creating a bank

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Introduction

If there is any industry that has been known to be lucrative, then it has to be the banking industry. This is one industry that produces quite lucrative or impressive profit margins as compared to other sectors or industries. It is therefore no wonder that we have banks cropping up every now and then all in an effort to have a share of the market and make some returns on investment.

With the lucrative nature of the business, definitely sounds impossible especially for the small man. It is an open secret that many think of this field as the precinct of the rich and privileged. However, this does not have to be the case. In fact, the banking industry comes with fewer risks compared to some other sectors. Research shows that in a three year period, the new banks that failed amounted to less than 0.1% which translates to one bank for every a thousand newly established financial institutions. This is quite a low figure compared to the failure rate of new restaurants which stood at sixty percent. In addition, their profits have been quite commendable. The studies further indicate that over the last five years, the earnings for 6700 community banks were $67 billion. This supports the notion that the industry produces quite impressive profit margins.

One thing that you will note however is that, starting your own bank would not be a walk in the park. Your will would be put to the test not to mention the financial muscle. While you may have all the finances in order, building the knowledge base as to the location, how to allocate capital organizing group, directors and the whole hierarchy will have to be considered. Assigning the roles and responsibilities to the reputable individuals will demand that you not only employ particular individuals but also undertake a rigorous selection for them.

Determining the members of the organizing group will be important. This is even before you look into getting the right employees or members of the staff. These are the original partners of the private bank. The importance of making the right selection of the partners cannot be gainsaid having in mind that bank regulators have to pay attention to the group as a whole as well as the individuals in isolation. While it will be important that the organizing partners have a favorable net worth, you will have t ascertain that their character is beyond repute.

With the right organizing group, you will need to pay attention to the members of the staff. Recruiting professionals who will be heading the private banks board would be a balancing act between their experience and skills in banking as well as in management.

Bank managers

These would be responsible for smooth operation of the private bank. Bank managers have a direct responsibility for any other staff working in your bank right from the process of hiring to training and even supervision. Given the importance of the bank managers, being in a position to communicate to the other employees and supervise and train them adequately would be imperative in order to ensure that standard procedures of the bank are followed not only in the handling of money but also in the handling of the customers. They maintain a balance of the deposits held by the bank at a particular time. They also handle complaints of the customers on issues like accounts discrepancies, charges, services etc. Managers form a link between the marketing team, bank president, loan departments, mortgage divisions and investment consultants in order to enhance business for the bank. Some of the formal certificates to look out for include diploma, degree or certificates in corporate banking, banking practice and management, retailing financial services, banking and even professional DFSM. A single bank manager propped by the departmental managers would be sufficient since it will be the pioneer branch of the bank.

Bank tellers

This is the individual that many people identify with in the banking fraternity. They will be making about 28% of the private bank employees. They undertake the larger part of the routine transactions of the bank. Their responsibilities will be accepting deposits, cashing checks, processing withdrawals and receiving the loan payments. They will also accept utility bill payment, sell bonds and travelers’ checks. In the initial stages, an influx of customers would be expected. However, the number of tellers may not have to be high due to incorporation of technology. In this case therefore, eight tellers or cashiers would be sufficient.

Credit officers/ loan officers

The major occupation of the bank is bound to be lending and this is where the loan officer would come in. he or she would assist the prospective clients apply for the loans, assess their creditworthiness, help in determining the type of loan that would be appropriate for them and judge how suitable the borrowers may be as well as the terms on which the loan would be granted to them. In some cases, he or she will be required to seek out the applicants rather than wait for them. three credit officers would be sufficient for the bank.

Salespeople

Any business enterprise acknowledges the importance of marketing. Sales people will be helping the private bank to market its products to the clients. They would analyze the financial data of the prospective client, their investment objectives as well as their risk profile then recommend an appropriate product. Their sales skills and results will definitely have a bearing on their earnings since they receive commissions. Having in mind that the bank will not be incurring any expense on these since they will be earning from their commissions, the more they are the better.

Accountants

These would be responsible for ensuring a positive cash flow as well as ensuring the profitability of the private bank. Essentially, the accountants will be preparing permanent record of the transactions that the bank has engaged in. in this case, the bank statement of accounts will be depicting the bank accounts in general while the various books of accounts give the comprehensive analysis of particular items and transactions. Basically, it is understood that for every credit, there is a debit and vice versa in which case, every dime spent must be accounted for by a particular asset. The accountant would also be responsible for giving a clear picture of the true financial position of the bank as well as advising the bank on the factions to take incase the financial position is in jeopardy. The accountant would prepare financial statements such as statements of retained earnings, balance sheets, profit and loss accounts, cash flow statements as well as income statements. They would also show the changes in the bank’s equity thereby giving the investors an idea as to the operations of the bank. For accountants, having a degree would be an advantage but not necessary. However, it would be important that they be registered with accounting bodies such as Chattered Institute of Management accountants, Institute of Chartered Accountants In England, and Chartered Association of Certified Accountants. All these bodies dictate the standards to be followed in the banking accounting. For a starting bank, three accountants would be a good number.

What credentials to look for in the members of the staff?

While the banking industry is recognized as having quite impressive profit margins, there are variations as to the level of profitability between the individual banks. This is due to the fact that profitability will be a function of variables such as product appropriateness, marketing, good management, proper customer service as well as good cash handling capabilities. These are the some of the qualities or credentials that you will look for in the members of the staff.

Good communication skills both spoken and written- every business is founded on the communication skills of the staff. The individuals should have the ability to communicate the various policies of the bank to the clients, disseminate this information without complicating or confusing the client. Clarity of the communication would be important within the hierarchy to allow for smooth execution of decisions.

Due diligence- the staff should be able to pay attention to even the minutest details. Any information or even data that the accountants, tellers, managers etc. miss or have a mistaken analysis of would have devastating consequences on the reputation of the bank.

Prioritization and multitasking skills- with the multiplicity of duties that the individual members of staff would be expected to perform at any given time it will be important that they be able to undertake different projects simultaneously as well as prioritize on effectively on the projects. This ensures that the bank operations run smoothly.

Specific knowledge of the banking industry- while these members of the staff may have worked in other industries, there are dynamics that are industry-specific and therefore having some knowledge about them would be important. This explains why as much as formal education on the particular sectors would be important, longer experience in the industry may count much more.

Skills touching on qualitative analysis- you will more often than not be dealing with figures. In this case, being in a position to have a complete idea from just as collection of numbers will be important in saving time and exhibiting knowledge of the industry. This is important in building trust in the clients.

Decision making and problem solving skills- there is always the likelihood of problems cropping up between the workers, the management as well as the clients. Being in a position to remain level-headed and make rational decisions even when one is under pressure would be important especially having in mind the delicate nature of the clients.

These skills are appropriate over and above the necessary formal education and registration with the relevant bodies. Formal education or even experience would never work in isolation. They will have to be applied as a combination in order to allow for smooth running of the bank.

Budget for the 5000000

The major expenses of the bank would include capital costs for the building and equipments, operational costs such as employee salaries and emoluments as well as the office supplies and financing costs. Also looking at the reserves that are to be deposited with the federal bank would be important.

Conclusion

A private bank is always a worth investment as long as you pay attention to the specific considerations that should be made. These include location, budget, organizational group and the right professionals for the bank. Looking into their qualifications both in terms of formal education, experience and personal attributes would be important for the growth of the bank.