Bank Executives Seek New Ways to Manage Operations and Basel IV


While always an important consideration, products that streamline banking operations are now more vital to increasing bottom lines. With the coming changes in the capital requirements proposed by international regulators, strong bottom lines will be more critical than ever.

Basel III Morphs into Basel IV

The Basel Committee on Bank Supervision (BCBS), which reached accords with the world’s banks, has been plagued by spotty or incomplete implementation. Basel I, first drafted in 1988, established minimum acceptable levels of bank capital to minimize asset and credit risk.

Basel II, appearing in 2004, revised and updated the structure of Basel I, refocusing and limiting capitalization to stated balance sheet assets only. Many believe this modification contributed to the subprime financial crisis, leading to the recent worldwide recession.

Adopted to defeat recessionary effects, Basel III focused on issues different from those addressed in Basel I and II. Many U.S. banks chose not to implement all provisions of Basel II, with the support of the Fed and the FDIC. However, many European banks already took advantage of Basel II’s modifications to establish large portfolios of sovereign debt, contributing to a global financial crisis. Additional regulatory capital restrictions, indicating a major change in Basel III has led observers and ban executives to refer to the coming regulations as Basel IV. Credit union executives face additional issues because of the difficulty in raising additional capital major and community banks do not face when they can sell more stock.

Streamlining Operations to Better Manage Costs

Top financial institution partners, such as BankTEL Systems, offer accounting, financial and vendor management software to control costs and streamline operations. For example, with over 1,400 financial institution clients in all 50 states, BankTEL offers proven financial accounting and cash management software that improves bank efficiency and often makes positive contributions to net profits.
While strong bottom lines are vital to credit unions’ ability to increase capital, banks need healthy profits to encourage investment to enhance their capital positions. The challenges to increase revenue for financial institutions are often daunting in the current business environment.

Streamlining operational efficiency is best accomplished using state­-of­-the­-art technology, which generates a healthier bottom line. Bank executives should match their policies and procedures with cutting­-edge technology to maximize the benefits of more efficient operations.

Automating financial institution internal processes cuts operating costs that previously may have proved troubling, particularly if the institution functions in a market area that discourages revenue increases In overly competitive markets, instituting new revenue­-generating fees can be impossible for banks hoping to
enhance their brands and/or increase core deposits.
Typically, using integrated accounting software and other automated processes reduces costs significantly,
translating to higher net income. Since growing retained earnings increase capital, strong net profits boost
bank and credit union capital percentages.

Does Basel IV Go Too Far?

Some banking industry experts, such as the managing principal of  MRV Associates, believe the prospective changes of Basel IV may go too far, provoking financial institutions to strongly “push back.” Key provisions troubling bank executives, boards and industry observers involve the BCBS demanding that banks be more transparent in disclosing how they determine risk­weighted policies. This forces institutions to clearly disclose how much risk they assume—and why.

Current Basel III rules offer banks wide discretion in credit and operational risk assessment policies. Banks have no obligation to disclose the criteria used in credit risk decisions. Banks want to keep this control and appear ready to fight for that right. Decision­-making bank executives must decide how strong a fight they want to generate. Since the BCBS appears to be committed to regulation reform, particularly as it addresses capital level calculations, this could become a long, bitter battle. Are bank executives and boards equally committed to waging such a battle? Does more transparency encourage higher capital? Do liquidity minimums play a role in increasing or decreasing capital, depending on risk assessment policies? At this time, it is impossible to know how the bank-­BCBS war will be waged. Stay tuned for further developments.


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Sales Tactics Banks Must Employ


Increased competition, new technology that is keeping customers out of the branch and increasing costs across the banking industry has increased the demand on sales professionals to do their jobs well in order for the bank to make a profit. Today’s bankers can do well by keeping some sales tactics in mind as they try to sell more products to their customers. Without these fundamentals, your branch’s sales numbers will suffer.

Target the Right Prospects

The first step in successful sales is targeting the right prospects. Whether sales professionals working in the bank or calling officers who are soliciting targets in another way, bankers need the tools to target the right prospects.
It helps no one when your sales professionals spend their valuable time calling or reaching out to prospects, filling out applications and running credit checks for offers that are simply not going to go through. Why does this happen? It happens because all too often management expects their sales professionals to find their own prospects, or the bankers are given a list of prospects to contact that has not been screened. This wastes everyone’s time.
The truth, however, is that this is not necessary. Data on prospects is readily available, and the latest analytic programming can make it easy for bankers to receive a targeted list of prospects. Consider, for example, a bank looking to increase its business checking account numbers. By using analytics to identify the customers who are using DDAs instead of business accounts, and targeting those specific customers, the sales team will have a much higher rate of success.

Offer Engagement Services to Harvest Easy Sales

Another tactic that banks can use is targeting existing customers with engagement services connected to the accounts they already have and use. For example, a customer with a debit card and checking account can be enrolled in online bill pay or an automatic savings transfer agreement. Customers with credit products can upgrade to privacy protection.

Why is this so effective as a sales tactic? These customers already use, and hopefully like, your bank. As a result, they are more likely to accept the additional service. They are familiar with your bank and enjoy banking there.

Offer the Right Products

Your bank has many different products you wish to sell, but not all of these are a benefit to your customer. Banks need to teach their sales teams how to provide appropriate products to the specific prospect they are talking to.

How can you do this? Again, it requires data collection and analysis of that data. Your bank must know the demographic of its typical customer, and target those customers with the products that make sense for them.

Data can be collected in several ways, but customer service representatives are one of the greatest tools you have to collect this data. Customer service representatives need to make notes in a customer’s account when they hear information that could lead to a future sale. For example, when chatting with a customer who mentions children, a note can be made to offer a college savings plan at a later interaction. The more personal and targeted the product offering is, the more likely it will be that the offer is accepted.

Another way to do this is to create packages that target the demographic you see most frequently at your branch. In order to make these packages work, bankers must be trained how to match customers with a package offering.

Sales in today’s banking industry are not easy to come by, but with the right strategies, they are not impossible to make. Target the right people with the right products, and don’t forget engagement services, and your bank will be able to reach your sales goals more effectively, even in a competitive market.

Expense Report Software Saves Banks Time and Money

Expense_ReportWhile many of the Accounting and Finance Department’s duties remain debatable as to whether they represent cost or revenue centers in the banking industry­­ and others. Mention expense report tasks to a bank executive and witness a painful

Although, you could argue that expense reports offer a) a legitimate tax deduction and b) an indirect contribution to the bottom line, generated by direct increases to loan portfolios or fees, most executives would agree the Accounting Department expends non revenue producing time and money processing expense reports and authorizing reimbursements.

Software Advantages

There is little debate that examining expense reports, authorizing and ensuring timely reimbursements, and verifying said reimbursements is time consuming when done manually. State­of the­art software, such as available from BankTEL, eliminates much of the time and wasted money having talented accounting staff complete this task manually.

Submitting, tracking and evaluating expense reports using cutting-edge software accelerates the process and goes further. After submission, approved reports transfer directly into Accounts Payable, to ensure timely reimbursement.

There is an added advantage for banks’ using outstanding expense report software. Banks enjoy compliance and internal policy adherence benefits. One result is assured: Your accounting staff and executives will spend less productive time analyzing expense reports, less time matching employee receipts, authorizing reimbursements, and ensuring timely payments.

While up-­to­-date­-software is not the solution to every bank issue, expense report apps that work answer many questions, controlling costs and increasing money ­saving efficiency. There is little, if any, debate about the value of expense report software pros and cons. The pros are many; the cons few or possibly, non­existent.

Expense Report Software Benefits Translate to Bottom Line Increases

While expense report software may not be a direct revenue generator, like higher loan interest rates or other income increasing strategies, top software often contributes positively to a bank’s  bottom line. By controlling wasteful costs, the resulting effect is an increasing bank profit picture.

The larger the bank, with more employees, the greater the benefit of expense report software. However, the percentage increase of benefits to the bottom line often is higher with smaller community banks. In all situations, the bank is the beneficiary of the cost savings when using state­-of­-the­-art software to manage employee expense reports.

By recording receipts as they are submitted, the possibility of losing or misplacing expense receipts is eliminated. Among the benefits, evaluating legitimacy of claimed expenses is a predominant feature. There should be no further troubling questions when claimed allowable expenses lack third party evidence.

Mouse Clicks Instead of Time Consuming Investigation

Digitizing receipts and expense reports eliminate the need for tedious manual investigation to validate expense report data. The efficiency of mouse clicks in lieu of tedious manual evaluation and/or matching physical receipts to submitted expense amounts is unquestioned.

Analyzing even routine expense reports takes time. Eliminating most of this expensive time, while ensuring the legitimacy of report contents, improves the accuracy of expense reports. Saving time with mouse clicks instead of tedious manual investigation delivers significant benefits to financial institution management. Keystrokes and mouse clicks accelerate the process of examining, verifying and authorizing expense reports. Many apps also create the accounting records necessary to properly document the accuracy and disposition of expense reports. Replacing time consuming accounting entry creation with a few mouse clicks is an invaluable aid to cost control and time saving action, indirectly impacting banks’ bottom lines.

As all experienced bank executives are painfully aware, despite common headlines decrying banks’ obscene profits, financial institutions typically face serious challenges to increase revenue. Shrinking bottom lines can be positively impacted by lowering expenses. Using top expense report software accomplishes the goal of reducing expenses, which gives bank bottom lines their needed boost.

4 Biggest Risks for Today's Banks and How to Manage Them




When the public thinks of the modern bank, they likely think of a stable organization committed to providing ongoing financial services for years on end, without a struggle. Yet banks face risks today as much as they always have, and perhaps more so in the current financial market. Banking professionals must learn to identify and then protect themselves from common risks if they are going to succeed. Here are the four biggest risks for today’s banks, and steps you can take to protect yourself from them.

1. Credit Risk


Credit risk is, perhaps, the most obvious of the risks. Banks must do their best to determine the likelihood that a customer will pay back what is loaned to them. In light of the recent lending crisis, the modern bank is looking more closely at credit risk before lending to consumers.

Your bank will have to determine how much of a credit risk you are willing to take on a particular consumer. This is a question that you will have to answer for your individual situation. Each bank will have specific terms and conditions that it is willing to operate under, but you will need to determine what those are, and then stick with them as you bring on new credit customers.

2. Operational Risk


Operational risk is the risk that comes from within. These are the decisions you, as a bank, make internally that mess up yourself, and those employee decisions made on a day­-to­-day basis that can create problems for your organization. Inadequate internal controls and employee accountability can lead to serious risks for your bank.

How can you avoid this? The answer is easy to state, but hard to implement. Adding more internal rules and accountability may be the answer, but, unfortunately, the bending of internal rules is far too common in the banking industry. Fostering a sense of unity among your team members can be a helpful place to start. When everyone has a vested interest in seeing your bank succeed, the temptation to bend rules is lessened. Also, adding monitoring programs to help identify risky behavior and put a stop to it can help limit this type of risk.

3. Market Risk


Banks are at the whims of the markets. When the markets do not behave properly, banks lose money on their assets. Managing market risk is essential for today’s banks, especially with the volatile nature of the current markets.

Managing market risk is not something new to the modern bank, it’s just newly pressing because of recent market years. The best strategy, for managing market risk, is one of diversification. Ensuring that assets are held in a wide range of investment options will help limit this type of risk.

4. Liquidity Risk


If the market suddenly changed, would your bank be able to stay afloat? Have you spread yourself too thin? This risk is known as liquidity risk. This is the risk that you will not be able to stay buoyant if your funds suddenly ran out. This is more important now in the post-­financial market crisis environment. Funding is no longer readily available and cheap, so you need to have a plan.

Unfortunately, liquidity risk is always going to be a vulnerability of the modern banking model. As you strive to transform your short-term deposits into long-term assets, you are always going to be at risk

So if it’s inevitable, how can you manage liquidity risk? The key to managing liquidity risk is to create mismatches between asset and liability maturity, and then to ensure that those mismatches keep enough funds flowing in the bank to both increase assets and meet obligations when customers ask for their money.

Each of these risks is interdependent, which can make managing them more challenging. A solid risk management plan is essential to keep the modern bank fully operational.


Automating Accounts Payable Allows Banks to Enjoy Discounts



Vendors and utilities submit bills to banks. They then expect banks to pay these bills on time. Manual accounts payable systems require bank staff time to schedule and make timely payments, none of which saves a financial institution any money—manual systems typically only increase expenses without any positive return to the bottom line.

However, automating the accounts payable function manages cost, frees up bank personnel to focus on more productive tasks, and allows institutions to take advantage of vendor discounts offered for prompt payment. No one needs a Masters degree in Advanced Mathematics to understand that a discount for prompt payment is light years better than a costly late fee for tardy payment of an invoice.

Yet, often bank staff becomes overwhelmed by manual accounts payable systems that require massive amounts of time and paper moving to manage. Since accounts payable departments are seldom considered to be profit centers by experienced bank executives, any arguments supporting manual systems fall short of wise management decisions. Conversely, there are numerous advantages to automating the accounts payable process.

Automated Accounts Payable System Advantages

Among the many advantages of automated accounts payable software are the following items.

  • Reduces the volume of time wasting paper. Digitizing invoices saves money, time and trees. Along with eliminating the paper shuffling requirements of manual systems, automated accounts payable systems immediately make data available to appropriate staff and management.


  • Speeds invoice approvals. Does this sound familiar? As invoices come in, staff must record the details and wait for executive approval to pay. After spending the time to accurately enter invoice information, taking advantage of discounts and avoiding late fees sometimes becomes a daunting challenge while waiting for management approval to pay. Since automated accounts payable information is available instantly after digitizing it, bank management does not need to wait for the tedious process of manually recording data from invoices.


  • Use “quick pay” discounts to impact the bank’s bottom line. Prompt pay discounts, such as 2% if paid in 10 days, may not seem like much, but if the bank establishes a pattern of quickly paying invoices, over the course of a fiscal quarter or year, these savings translate to positive impacts on financial institutions’ bottom lines. These results are far better than consistently making late payments and the penalty fees this practice generates. Upper management seldom appreciates the negative impact late payment creates on the expense aea of a bank’s Income Statement. Unless specific invoices are disputed, bills must be paid anyway. Why not save money by taking an offered discount?


  • Minimize accounts payable errors. Overwhelmed accounts payable staff will make mistakes. Count on it. Efficient accounts payable software minimizes or eradicates typical typographical errors, which usually defeats even the best cost control procedures.


  • Simplify the internal audit policy. A bank’s audit staff can save time and money by having accurate accounts payable data at their fingertips. They appreciate the simplicity of following digital trails and reduces the time needed for internal audit procedures. This electronic audit trail continues to pay dividends when it is time for financial institutions’ annual outside audits. Outside audit teams need less time to examine accounts payable data for accuracy.


  • Automated accounts payable software maximizes staff productivity. Saving the time and money of personnel entering, proofreading and verifying invoices to produce accurate manual reports and payables aging, gives staff the time to address more pressing matters. Accounts payable personnel also have more time to analyze and evaluate bank payables, including vendor contract terms, expirations, and/or renewals.

Using accounts payable software offered by top firms dedicated to financial institution solutions, such as BankTEL, saves money, time, and minimizes human errors. To save more, these proven apps can often accept electronic invoices, saving paper, postage, and staff scanning time.

Some of these systems allow banks to memorize and schedule payment amounts and/or dates to ensure timely payments and take available discounts. Who knows, bank senior management may even start referring to the accounts payable department as a profit center.

U.S. Bank CIOs Respond that Mobile Banking and Online Banking Are Top Priorities for Tech Focus in 2015

There is true optimism from the banking community about U.S. economic growth for 2015. However, growing concern regarding security breaches tempers CIO and executive management enthusiasm.

The growing influence of bank consumer preferences on financial institution strategy and spending has never been more evident than in budget priorities for 2015. Bank spending plans for the new year reflect the impact of bank customer wishes. Tech budget allocations display positive responses to consumer preferences.

Top Bank Spending Priorities for 2015
The top two priorities of the banking community are clear.

  •  Mobile banking—14.02%
  •  Online banking—14.02%

Remaining top priorities also reflect the consumer influence.

  • Product development—12.15%
  • Contact center development—10.28%
  • Improving internal operation efficiency—6.54%

While digital banking, including mobile and online enhancements, dominates the tech spending landscape with over 28% of planned investment, budget allocation for overall tightened security of bank operations applies to all individual priorities. The recent data breaches at some major national retailers, such as Target and Home Depot, reinforced the need for attention to security upgrades.

Security Concerns

As most bank CIOs and security directors are aware, the threat to customers’ sensitive information is a real and present danger. Although most senior bank management naturally is reluctant to openly discuss the severity of these threats when outside of their financial institutions, there is deep concern about the increasing hacker effectiveness levels.

American Banker reported on the research of Ovum, which surveyed 500 CIOs and other tech decision makers about their technology spending plans for 2015. Respondents indicated the lion’s share of 2015 budgets focus on mobile banking and online banking upgrades that offer more customer ability to perform transactions and better safeguard important personal information.

Digital Banking Initiatives and Growth Plans

The Ovum survey results identified CIO dedication to improve mobile banking, projected to grow by 7.5%, and online banking, with predicted growth of 7%, in 2015. As ever more bank customers use smartphones and tablets to perform financial transactions, the use of cutting­ edge technology becomes vital to bank success.Upgrading websites and mobile apps must be done to meet consumer demand for more tech services. Top banking technology firms, such as BankTEL, respond with more efficient software that makes financial institution executives comfortable employing expanded tech solutions.

A senior research director at a prominent tech consulting firm recently referenced banking giant, Capital One, and its purchase of digital marketing firm, Adaptive Path, as evidence of U.S. banks’ commitment to invest in state­ of ­the ­art technology as a major components of their “. . . alternative methods of doing business . . .” as a direct result of customer service demands.

It appears most banks will continue partnering with top technology providers to improve bank functionality and consumer security for mobile and online activity. Lower operating costs are another significant benefit that helps banks maximize their digital banking capabilities and protection levels.

Customer Analytics

Along with planned mobile and online banking upgrades, the Ovum survey also displayed bank tech spending will focus on customer analytics, particularly as they impact financial transaction mobility.

With tech spending projected at 5.8% more in 2015 on customer analytics alone, there is obviously “. . . great interest in solutions that help banks drive up cross­selling and the average product holdings per customer,” stated Ovum’s financial services technology practice leader.

Financial institution resurgence has generated increased investment in retail banking, long subject to declining investment levels. The expanding use of cloud services and hardware pricing decreases offer economies of scale for the retail side of banking, reducing the cost center impact of retail transactions.

Digitizing operations, emphasizing mobile solutions, confirms the importance of customer analytics that indicate tech savvy bank customers want more mobile and online capability from their financial institutions.
The results of these tech spending increases on mobile banking, online banking, customer analytics, and security will ultimately determine the wisdom of bank decision makers to expand mobile operations. At the moment, however, the increased investment projects to be a rousing success, if tested and implemented properly.