Banking and finance are a growing industry. The global recession has reduced the number of individuals who are employed in finance-related professions, but the changing job market has created an opening for bankers who have the skills to manage their businesses within a strict financial framework.
Banking is a complicated discipline because there are many aspects to it. If you wish to be a banker, you need to become familiar with several different facets of banking such as:
Commercial Banks: Most of the world’s banks are commercial banks. Commercial banks operate their businesses in a different way than a public or private institution. Banks that are in the commercial sector are heavily regulated and subject to a range of restrictions that affect the way they conduct business.
Credit Bureaus: These organizations track all loans and payments that have been made by customers. This information is then sent to the various banks that use it to make their loan decisions. Credit bureaus keep track of the credit history of their customers, giving them a more accurate idea of how a customer will repay a loan.
Liquidity Ratio: This refers to the amount of capital required to be on hand at any one time in order to meet immediate needs. A higher liquidity ratio is desirable for banks that are looking to increase lending. These institutions are often required to hold more liquid assets than smaller banks.
Senior Debts: These refer to the bank’s own profits as opposed to all the borrowing that the bank does for its customers. If senior debts rise, this shows that the bank is managing its business more efficiently.
Banking Regulation: All banks are subject to government regulation, and the laws that govern the day to day operations of banks are governed by the Bank Holding Company Act (BHCA). These are the laws that ensure banks adhere to the general rules of good business practice, are managed correctly, and provide their customers with adequate protection against financial fraud.
Reserve Requirements: Reserve requirements also refer to the amount of capital that banks must hold in order to operate. Most small banks do not have enough money to give them the necessary capital for day to day operations. They can also have difficulty obtaining additional funding to expand their business.
Financial Products: Another aspect of banking is the regulation of financial products, such as mortgage-backed securities and repo financing. These are programs that can help you get money in the short term but provide little or no benefit over short term investments. In order to obtain financing they must be part of the loan you take out.
Sales Process: Your job as a banker is to provide a solid financial service to your customers so that they can achieve their financial goals. If your customer has any questions regarding their financial future or the risk they are taking, you must be able to answer those questions accurately.
An accountant or bookkeeper can be needed to audit your client’s ability to pay their loans back. Sometimes you may need to find a special loan or buyer to fund a particular product if your client cannot pay the capital cost of the product. These activities are examples of what is known as a specialized activity.