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In universal banking, banks are not limited to just loans, checking and savings accounts, and other similar activities, but are allowed to offer investment services as well. Universal banking is less common in the United States than in Europe universal bankingUniversal Banking : An Overview: Universal Banking includes not only services related to savings and loans but also investments. However in practice the term 'universal banks' refers to those banks that offer a wide range of financial services, beyond commercial banking and investment banking, insurance etc. Universal banking is a combination of commercial banking, investment banking and various other activities including insurance. If specialized banking is the one end universal banking is the other. This is most common in European countries. Universal Banking : An OverviewAdvantages & Disadvantages: The main advantage of universal banking is that it results in greater economic efficiency in the form of lower cost, higher output and better products. However larger the banks, the greater the effects of their failure on the system. Also there is the fear that such institutions, by virtue of their sheer size, would gain monopoly power in the market, which can have significant undesirable consequences for economic efficiency. Also combining commercial and investment banking can gives rise to conflict of interests Advantages & DisadvantagesObjectives of Universal Banking : The main objectives of such a model are an increased participation in investment strategies, securing clients through saving and loan schemes, development of private sectors and cutting costs for financial services Participation in Investments Savings and Loans Development of Private Sector Cutting the Costs Objectives of Universal BankingPowerPoint Presentation: Participation in Investments Universal banking focuses on performance of private firms by directly investing into such entities. By participating on the investment market, such banks can directly exercise decision-making power in the governance of corporations. This objective of universal banking aims to secure the financial interests of companies that have received direct investment and to protect the future development of such institutions. For example, Swiss economist Georg Rich indicates that by aiming to directly participate on the investment market, universal banks in Switzerland want to ensure that the companies that have received investment funds would deal with them properly and will not undertake unreasonable financial decisions Savings and Loans By delivering multiple financial services, universal banking aims to deliver immediate benefits for their clients. This makes such entities quite attractive for people who want to take care of their all financial needs at one place -- they can both apply for an investment scheme and require credit for business development. By providing their clients with saving and loan options, universal banks aim to diversify their range of services and have larger influence on the financial markets. German economist Ralf Elsas from Frankfurt University emphasizes on the fact that by aiming to promote saving and loan programs, universal banks can benefit from different types of clients and obtain more working capital to invest in the future.PowerPoint Presentation: Development of Private Sector Among the main objectives of universal banking is the development of the private sector. As such, banking institutions are highly unlikely to cooperate with governmental funds because of their urgent need to invest money, universal banks target the private sector as a main source of clients. But to have such clients, universal banks need to develop the sector and ensure its stable run and economic growth. This has been revealed by economist Gary Gorton who states that universal banks in Germany are the main contributors for the rapidly expanding private sector in the country. Cutting the Costs Since many of the European continental banks are adopting the universal banking approach, it is essential for them to be more competitive on the global market where American and Asian banks offer better prices for providing financial services. The idea of the universal banks is to reduce the costs of their financial services by enlargement -- being able to expand their areas of expertise would empower European banks to engage in more serious price reduction strategies. The European Central Bank has already partially achieved this objective by providing low interest loans to European Union economies.Universal banking in India: In India Development financial institutions (DFIs) and refinancing institutions (RFIs) were meeting specific sect oral needs and also providing long-term resources at concessional terms, while the commercial banks in general, by and large, confined themselves to the core banking functions of accepting deposits and providing working capital finance to industry, trade and agriculture. Consequent to the liberalization and deregulation of financial sector, there has been blurring of distinction between the commercial banking and investment banking. Reserve Bank of India constituted on December 8, 1997, a Working Group under the Chairmanship of Shri S.H. Khan to bring about greater clarity in the respective roles of banks and financial institutions for greater harmonisation of facilities and obligations . Also report of the Committee on Banking Sector Reforms or Narasimham Committee (NC) has major bearing on the issues considered by the Khan Working Group. The issue of universal banking resurfaced in Year 2000, when ICICI gave a presentation to RBI to discuss the time frame and possible options for transforming itself into an universal bank. Reserve Bank of India also spelt out to Parliamentary Standing Committee on Finance, its proposed policy for universal banking, including a case-by-case approach towards allowing domestic financial institutions to become universal banks. Now RBI has asked FIs, which are interested to convert itself into a universal bank, to submit their plans for transition to a universal bank for consideration and further discussions. FIs need to formulate a road map for the transition path and strategy for smooth conversion into an universal bank over a specified time frame. The plan should specifically provide for full compliance with prudential norms as applicable to banks over the proposed period. Universal banking in IndiaPowerPoint Presentation: Expanded commercial banks or universal banks constitute twelve (12) financial institutions, considered as one-stop commercial banks performing com-banking functions and non-related banking activities. Is universal banking is also know as commercial banking? Yes, Universal banking is commercial banking itself. However, Universal bank does more than a commercial bank. Universal Bank are what we call the "expanded commercial bank" (EK). Commercial banks are limited to allied banking only whereas a universal bank does allied and non-allied banking transactions. What Is the Difference Between Universal Banking and Merchant Banking? : Universal Banking Products and Services Universal banks offer a wide range of consumer financial products and services. The core of all consumer banking activity is deposits and lending--every universal bank offers checking and savings accounts along with mortgages and even auto loans. Universal banks also offer consumer investment products such as mutual funds and annuities. For high-net-worth individuals, many universal banks offer their clients private banking services What Is the Difference Between Universal Banking and Merchant Banking?PowerPoint Presentation: Private Banking Private bankers offer individuals and families the highest level of service a bank can offer. Private bankers typically offer financial planning services along with sophisticated wealth management solutions. The financial planning services often include retirement and estate planning solutions. Merchant Banking Products and Services Merchant banks focus on providing solutions and financial products to midsized and large private and public companies. Merchant bankers not only handle corporate deposits and treasury services but also commercial lending and equipment finance. Investment banking services are typically also offered by merchant banks to allow their clients access to new capital. Investment Banking Investment banking is the division of merchant banks that handles all mergers and acquisitions and all securities issuance. Mergers and acquisition advice is expensive, and the consulting services merchant banks offer businesses in these areas serves as a profit center for the bank. Merchant banks help companies raise additional capital by issuing new securities such as stocks or bonds. Traditional Banking Traditionally, banks only offered simple depository and lending services. Today, the service and product offerings of banks have become far more diverse.Advantages of Universal Banking : Economies of Scale. The main advantage of Universal Banking is that it results in greater economic efficiency in the form of lower cost, higher output and better products. Many Committees and reports by Reserve Bank of India are in favour of Universal banking as it enables banks to explit economies of scale and scope. Profitable Diversions. By diversifying the activities, the bank can use its existing expertise in one type of financial service in providing other types. So, it entails less cost in performing all the functions by one entity instead of separate bodies. Resource Utilization. A bank possesses the information on the risk characteristics of the clients, which can be used to pursue other activities with the same clients. A data collection about the market trends, risk and returns associated with portfolios of Mutual Funds, diversifiable and non diversifiable risk analysis, etc, is useful for other clients and information seekers. Automatically, a bank will get the benefit of being involved in the researching Advantages of Universal BankingDisadvantages of Universal Banking: Grey Area of Universal Bank. The path of universal banking for DFIs is strewn with obstacles. The biggest one is overcoming the differences in regulatory requirement for a bank and DFI. Unlike banks, DFIs are not required to keep a portion of their deposits as cash reserves . No Expertise in Long term lending. In the case of traditional project finance, an area where DFIs tread carefully, becoming a bank may not make a big difference to a DFI. Project finance and Infrastructure finance are generally long- gestation projects and would require DFIs to borrow long- term. Therefore, the transformation into a bank may not be of great assistance in lending long-term. NPA Problem Remained Intact. The most serious problem that the DFIs have had to encounter is bad loans or Non-Performing Assets (NPAs). For the DFIs and Universal Banking or installation of cutting-edge-technology in operations are unlikely to improve the situation concerning NPAs. Disadvantages of Universal BankingPowerPoint Presentation: RBI guidelines on Universal Banking As per RBI guidelines of April 2001, FIs have an option to transform into a bank provided they ensure compliance with the following: Reserve requirements (CRR/SLR) - Compliance with the cash reserve ratio and statutory liquidity ratio requirements would be mandatory for an FI after its conversion into a universal bank. Permissible activities - Any activity of an FI currently undertaken but not permissible for a bank under Section 6(1) of the B. R. Act, 1949, may have to be stopped or divested after its conversion into a universal bank. Disposal of non-banking assets - Any immovable property, howsoever acquired by an FI, would, after its conversion into a universal bank, be required to be disposed of within the maximum period of 7 years from the date of acquisition, in terms of Section 9 of the B. R. Act. Composition of the Board - Composition of the Board of Directors to ensure compliance with the provisions of Section 10(A) of the B. R. Act, which requires at least 51% of the total number of directors to have special knowledge and experience.PowerPoint Presentation: "A Reply From CEO of J.P. Morgan To A Pretty Girl Seeking A Rich Husband".. ! A young 'n pretty lady posted this on a popular forum: ... ---------------------------------------------------- Title: What Should I do to Marry A Rich Guy? ---------------------------------------------------- I'm going to be honest of what I'm going to say here. I'm 25 this year. I'm very pretty, have style 'n good taste. I wish to marry a guy with $500k annual salary or above. You might say that I'm greedy, but an annual salary of $1M is considered only as middle class in New York. My requirement is not high. Is there anyone in this forum who has an income of $500k annual salary? Are you all married? I wanted to ask: what should I do to marry rich persons like you? Among those I've dated, the richest is $250k annual income,'n it seems that this is my upper limit.PowerPoint Presentation: If someone is going to move into high cost residential area on the west of New York City Garden(?), $250k annual income is not enough. I'm here humbly to ask a few questions: 1) Where do most rich bachelors hang out? (Please list down the names 'n addresses of bars, restaurant, gym) 2) Which age group should I target? 3) Why most wives of the riches are only average-looking? I've met a few girls who don't have looks 'n are not interesting, but they are able to marry rich guys. 4) How do you decide who can be your wife, 'n who can only be your girlfriend? (my target now is to get married) Ms. Pretty A Philosophical reply from CEO of J.P. Morgan: Dear Ms. Pretty, I have read your post with great interest. Guess there are lots of girls out there who have similar questions like yours. Please allow me to analyse your situation as a professional investor.PowerPoint Presentation: My annual income is more than $500k, which meets your requirement, so I hope everyone believes that I'm not wasting time here. From the standpoint of a business person, it is a bad decision to marry you. The answer is very simple, so let me explain. Put the details aside, what you're trying to do is an exchange of "beauty" 'n "money" : Person A provides beauty,'n Person B pays for it, fair 'n square. However, there's a deadly problem here, your beauty will fade, but my money will not be gone without any good reason. The fact is, my income might increase from year to year, but you can't be prettier year after year. Hence from the viewpoint of economics, I am an appreciation asset, 'n you are a depreciation asset. It's not just normal depreciation, but exponential depreciation. If that is your only asset, your value will be much worse 10 years later.PowerPoint Presentation: By the terms we use in Wall Street, every trading has a position, dating with you is also a "trading position". If the trade value dropped we will sell it 'n it is not a good idea to keep it for long term - same goes with the marriage that you wanted. It might be cruel to say this, but in order to make a wiser decision any assets with great depreciation value will be sold or "leased". Anyone with over $500k annual income is not a fool; we would only date you, but will not marry you. I would advice that you forget looking for any clues to marry a rich guy. 'n by the way, you could make yourself to become a rich person with $500k annual income. This has better chance than finding a rich fool. Hope this reply helps. If you are interested in "leasing" services, do contact me. signed, J.P. Morgan CEO... You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.