bank’s account at face value or alleged loan amount value! On pp6.6 we are advised “What they do when they make loans is to accept PROMISSORY NOTES in EXCHANGE for CREDITS to the BORROWERS TRANSACTION ACCOUNT.” Then on the same page at paragraph 2 we see that those NOTES are EXCHANGED ‘through the trading desk’ for Treasury Bills from a dealer in U.S. Government securities.” [reference – Modern Money Mechanics Banking Manual]

The borrower, YOU, created the money through a banking process and gave your lender the first loan, so there is no loan made by the banks or lenders. The bank did not loan the borrower anything. Interest on the alleged loan becomes a question. ANY INTEREST on NOTHING is EXCESSIVE. The Lender has been PAID for the NOTE and MORTGAGE Contract when the Lender SOLD it! The note and mortgage state this in no certain terms. You are still expected to continue paying the BANK as if they still hold and own the NOTE.

The banks are failing because they practiced deceits, deception, and non disclosure in the loan process, and CONTINUE to make loans under this failing process. It is not entirely the borrowers “default on the alleged loan” that caused the banks’ failure. Hell, the bank is being paid TWICE, plus interest, on an alleged loan they NEVER even paid one cent on. Then the bank has the nerve to take the borrower to court trying to repossess a house/property they never actually loaned a cent on… and on a NOTE they sold on the open market… What a farce! What a scam on the American people.

The Banks are getting all their money for free, a 200% return, plus interest, on NOTHING!

This is the biggest scam upon the American people in the history of man!

In summary, the bank never actually loans the borrower any money, the bank merely processes the paperwork and acts as a Money Exchanger to create an account to make the credit entry by accounting bookkeeping entries. The note is DEPOSITED as CASH into the bank’s or Lender’s account. They get a security (called a “lunge”) against the note in the form of a U.S. Bond or Stock Certificate, then sell the Intangible Certificate in small portions or parts to thousands of investors on the open market.

All About Careers in the Banks

Banks are going to recruit over seven lakhs professionals by 2016 and among these, over four lakhs jobs are at the entry level positions for fresh graduates. This article takes a close look at the different career opportunities available in banking.

It cannot be denied that banking has emerged as one of the biggest recruiters among the different financial services. In addition to creating large number of jobs, banking jobs are more stable compared to other financial services.

Financial Services

Although, there are varied types of jobs available in the financial services, but we will consider jobs meant for graduates, who are aspiring for jobs in this sector.

It should be noted at the outset that students pursuing any degree course can enter this sector for a thriving career. It is not limited to commerce or management graduates to join the sector. Here we will discuss more on mass employment opportunities and not on jobs with few openings.

Financial services companies are broadly divided in three categories:

· Banks

· Insurance companies

· Non-Banking Finance Companies (NBFCs)

The NBFCs are mostly into multiple businesses like capital markets, lending, asset management, wealth management, etc.

There are 5 categories of Banks. These are:

· Public sector banks – State Bank, United Bank, etc.

· Private sector banks – HDFC, ICICI, Axis, Yes bank, Kotak Mahindra, etc.

· Foreign banks – Citibank, Standard Chartered, HSBC, Barclays, etc.

· Regional rural banks – Gramin banks

· Cooperative banks – Greater Bombay co-op bank, Abhyudaya co-op bank, etc.

In spite of the large number of banks, access to banking services still remain underpenetrated. Over twenty-five percentage of the population does not have access to the financial services sector. Hence these remain largely untapped and provide enough opportunities in the coming years. Given the rise in income levels and the use of latest technology, banking sector is expected to grow 4-5 times of its current size by 2020. The number of people who will be directly employed in banking sector is expected to be over 2 million.

Currently about 60% of people are employed in operations, 30% in sales and 10% in support functions.

How to start a career in banking?

The recruitment process in public sector banks starts with a selection process at entry level. The Institute of Banking Personal selection (IBPS) conducts the Common Written Exam (CWE) for 19 public sector banks. The marks scored at the CWE are used to shortlist candidates for Probationary officers (PO), Clerical cadre, and Specialist officers. The shortlisted candidates appear for group discussion and finally personal interview and the combined scores of both the stages are taken for the final selection.

Separate written test and interview are conducted by the State Bank for recruiting clerical cadres and PO posts. For regional rural banks (RRBs), recruitment is done by IBPS through a test. Private sector banks conduct their own tests and interviews for recruitment at the entry level. These banks have their in-house programs for training to improve skills of the employees.

In conclusion, there is a huge opportunity available in the banking sector for students doing graduation in any stream. A good number of courses are available that provide coaching to help students prepare for the selection process of the jobs in this sector.

An Over-view of Credit Risk Management in the Banking Sector

Over the years, banks have been involved in a process of upgrading their risk management capabilities. In doing so, the most important part of upgrading has been the development of the methodologies, with introduction of more rigorous control practices, in measuring and managing risk. However, the by far the biggest risk faced by the banks today, remains to be the credit risk, a risk evolved through the dealings of the banks with their customers or counterparties. To site few examples, between the late 1980’s and early 1990’s, banks in Australia have had aggregate loan losses of $25 billion. In 1992, the banking sector experienced the first ever negative return on equity, which this has never happened before. There have been many other banks in the industrial countries, where losses reached unprecedented levels.

The analysis of credit risk was limited to reviews of individual loans, which the banks kept in their books to maturity. The banks have stride hard to manage credit risk until early 1990s. The credit risk management today, involves both, loan reviews and portfolio analysis. With the advent of new technologies for buying and selling risks, the banks have taken a course away from the traditional book-and-hold lending practice. This has been done in favour of a wider and active strategy that requires the banks to analyse the risk in the best mix of assets in the existing credit environment, market conditions, and business opportunities. The banks have now found an opportunity to manage portfolio concentrations, maturities, and loan sizes, eliminating handling of the problem assets before they start making losses.

With the increased availability of financial instruments and activities, such as, loan syndications, loan trading, credit derivatives, and creating securities, backed by pools of assets (securitisation), the banks, importantly, can be more active in management of risk. As an example, activities on trading in credit derivatives (example – credit default swap) has grown exceptionally over the last ten years, and presently stands at $18 trillion, in notional terns. As it stands now, the notional value of the credit default swap (a swap designed to transfer the credit exposure of fixed income products between parties) on many established corporate, exceeds the value of trading in the primary debt securities, received from the same corporate. Loan syndications grew from $700 billion to more than $2.5 trillion between 1990 and 2005, and the same period saw a growth of loan trading, which grew from less than $10 billion to more than $160 billion. For the banks, securities pooled and reconstituted from loans or other credit exposures (asset-backed securitisation), provided the means to reduce credit risk in their portfolios. This could be made possible by the sale of loans in the capital market. This became especially viable in case of loans on homes and commercial real estate.

The banks are now more equipped in handling credit risk, in the allocation of its on-going credit allocation activities. Some of the banks use a more comprehensive credit risk management system, by critically analysing the credits, considering both, the probability of default and the expected loss in the possibility of a default. More sophisticated banks use the criteria given in Basel II accord in determining credit risk. In here the banks take credit decisions by increased expert judgment, using quantitative, model-based techniques. Banks, which used to sanction credits to individuals relying mainly on the personal judgment of the loan sanctioning officers, now use a more advanced method of srutinisation, applying the statistical model to data, such as credit scores of that individual. The lending activity of a bank has its credit risk invariably embedded, as one finds in the market risk. It all such cases, banks need to monitor risks by managing it efficiently, absorbing the risk involved.

Pricings of relevant risks are needed when-ever a bank moves in a lending contract with a corporate borrower. New analytical tools now enable banking organizations to quantify lending risks more precisely. Through these tools, banks can estimate the measure of risk that it is taking on the fund, in order to earn its risk-adjusted return on capital. This allows the bank to price the risk before originating the loan. Banks often use internal debt rating, or third party systems, that uses market data to evaluate the measure of risk involved, when lending to corporate issuing stocks.

The financial Pundits of the banking sector have discussed diverse range of subjects and issues, and have arrived on four main themes for a better credit risk management.

The first theme is concerned with a rapid evolution of techniques to manage credit risk. This evolution of techniques have been greatly supported by the technological advancement made, with low cost computing being made available, making analyzing, measuring, and controlling credit risk in a far better way. This has allowed introducing a more rigorous credit risk management system. However, despite the thoughts of the utilization of the techniques evolved, implementation of these practices still has a long way to go for the bulk of the banks. However, it is expected that the pace at which the changes are required to be introduced, will soon accelerate. With competition growing in the provision of financial services, there is a need for the banking and financial institutions to identify new and profitable business opportunities, and as such, it is inevitable that the policies on credit management have to change.

The second theme considered that, the ability to measure, control, and manage credit risk, is likely to be the criteria as to how the banking sector grows in the future. Widespread cross-subsidization has introduced significant negative impact on the net interest margin of all the banks, with a profitable business supporting the cause of otherwise non-profitable activities. The matter of cross-subsidization has been an intentional business decision by the management of the institutions. However, this has introduced problems in cash flow, with the inability to accurately measure risk and return. With the banks getting on to improve on their ability to measure risk and return on the activities, it is inevitable that the characteristic of the internal subsidies will become clearer.

The third theme considered the interaction between the management and the improved credit risk measurement. The theme also looked into the possibility of using alternative risk measurement techniques within the regulatory environment. There were certain issues that emerged.

1. The role of the supervision of a bank or a financial institution, in a more competitive and a much more advanced financial environment.

2. At what extent are the banks’ risk supervisory efforts and their relevant policies, keeping pace with the initiatives and developments taking place in the market.

3. The urgent need to align the supervisory methodologies conceived, with the newly emerging risk measurement practices. In this issue, a general sense of optimism exists, where the alignment between the banking sector and the regulatory authority, regarding the approached towards the risk management practices, would happen over time. However, there is an obstacle in meeting the objective. The banks need to demonstrate with confidence, that they have in place well defined, and well tested rigorous risk management models, which are completely integrated into their operational system.

The fourth and the last theme that evolved, was the need to have a firm commitment from the banking sector, relating to the management of risks in all its forms, and the need to have a strong orientation of the credit management policy embedded within the culture of banking. Without such a firm commitment coming from the higher levels in the banking sector, the alignment between the regulatory authorities and the banking institution, relating to strong credit management principles, is hard to achieve. It needs to be mentioned here that, today, unless banking institutions do not take a firm committed step towards a viable credit management system, and integrate the policies within their operational culture, it will be difficult for the sector to meet any broader objective, which importantly includes improved shareholder returns.

In the matter to be better aligned, there is a necessity of accurate measure of the credit risk involved in any transaction that the bank makes, and such a measure is bound to alter the risk-taking behavior, both, at the individual and at the institutional levels within the bank. So long we have been talking about the state-of-the-art technology and its use in rigorous credit risk modeling. With this, it should be borne in mind that, improved measurement techniques are not automatically evolved without the application of proper judgment and experience; where-ever credit or other forms of risks are involved.

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Expat Banking – Personal Finance For the Intrepid Investor

Here at Q Wealth we often receive emails and calls from people who are confused about how to manage their finances once they become expats or non-residents. I’m not talking so much about tax preparation or returns, but rather about the practical aspects of banking across borders.

For example: Do you need an offshore bank account? What is the difference between a multi-currency account and multiple currency accounts? Should I keep my money in the country where I am living? Can I still access my online brokerage account from overseas? These are all typical questions we are asked, and I will answer these and more in this article.

Let’s make up two typical composite characters, Bill and Mary Expat, who are retiring early abroad and planning to travel frequently. To make things easy, let’s say they are American. They have decided they like the laid-back lifestyle of Latin America, but they are still wavering between retiring in one of the more popular expat havens like San Miguel de Allende in Mexico, or Bocas del Toro in Panama… or maybe they would like to go to a more exotic, adventerous place like Columbia or Brazil. They don’t know yet. Either way, getting there is half the fun, and Bill and Mary are determined to enjoy the journey. For the moment, they are going to up stumps and travel!

Bank Accounts and ATM Cash Withdrawals

Bill and Mary are starting out on their journey with a few accounts at banks in their home country, the USA. Like most couples, they have a couple of joint checking accounts, a savings account, a credit union account and a few credit cards.

It’s certainly worth keeping these home country accounts. US checks are still useful in many Latin American countries, where they can be cashed at the friendly neighborhood casa de cambio. This is a good way to access cash for things like daily living expenses or home improvements. Typically the casas de cambio give a better rate of exchange than ATM machines without charging any fees, and without being subject to daily limits. But of course, before they will cash checks for you on the spot, they must know you. It is best to referred by an existing client, so ask around the “expat experts” in your chosen area.

US bank accounts will also be useful for paying bills at home. Regular bills like insurance payments may be debited automatically, while one-off bills might be best paid by mailing a check. Regular income like social security checks can be direct deposited into the US checking account.

Many people don’t even know they have daily cash withdrawal or spending limits on their ATM or credit cards until the day they urgently need a reasonably large amount of money. Scared of building up a large amount of cash at home, they wait until the last minute to withdraw funds, assuming that because they have the money in their account, they can withdraw it using their debit cards.

Big mistake! They have to pay their builders in cash and the cash dispenser refuses to spit out the money. In addition to that, many countries have just one or two ATM networks and these networks automatically impose their own daily limits.

It’s important to understand in this respect that there are actually three different types of daily limits you must contend with:

o Daily cash withdrawal limit imposed by the bank that issues the card

o Daily purchase limit imposed by the bank that issues the card – this applies to non-cash purchases, where you sign a card purchase voucher in a retailer.

o Daily cash withdrawal limit imposed by the ATM network owner – this limit is not set by your bank, but by the owner of the actual cash machine where you are conducting the transaction.

That is to say, you can ask the bank that issues your card for a permanent or temporary increase in your cash withdrawal limit. They might set it at $50,000 a day. But most ATMs don’t pay out more than about $500 in one transaction. In this case as far as your card issuer is concerned, you could do 100 transactions of $500 each per day, before you hit their limit.

ATM network owners set their own limits, for a variety of reasons. In Brazil, for example, things are particularly difficult. Withdrawals at night are limited to 50 reals, whereas a taxi across Sao Paulo can easily cost 150 reals. So if you are arriving in Sao Paulo on the red-eye flight, be sure to bring cash and don’t rely on local ATM networks! Argentina and other countries place similar restrictions on ATM withdrawals.

In some countries each bank has a different network. In other countries (Spain for example) you may find one monopoly network that controls virtually all the cash machines. They are the worst! If the network owner says nobody may withdraw more than say $500, their word is law. It doesm’t matter that the card issuer allows you to withdraw $50,000. You will get $500 a day, no more!

Internet Purchases and Credit Cards

When you are starting out in a new country without any established credit record, and as a new, recent arrival resident, it may be hard to obtain a credit card. So it is well worth keeping credit cards from your home country too. But there are a few tips and tricks for playing the cards correctly.

First, inform your card issuer that you will be traveling. Call them in advance. That’s important because these days, all transactions from abroad are viewed with suspicion by automatic tracking software used by all the banks. If your bank doesn’t know you are abroad, the software will most likely prevent you from suddenly spending $500 in Panama. This would, of course, be rather embarrassing if you are just leaving a restaurant with prospective business partners at midnight Panama time, early morning Eastern when your bank is closed, and you were relying on the card to pay the bill.

It’s also worth keeping a US billing address. This may be a PO Box or a private mailbox street address provided by an outfit like The UPS Store or Pakmail. You can get a phone number to go with it from a VOIP provider like Skype. This is important. Although your bank might be happy to mail statements to a foreign address, about 99% of online retailers are not set up to handle US cards with non-US billing addresses. Their systems will automatically detect from the card number that the card is issued in the US, then the same system will require an AVS (Address Verification System) match. AVS only works with US addresses. So if you have a US-issued card with a non-US billing address it is basically useless for internet purchases, and also for any other purchases where your ZIP code is requested (some gas stations in the US for example)

Equally, you should be aware that the unique IP address of each computer on the internet, allows the merchant to see what country the order is being placed from. If you order something that is popular with card fraudsters (like a new laptop, a digital camera or gold jewelery) using a US card, US billing address but a Panama IP address, the transaction will most likely be flagged as potentially fraudulent. Usually in cases like this, you need to pick up the phone and talk to the merchant directly to explain the circumstances, so they can manually override their fraud procedures. Most merchants will be happy to do this, but some simply won’t budge.

Opening a Local Bank Account

At some point you will most likely find you need to deal with the local banking system in the country you are moving to. For example, in most Latin American countries now you can pay your utility bills online rather than standing in line for 45 minutes to pay in cash. But you will need a local bank account to do this.

Bank account opening procedures vary enormously from country to country. Unless you are moving to a known ‘tax haven’ the banking system will probably be geared towards locals, and you might find that you have to demonstrate official residence by means of a permit or local ID card before you are even allowed to open a local bank account. There are often exceptions to these rules – but local bank staff in small-town branches will probably not be familiar with them. It’s best to ask local expats for their recommendations, and to choose a bank and branch that is accustomed to dealing with expats and foreigners.

Either way, before you leave home try to get several copies of a bank reference from your home bank addressed “To Whom it May Concern” and stating that you have been a client for a number of years and that have always operated your account in good standing. These documents will prove very useful when dealing with foreign banks, both local and offshore. If your home bank says they want to address a reference to a specific bank, explain that you are travelling and are planning to buy property overseas, but you don’t yet know in which country you will end up.

It’s not just the account opening procedures that vary a lot depending on the country you go to. So do the services offered, which may be significantly different from what you are used to at home. Make sure you take the time to understand the terms and conditions of operation related to your new account, otherwise your bank might assume one thing while you assume something totally different. For example, how long do you have to wait after making a deposit before you can write a check against it? Some countries have complicated systems of value dates where money might show up in your account even though it is not available for you to spend. If there’s anything you don’t understand, ask your bank.

Do you need a Private Offshore Bank Account?

Banking services vary widely, but are rarely of very high quality. You should probably therefore consider opening an account at an offshore bank that specializes in dealing with non-residents. You can open this in a neutral third country – places like Switzerland, the British Channel Islands, Singapore and Panama are typically good. Big names like Barclays Wealth and HSBC offer these services, as do a multitude of smaller banks. Even in this day and age it should be possible to open non-resident bank accounts by mail, without the need to travel there. You can then operate the account using internet banking and debit or credit cards.

There are two main reasons why you might want to open an offshore account. The first is for convenience – you will be dealing with a sophisticated private banker who speaks your language and can offer the range of international services that you will demand. The second is for privacy and asset protection – offshore banks offer confidentiality and discretion. As you become non-resident of your home country for tax purposes, you will gain substantial tax advantages by moving your money offshore.

One of the convenient services most offshore banks offer expats is the multi-currency bank account. This allows you to keep various currencies in the same account. For ease of use you have just one account mnumber, but you can keep all major currencies there and switch them at will with the click of a mouse. Another useful service is the so-called InvestLoan which allows you to borrow money in one currency at a low rate of interest, then re-invest it in a higher interest currency to make a profit.

Of course this doesn’t necessarily apply if you are moving to a banking center like Panama or the Cayman Islands, but if you are moving to a high tax bureaucratic country like Mexico, Brazil or almost anywhere else in Latin America, you don’t want to put all your assets into the domestic banking system where the government can see them on the radar. Neither do you want to leave them in your home country like the USA which will also try to tax you on those assets!

Another consideration when opening your offshore account is whether to open a personal or corporate account. If privacy is a concern for you, it is generally worthwhile forming an offshore corporation and holding the account in the name of the corporation instead of your personal name. This helps keep your account under the radar, as transfers in and out will not show your name.

If you would like to open a private or company offshore bank account, there are consultants who can help you. They will explain a number of do’s and don’ts, and also direct you to specific banks that you can contact directly in order to open accounts. They can also tell you which banks will open accounts for offshore corporations.

A separate brokerage account is usually a good idea too, since most online offshore banks do not offer great brokerage facilities. But there are some. I know, for example, a European-owned offshore discount brokerage house based in Panama that allows you instant online access to major world markets such as New York, London and Frankfurt.

The Advantages and Disadvantages of Online Banking

The advantages and disadvantages of online banking are both persuasive, and many people nowadays use a hybrid of both internet banking and a physical banking account with a local bank. While online banking doesn’t seem as tangible as withdrawing and depositing your cold hard cash, you can do almost anything with online banking that you did at your bank branch.

Save Time and Money
Arguably one of the biggest advantages of online banking is saving time and money. When you use online banking, you can check your account, schedule bill payments and manage deposits with a few clicks of the mouse. Even better, you have control of your money 24/7; not on a 9-to-5 physical banking schedule at some place across town.

No more phone calls or trips to the ATM to check your balance; no more fussing around with paper bills, losing one and having to go search for it, and missing a payment; and no more wondering whether cousin Sally has cashed her birthday check, or waiting until your paper statement arrives in the mail to find out.

Online Bill Pay
Most internet banking institutions give you the option of setting up online bill pay. By using online bill pay, you can either choose to make a one-time payment on your bills, or you can set up recurring bill payments for monthly bills, such as an auto loan, car insurance or your mortgage. This advantage of online banking is invaluable since you can set up payments anytime and know exactly when the payment is credited.

No more putting a bill in the mail and receiving a notice the next month that the check arrived late, or that the recipient didn’t get around to processing it until after your deadline. Online bill pay also saves you the worry of losing a bill; manage your bills electronically, and you never have to worry about a missing piece of paper.

Interest-Earning Accounts
It’s common knowledge that online savings accounts typically earn a better interest rate than the savings accounts at a bricks-and-mortar bank, but you might not realize that some internet banking institutions also offer interest-earning checking accounts. Internet banking interest rates for checking accounts range from 0.5% to 3.40% annually. These rates rival the interest rate you’d get for a savings account at any traditional banking institution, and you’re unlikely to find an interest-bearing checking account at a regular bank, either.

Funny Money
While internet banking makes it easier for you to manage your money, it might make it easier to forget to check how much you have so you can budget. Online banking is a lot like using a credit cards – the easy access makes it easier to spend without thinking about why you are spending. You can set up e-mail alerts to let you know how when your account dips below a certain number, but nothing beats looking at it yourself and keeping your checkbook balanced.

Also, when you get a credit-card statement in the mail and open it on a monthly basis, you are instantly reminded to check if any strange charges appear on your account. It’s easier to forget to keep track of such information online, and you’ll need to have good money management habits.

Hackers can break into nearly any computer system, so how can you be sure they won’t break into your bank’s system? You can’t, but any online bank site you consider should have statements on the type of security they use. You should also e-mail the bank or head to the bank branch to find out exactly what would happen if there were a security breach and press the point or go to another bank if the answer is vague. In general, you should think of your money as being as safe online as it would be in a vault, but it is your responsibility to find out just how secure the bank is, if it is FDIC-insured and if they keep their security systems up-to-date. Finally, you should also make sure that you use security software on your personal computer to reduce the chance that anyone can get your personal data.

You Might Miss That Physical Location
While online banking has many advantages, one of the biggest disadvantages is the absence of a physical location. Being able to make deposits to a physical bank account assures peace of mind; you don’t have to wonder if your check is lost in the mail or when it’s going to be credited to your account.

You might also want that physical location for other reasons. Finances are complicated enough, and it’s not a stretch to think that you might have a question about a transaction or fee someday. One of the disadvantages of online banking is that you can’t speak to a customer service representative in person; you must either send an e-mail or call a number and wait for your call to be answered. If it’s a sensitive question or if you are dealing with a mistake on your statement, you might get an answer faster if you go to a bank branch.

Internet Banking That Makes Sense: The Hybrid Approach
While an increasing number of companies have gone electronic, giving you the option of checking statements and paying online, some occasions even today simply require doing business on paper. Some companies aren’t set up for online banking, so you’ll need paper checks for those businesses. If you rent an apartment, your landlord probably isn’t equipped to receive payments electronically, so you’ll need a check to pay rent. While it’s convenient to be able to use electronic bill pay, you’re going to need to use a paper check at some point.

Deposits constitute another disadvantage of online banking. If you use a bank that doesn’t have a physical location, you’ll have to mail your deposits to your online bank. In these cases, you may be waiting a week or two for your deposit to be received and processed, and that’s time in which you can’t access that money. Sometimes things are lost in the mail, so the security of making a deposit by mail is questionable. Many people who use banks that exist solely online keep a second banking account at a nearby physical bank to make deposits and then transfer them electronically to their internet banking institution.

Even if you’re inclined to rely solely on internet banking, the disadvantages of online banking are strong enough to make it prudent to keep a second banking account at a physical bank. Finding a physical bank that offers online banking provides the best of both worlds, giving you a location for fast and easy deposits, but the freedom to access your money anytime.

Unique Models Associated With Mobile Banking

Since the development of cell phones and wireless technology, the ways in which phones are used has changed dramatically. Today, it is estimated that approximately 15 million people in the United States alone use mobile phones, with numbers expected to hit around 90 in the next five years. Then when looking at the European market, currently some 10 million people use mobile phones with it anticipated numbers to reach 115 million by 2015. Obviously, Europeans are more eager to purchase mobile phones but remember this technology is available around the world, even in remote countries.

Using mobile banking offers a number of incredible and fascinating advantages to conducting banking in other ways. Among the top mobile phone companies, a variety of banking business models now exists. Remember that each of these companies such as Sprint, Nextel, T-Mobile, Singular, and so on are all vying for your business while trying to keep up with growing demand by the public for more innovative solutions, especially when it comes to finances. Therefore, mobile banking models are quite broad.

For instance, when mobile bank models are developed as a means of attracting low-income populations, which is common in many rural areas, the model would depend heavily on banking agents, such as retail stores, post offices, etc for financial transactions to be processed on behalf of the bank. In this particular case, the banking agent is crucial to the mobile banking model to work. Models such as this are used around the world, with some banking agents being airports, bakeries, pharmacies, grocery stores, and so on.

Another model specific to mobile banking is known as the “bank-focused model”. This particular mobile banking model would be used whenever a conventional brick and mortar bank uses some type of non-conventional and inexpensive delivery channel as a way of providing services to existing bank customers. A perfect example would be mobile banking, although online banking and ATMs are also possibilities for providing customers with banking services. Keep in mind that this model provides only limited services of what the conventional bank would offer.

Next, the bank-led model for mobile banking is an alternative solution from using a traditional bank. Unlike the bank-focused model where services via mobile phone would be limited, with this model the customer would have the same range of services that a brick and mortar bank offers. Because the delivery channel is different, services are more robust. For this model to work a JV would need to be created between the bank and non-bank agent or a correspondent arrangement would need to be established.

When mobile banking is used where a bank has limited involvement in the daily management of accounts, perhaps only being responsible for protecting money with FDIC insurance, the model is called a “non-bank-led model”. Because of these and other models used to make it possible for people to use mobile banking, various services can be enjoyed by customers, some to include:

For instance, customers would enjoy a variety of options for obtaining information about accounts to include mini-statements, checking and savings account history, account activity alerts based on set criteria, deposit monitoring, access to all bank statements, ordering new checks, balancing accounts, transferring money, changing a PIN code, reporting or blocking a lost credit card, and much more.

The different models also make it possible for customers to perform a number of functions through the mobile phone such as handling payments online, making withdrawals and deposits at a banking agent, managing stock portfolios, and more. Of course, along with all this, mobile banking also comes with quality support whenever the service is through a reputable bank.

An Overview of Multi-Channel Banking

Banking Turns Increasingly Digital

It is not an exaggeration to say that digital consumers are like no other. They belong to a generation that is more educated, more technology savvy and better connected socially than any other that came before. If they need information, they will research it on the Internet; if they want advice about a particular purchase, they will ask their social network. Their demands fuel innovation in the technology and communications space, giving rise to new, better products that they can’t get enough of. They seek convenience, reach, availability and instant gratification.

These expectations have split over to their banking activities too. Now, digital consumers want their banks to acknowledge these needs and fulfill them, just like other retail businesses are doing. Banks are responding by delivering their services over a range of digital channels including the mobile and the Internet.

Digitization in Africa and the Middle East

Today, digitization is a worldwide phenomenon. The following data indicates how it has pervaded banking in this part of the world.

Banks in Africa and the Middle East record the highest number of average monthly ATM cash withdrawals. In 2009, this figure was 3,914 compared to 1,631 in North America, 2,797 in Western Europe and 2,789 in the Asia Pacific region.

In the Middle East, Internet penetration is 33.5% which is 3.3% of the world’s Internet penetration. Mobile penetration in the UAE is already in excess of 200% and broadband penetration is expected to reach 100% by 2012. On the African continent, mobile adoption has crossed 50% in 26 nations; South Africa achieved twice that number at the end of last year. As a natural progression, this region will surely see high rates of adoption of these media as banking channels in the Middle East and African regions.

What is Multi-channel Banking?

With the availability of alternative modes of banking, consumers started to use more than one channel. They went to the ATM to withdraw cash and enquire about their account balance. Then they started to use Internet banking, first to monitor their accounts, and then to make payments and transfer funds. At the same time, they also made visits to the branch. This was the time when consumers “banked on multiple channels”.

The drawback of this kind of banking was that each channel was isolated from the other. Data generated on one was not visible on another, which meant that if a consumer initiated a transaction at the call center, but resumed it at a branch, he would have to explain the entire situation all over again to the staff. Banks too lost the opportunity to render efficient service or cross-sell, to these channel siloes.

With the integration of channels on a single platform, multi-channel banking became reality. Today, banking is integrated across devices, channels, products, and functions to provide seamless experience to customers across all touch points. Accordingly, banks have a 360-degree view of customer activity on every channel at any point of time. Customers enjoy similar visibility, and are also able to seamlessly transition from one channel to another, even during the course of a single transaction.

What Multi-channel Banking brings to Banks

A recent report by a research firm indicates that although branch investment still tops the list of a bank’s spending, investment in other channels like Internet and mobile banking is on the increase. In Middle East and Africa, spending on online banking channels is expected to touch US$ 50 million in 2012.

Banks stand to gain substantial benefits by investing in integrated multi-channel banking.

• Cost reduction

Multi-channel banking helps banks optimize operating costs and resources. For instance, branch staff engaged in routine operations such as cash disbursement may be deployed in other, more critical functions. With fewer customers walking in, branches can be smaller, and more cost effective to establish and maintain. Channel integration reduces data duplication. Overall, it is estimated that the cost of serving a customer or transaction through Internet and mobile banking is a fraction of that incurred at a branch.

• Customer satisfaction

Seamless multi-channel banking makes banking convenient for customers as it allows them to transact from anywhere, at any time. Since transactions and data are updated in real time, customers have access to the latest information irrespective of the channel. Integration also provides customers a single view of all the accounts held by them at the same bank. These facilities improve customer satisfaction and with time, loyalty.

• Customer acquisition

Banks with an advanced multi-channel banking system can attract customers of other banks, which are lagging in channel integration. They can also use channels – such as mobile banking – to make in roads into markets where they have insufficient branch presence.

• Revenue enhancement

By providing a unified view of customers and enabling tracking of their channel usage, integrated multi-channel banking improves banks’ cross-selling efficiency to bring them more business from existing customers. By reducing cost per transaction as mentioned earlier, and improving sales, multi-channel banking can make a reasonable impact on banks’ top and bottom lines.

The Profile of an Ideal Multi-channel Banking System

A multi-channel banking system should be simple, convenient, affordable and anytime anywhere accessible, providing a unified view of customer’s banking relationships for customers as well as for relationship managers. True multi-channel banking extends beyond the provision of banking access over multiple channels, to add value through:

• Superior user experience

Seamless customer experience is the essence of multi-channel banking. A customer should be able to use a bank’s service on any of its channels. Also, having initiated a transaction, he should be able to continue it on another channel without obstruction. For instance, if he receives an offer about a new high interest deposit on SMS, he should be able to buy into it using his mobile, but send all the supporting documentation via the Internet banking channel.

• Personalized banking

Today’s consumer has a strong sense of uniqueness that he would like service providers to acknowledge with personalized products and services. He desires personalized banking facilities that enable him to set reminders, quickly access links and”favorite activities”, and choose the channels on which the bank must send alerts or initiate contact. Not only that, he may also want to personalize each channel separately. Multi-channel banking must be able to fulfill all these expectations.

• Interactivity

While customers are happy to conduct routine transactions on self-service channels, they invariably seek human assistance when faced with a problem. If ready help is not available at that time, they may give up the channel altogether. Banks can prevent this eventuality by making help available to customers on every channel, at the touch of a button. This can be achieved with a text chat facility – already provided by many – or an audio/video help service, or even co-browsing, whereby a customer care representative can remotely see the customer’s desktop and walk him through the solution. What’s more, using social media, banks can not only make these situations more interactive but also enable a customer to seek assistance from other customers who have had similar issues.

Brief History of Banking in the United States

Before the Revolutionary War, most banking in the Colonial America were unregulated,and was done with agents and banker institutions from England.

After its Independence, the first banks established in the United States were several state banks like the Bank of Pennsylvania in 1782, and the Bank of Massachusetts and Bank of New York in 1784. While the first private commercial bank, the Bank of North America had been established earlier during the war in 1781.

Many founding fathers like Thomas Jefferson were against the notion of central banker institutions, who in accordance with the libertarian ideals of the time believed them to be powerful and evil institutions. But in 1891 the Secretary of Treasury Alexander Hamilton initiated the creation of the First Bank of the United States.

It did not last long, as the evils believed to be produced by central banks began to manifest itself when inflation rose by 62% and the U.S. Government was indebted by more than 8 million dollars within 5 years. And in 1811 its charter was not extended by Congress.

But the economic conditions after the costly War of 1812 necessitated the creation of a Second Bank of the United States which was chartered in 1816. But there was still great opposition against a central bank during the time, and President Andrew Jackson, determined to end the power of bankers over the state, vetoed the extension of its charter in 1836, resulting in the U.S having no central bank for the next 77 years.

During these period of strict opposition against a central bank, the number of state banks flourished and by 1837 there were almost 800 state banks in the country.

Numerous commercial banks also were established across the country like Wells Fargo which was established in New York in 1852.

The large number of banks was mainly in part due to the influential New York Free Banking Act of 1837 which became the basis of banking laws in several other states, and which stipulated that any person can engage in banking and that there can be any number of banks. This era became known as the Free Banking Era.

In 1863 the National Bank Act was created to create a national system of national banks and to encourage the development of the national currency.

While the Federal Reserve System was established in 1913 mainly as result of the financial panic of 1907, and the U.S by then becoming one the largest economies in the world. It officially became the central banking system. It had a poor start as it failed to prevent the Great Depression of the 1930s. And it had to be reorganized and given powers to effectively function in 1934.

While today, the value of the five of the largest banks in the U.S equals more than 50% of the economy.