RetailBankingA.ppt

Retail Banking – Learning, knowledge, intangibles and intermediation Professor John B Holland The University of Glasgow RETAIL BANKING – FOUR KEY QUESTIONS IF KNOWLEDGE IS SO IMPORTANT HOW CAN RETAIL BANKS LEARN? WHAT IS KNOWLEDGE IN RETAIL BANKING? HOW CAN BANKS CREATE ADVANTAGE VIA LEARNING KNOWLEDGE WHAT IS THE IMPACT OF KNOWLEDGE ON INTERMEDIATION ? DYNAMIC VERSION OF Sustainable Competitive Advantage (SCA)? WINNER BANKS? Losers ? Retail Banking – Learning RETAIL BANKING - A DEVELOPED ‘INTANGIBLES’ MODEL 1st OUTCOME LEARNING =BANK BASIC INTERMEDIATION MODEL = LEARNT OVER TIME by practitioners + Academics codify and use to Explain nature of RB via finance concepts of financial intermediation, information asymmetry, adverse selection, moral hazard. 2nd OUTCOME LEARNING = KNOWLEDGE INTENSIVE INTANGIBLES = KEY COMPETITIVE ADVANTAGE ? HOW UNDERSTAND ? = VIA INTELLECTUAL CAPITAL (IC) LITERATURE. ? ?WHAT ARE DETAILED IC INTANGIBLES? COMBINATION? Learning about theBasic model 1. RETAIL BANKING – LEARNING ABOUT BASIC MODEL BASIC INTERMEDIATION MODEL = LEARNT OVER TIME, THROUGH TRIAL ERROR, MANY FAILURES in core areas LEARNING ABOUT problems, errors, failures – (on both ASSET SIDE LIABILITY SIDE) in core areas =? - CUSTOMER BEHAVIOUR, RELATIONS - REGULAR TRANSACTING AND INFO ADVANTAGE -CONTRACTING WITH CUSTOMERS, MONITORING, RENEGOTIATE CONTRACTS - ie Contracting at trans level to control loan/deposit IS,AS,MH; -DIVERSIFICATION OF RISK, LAW OF LARGE NUMBERS -USE CAPITAL (cash, equity) AS ‘BUFFER’ AGAINST RISK 1. RETAIL BANKING – BASIC MODEL - LEARNING ABOUT CROSS BALANCE SHEET EFFECTS how good ..ASSET SIDE PRACTICE ENCOURAGE DEPOSITS ..LIABILITY SIDE PRACTICE ENCOURAGE DEMAND FOR LOANS HOW ALL THESE INTERACT HOW CREATE STABLE BANK ‘RISK MACHINE’ MADE UP OF STABLE STOCHASTIC PROCESSES THUS LEARN HOW THESE ALLOW BANK TO TO INTERMEDIATE OR TRANSFORM SIZE, LENGTH, RISK OF CAPITAL OR = BASIC