Banking management

The banking administration is a specific business administration for the banking sector (so-called branch of industry ). The subject of teaching and research in banking management are the credit institutions .

history

When the first German giro bank, the Hamburger Bank , was founded on March 2, 1619 , there was still no systematic scientific bank research. Banking management is one of the youngest sciences, the beginnings of which date back to 1717 with regard to specialist literature with Paul Jacob Marperger's “Description of the Banquets”. In his two-volume work “Die Banken” (1854), Otto Hübner demanded complete congruence of deadlines with the golden rule of banks , while Adolph Wagner in 1857 with his sediment theory partially moved away from this. In 1911, the University of Cologne spun off business administration from banking as an independent special business administration . There were courses in payment and short-term credit transactions, mortgage and securities transactions, and operating technology for banks. The lecturers were Eugen Schmalenbach , Walter Mahlberg and Ernst Walb . The latter published in 1914 an essay concerned with the further development of banking management. In his “Doctrine of Banking Operations” (1924), Willi Prion first described banking management theory as the “science of the structure and design of those businesses that conduct banking ”. Wilhelm Hasenack was one of the first important German authors in the banking calculation sector . In 1924 he dealt with the relationship between bank calculation and fee policy. For him, the bank calculation was the "attempt to create a coherent cost accounting procedure for banking services from an economic point of view, be it to carry out an operational control ... or to obtain documents for setting fees, commissions and interest".

By then, however, banking management had not yet overcome its largely descriptive phase. Stefan Kaminsky provided the first essential bank analytical approaches in 1955 with his fundamental work “Cost and Income Statement of Credit Institutions”, in which he divided banking operations into a “technical-organizational” and “liquidity-financial” area. The dualism of bank performance was recognized. Wolfgang Stützel - actually an economist - dealt in September 1959 with the loss compensation function of own funds and expanded his findings on the theory of maximum stress . Ludwig Mülhaupt and his assistant Hans-Dieter Deppe developed - based on Erich Gutenberg's System of Production Factors - in 1969 an independent banking factor system based on Kaminsky, which better represents the organizational structures of credit institutions. According to Deppe, every banking service is made up of partial services of a liquidity-financial (" value sphere ") and a technical-organizational sphere (" operating sphere "). Under the liquidity-financial area, Deppe understands the totality of all cash stocks and all cash movements triggered by the bank's service creation and marketing process , which are understood as a so-called “monetary production factor”. In this sphere of values, the main banking functions of capital procurement ( deposit business ) and capital provision ( lending business ) take place. The technical-organizational sphere in turn includes the production factors object-related and dispositive work , work and operating equipment as well as the “ information ” factor . Today's banking management sees credit institutions as financial intermediaries with the functions of transforming deadlines , lot sizes and risks . This view has been rejected by various central banks since the financial crisis in 2007 . They emphasize the active role of commercial banks in creating money .

Apart from those already mentioned, important scientists were Hans Büschgen , Karl-Friedrich Hagenmüller , Wilhelm Kalveram , Hans-Jacob Krümmel , Heinrich Rittershausen and Joachim Süchting .

Cognitive object

The object of knowledge is banking . The knowledge gained from industrial management can only be applied to banking operations to a very limited extent. The historical development of banking management has shown that neither the generally accepted division of production factors nor the general business management structure of the operational functional areas of procurement , production and sales can be transferred to bank operations. The operational use of factors and the process of creating and marketing services in the banks required an independent investigation. Rather, the typical characteristics of banking services and their creation are responsible for the fact that banking management has developed into an independent institutional discipline independently of general business management.

aims

Banking management pursues three scientific goals:

• Descriptive objective : It pursues a systematic recording and representation of the essential part of the banking reality as an object of knowledge with the help of the empirical-deductive research method. The description is of particular importance in banking structure theory and banking business theory.
• Explanation goal : It pursues the scientific explanation and justification of experienceable and comprehensible banking phenomena in an intersubjectively comprehensible way. Explanatory models should form systems of empirically based hypotheses that should serve to reveal functional and causal relationships.
• Design goal: The knowledge gained in pursuing the aforementioned goals is used here as an instrument for designing the reality of banking operations. This is intended to transform scientific knowledge into practically applicable maxims of action and behavior for banking practice.

content

Banking management deals with the structure and processes of banking and deals with the special aspects of banking organization . In addition to business management, legal and regulatory aspects also play an important role. In addition to generally binding commercial law, the legal situation of the banks is regulated by special banking and supervisory regulations, which represent the subject of knowledge of banking law . The bank bodies deal with the overall bank control with the strategic bank planning and control and carry out the financial planning and liquidity planning , try to win the attention and loyalty of the bank customers through appropriate products and conditions and monitor and control the risks of the bank in a bank-specific form of the risk management . The credit management checks the creditworthiness of the prospective borrower and monitors the credit risk by means of its own or external rating & hsy; procedure and controls the loan portfolio . In doing so, she applies the findings of the portfolio theories and examines significant risks such as cluster risk and granularity . Of interest are the credit decisions and the possibilities of risk management . The Investment Management plans to medium- and long-term investments in buildings, equipment and security systems. In particular, investments in the IT sector pose particular challenges for the banks. The project and operating costs of the EDP ​​banking platforms are the largest cost item at most banks, along with personnel costs .

Role of banking in the economy

Tasks of the banking system

The universal medium of exchange money, with its many modifications, is the central medium in the banking industry. On the one hand, money simplifies pricing and reduces transaction costs in the exchange of services. On the other hand, the price level itself becomes dependent on the amount of money that has circulated and, with inflation and deflation , leads to new money- related problems. In the national economy, the banking system, as a counterpart to the goods economic (real economic) processes, performs the tasks of the monetary sector by supplying money to the economy and is thus the central economic sector of an economy.

The banks act as intermediaries ( financial intermediaries ) between lenders and borrowers :

• As a rule, investors and borrowers do not want to trade the same capital contributions. For example, companies need a larger amount of debt and equity , while individual investors can only provide small contributions. It is also conceivable that a large investor is faced with a large number of capital takers with low capital requirements. Bringing the ideas of financiers and borrowers into agreement is known as lot size transformation .
• The different temporal needs of lenders and borrowers are coordinated with one another through the temporal transformation of the different capital in and out payments ( maturity transformation ).
• Risk transformation means that the risk of a financial contract accepted by investors is brought into line with the risk of a contract desired by investors. Risk transformation can be achieved through risk reduction and risk splitting.

Legal framework, banking law

Rules on minimum liquidity and capital adequacy

The legislature tries to ensure healthy bank balance sheets and sufficient liquidity through regulations on liquidity management ( Liquidity Ordinance ; formerly Principle II ) and the establishment of minimum standards ( Solvency Ordinance , formerly Principle I ) for the capital backing for credit risks . The bank's solvency at all times should be ensured through stringent regulatory requirements.

Bankruptcy and systemic risk

Banks play an important macroeconomic mediator role between households' money demand and supply. The insolvency of a large bank could, without special precautions, trigger a regional to international banking crisis and subsequent economic crisis, depending on the catchment area of ​​the bank. Inevitably, other banks and non-banks could also go bankrupt. Because a bank's potential insolvency represents a threat to the entire economy (so-called systemic risk ), the legislators have recognized a particular need for regulation.

Banking legislation

In addition to general commercial and contract law, the national banking legislation defines more stringent framework conditions for banks.

Bank client confidentiality and duty to provide information

By the bank secrecy privacy is protected by the customer against third party access. It is a professional secret that forbids the bank employee to provide any information. It can therefore neither be affirmed nor denied whether and to what extent a customer relationship exists or has ever existed. However, the bank is obliged to provide information to third parties if they are authorized in writing (authorized representatives, legitimized heirs, enforcement authorities).

Central bank and monetary policy

→ Main article : Central bank

→ Main article : monetary policy

Development and tasks of the central bank

Central banks were originally banks that were granted the sole privilege of issuing banknotes by the state (so-called banknote privilege ).

The issue of regionally different banknotes by different central banks has led to undesirable frictions and transaction costs in banknote exchange due to the increasing importance of banknotes. Different credit ratings of the various central banks and some bankruptcies in the second half of the 19th century temporarily called the security of banknotes into question. This has led to the formation of national central banks , which have been given a monopoly on the issue of banknotes. The central bank has been given the task of providing money and credit for the economy as a whole, which is to be carried out in compliance with a legally anchored catalog of objectives.

Due to the development of monetary transactions with cashless payments and the associated expansion of the money supply through book money (see deposit money and money creation ), the task of money supply control has become more complex.

In this context, a central bank has the following tasks:

• Supply of liquidity to the money market
• Guarantee of the supply of cash
• Facilitation and security of cashless payment systems
• Management of currency reserves
• Contribution to the stability of the financial system

In order to fulfill these tasks, the central bank has the following room for maneuver:

• Lending for commercial banks against the deposit of collateral
• Borrowing from commercial banks
• Issue and repurchase of interest-bearing bonds (cash or forward transactions)
• Creation of derivatives on receivables and securities
• Establishing business relationships with foreign central banks

In this framework, various instruments are used to pursue the statutory goals of the central bank (see monetary policy instruments under monetary policy ).

The money supply control also has an indirect effect on exchange rates and currency policy . In addition to the primacy of price stability , exchange rate policy must therefore also be kept in mind as a secondary goal. In addition to monetary policy, however, the current account , i.e. H. the balance of imports and exports , as well as the national debt, have an impact on exchange rates.

Money supply control and the economy

Due to the increasing creation of money in the credit system, the circulating money supply can grow or shrink depending on the business cycle. Too little money can lead to credit crunch, recession and deflation . A growing amount of money can lead to greater demand for goods . Since the supply of goods cannot be expanded to the same extent, a further increase in the amount of money leads to price increases on the goods markets, i.e. H. to inflation . Too much money can lead to economic overheating and inflation.

Commercial banks

There are different legal definitions for characterizing banks depending on their country of origin . From a business point of view, given the different national legislations, it is not so easy to find a uniform definition of what a bank is. A commercial bank is someone who offers himself to a public audience to conduct banking transactions . Central banks are not commercial banks in this sense. If they operate at least one of the banking transactions, they require a banking license from the banking supervisory authority .

Banking

The core business of a universal bank is based on customer needs.

Customer need	Banking product	Balance sheet side
Save up	Deposit business : savings accounts , call money accounts , time deposits	liabilities
Disposition	Current account ( cash ): Deposits , withdrawals , book money : payment transactions , payment orders (form or electronic banking ), electronic cash , payment card	passive, if there is a credit line or debit balance also active
Invest	Bond / debenture , share , investment certificate	Passive or off-balance sheet
Finance	Lending business : Loans to natural persons and legal entities : Construction and real estate financing, e.g. B .: collateral of real estate , securities ( Lombard loan ); Overdraft facility , consumer credit, corporate finance z. E.g .: investment loan municipal loans	assets
Provision	Tax-privileged pension accounts	assets
Safekeeping of value (third-party assets)	Security deposit , safe deposit box	off balance

According to the type of income sources, the banking operations can be differentiated

• Interest rate differential transaction or
• Commission business

The interest differential business is achieved on the liabilities side through savings and investment accounts and on the assets side of the balance sheet through credit transactions. In the deposit business , the customer receives interest on his money deposits that is lower than the interest that the bank would have to pay for borrowing on the capital market. In lending business , the customer pays interest on his loan debt that is higher than the interest the bank would receive if it were to lend on the capital market. The banks receive better interest rates on the capital market because they conclude transactions with higher amounts and because they can demonstrate a very good credit rating .

Capital adequacy

Banks' lending options are limited by capital adequacy regulations . Each loan must be backed by a certain proportion of equity. The amount of equity capital limits the maximum credit volume that a bank can borrow. The required capital adequacy is one of the guarantees for the stability of the individual bank and the entire banking system. By December 2013, 8% of the loan volume had to be backed with own funds. A new set of rules on capital adequacy under the title Basel III is intended to ensure that loans can / must multiply these eight percent by 3/4 (for low risk) up to 1.5 (for high risk), depending on the risk classification. This removes the incentive to take out riskier loans (since these have a higher interest rate and thus a higher return could be achieved with the same equity). In addition, operational risks are now also taken into account. The national implementation is carried out by MaRisk ( minimum requirements for risk management (BA) ) and the SolvV ( Solvency Regulation ).

liquidity

A bank must be able to meet its obligations to its customers at all times. The bank must therefore keep a certain proportion of liquid funds available for every deposit business volume that can be terminated at short notice. The legal requirements for minimum liquidity assume that not all customers cancel their deposits at the same time.

Calculation of the interest income with the pool method

The assets side and the liabilities side of a bank balance sheet are related to one another in that lending on the assets side on the liabilities side has to be refinanced through customer funds and the taking out of money and capital market loans. On both sides of the balance sheet, the amount of the customer interest depends on the fixed interest period . With a normal yield curve , a long-term capital commitment generates a higher interest rate than a capital amount that can be terminated at any time.

The volume of money on the assets and liabilities side can be sorted according to the due date or termination date and compared to one another in due date groups. The mean gross interest margin can now be calculated for each group . This procedure corresponds to the interest income calculation using the pool method . The method is imprecise and has several disadvantages. In particular, it should be possible to control the interest conditions on the assets side and the liabilities side independently of one another. It was therefore practically completely displaced by the market interest method.

Market rate method

In the market interest method , every banking transaction is compared with a capital market transaction with the same maturity behavior as an opportunity transaction . According to the principle of opportunity , instead of lending to a customer, the money could be invested in the capital market. Instead of accepting savings, the bank could borrow the money it needs for refinancing on the money and capital markets . The difference between the customer interest and the opportunity interest, i.e. H. the interest rate on the business opportunity forms the interest condition contribution .

The complementary differences summed up over the assets and liabilities side form the structural contribution . The structural contribution describes the income that the bank achieves due to the maturity transformation . However, a one-sided excess deadline always means a market risk. The yield curve can move in an unexpected direction over time, which can adversely affect the bank's financial performance. These market risks can be eliminated within the framework of balance sheet structure management using appropriate derivative instruments. In return, however, the costs of this protection will more or less consume the structural contribution.

Annual report, annual accounts and key figures

The banks prepare an annual report for each financial year , which consists of the annual financial statements , the notes and the management report (including the risk report ). The annual financial statements consist of a balance sheet , income statement and cash flow statement . With regard to the annual accounts, i. d. As a rule , certain minimum classification requirements are required by law (see bank accounting , annual financial statements of the bank (Switzerland) ).

In order to measure the size of the company and the market shares , the banking business theory decided instead of the insignificant sales revenues for the business volume as a measure and thus introduced the balance sheet total as its main factor. Since then , business indicators focused on banks, such as return on assets , have been calculated on the basis of the business volume. In addition to general business management indicators, banking management has also developed specific indicators that take into account the peculiarities of banking operations. These include cash ratio , core capital ratio , margin , net interest margin , cost-income ratio , leverage ratio , or IRB formulas and the risk Para Menter probability of default , loss loan amount and default loss rate .

Organizational structure

The minimum requirements for risk management (MaRisk) stipulate in their general part all credit institutions, u. a. To make arrangements for the structure and process organization. The type, scope, complexity and risk content of the business activities of the respective institute must be taken into account. The regulations for the structure and process organization must follow the principle of separation of functions. It must be ensured that incompatible activities are carried out by different employees. Responsibility for entering into risk must be separated from control and monitoring activities in organizational terms.

The organizational structure of a medium-sized regional bank can look like this:

 Geschäftsleitung oder Vorstand

 Zentralbereiche
   Organisation
   EDV
   Personalwesen
   Rechnungswesen
   Controlling
     Risikocontrolling
   Kredit
     Kreditbearbeitung
     Sicherheitenverwaltung
     Kreditservicing
     Kreditabwicklung
   Zahlungsverkehr
   Treasury/Eigenhandel
     Handelsabwicklung
     Handelsüberwachung

 Marktbereiche
   Investmentbanking
   Firmenkunden
     Großunternehmen
     Kleine und mittlere Unternehmen
   Private Banking (Vermögende Privatkunden)
   Retail Banking

 Regionen
   Zürich
   Weinland
   Oberland
   Mittelland

Challenges in banking management

The extremely dynamic financial system has contributed to significant financial risks , through which states got into a financial crisis like the financial crisis from 2007 onwards. Changes in the financial sector such as new financial institutions ( shadow banks , mailbox companies ), financial innovations (such as electronic money ), globalization , regulation and deregulation or the commoditization of financial products require a detailed examination in banking management. The banking risk management must subject the existing risk aggregation to a detailed risk analysis in order to meet the risk-bearing capacity required by the banking supervisory authority .

See also

• Banking system
• German banking
• Bank term in Swiss law
• Stress tests

literature

• F. Görgen, M. Rosar: Banking apprenticeship . Bookboon, 2013, ISBN 978-87-403-0482-4 , e-book
• Henner Schierenbeck: Profit-oriented bank management . 8th edition. Gabler, Wiesbaden 2003, ISBN 3-409-85000-7
• T. Hartmann-Wendels, A. Pfingsten, M. Weber: Banking apprenticeship . 3. Edition. Berlin / Heidelberg / New York 2004, ISBN 3-540-21227-2 .

Individual evidence

1. ^ Christoph J. Börner, Claudia Wendels: 100 years of banking apprenticeship in Cologne . ( Memento of the original from September 24, 2015 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. (PDF) 2001, p. 26 f. 
2. ↑ Ernst Walb, The further training of the operating theory of the beacons , in: ZfhF , 1914, pp. 179–186
3. ^ Wilhelm Hasenack : Bank calculation and fee policy . In: Zeitschrift für Betriebswirtschaft , 1924, p. 450 ff.
4. ^ Wilhelm Hasenack : Company calculations in the banking industry , 1925, p. 34
5. ↑ Bank of England: Money creation in the modern economy | Bank of England. March 14, 2014, accessed February 4, 2019 . 
6. ↑ Deutsche Bundesbank, Monthly Report April 2017 , The Role of Banks, Non-Banks and Central Banks in the Money Creation Process, page 19f
7. ↑ MaRisk AT 4.3 [1]
8. ↑ MaRisk AT 4.3.1