Banking Relationships & Operational Risk

Question 1

Why is a banking relationship needed?

Answer 1

Because the CT has to manage the Cash & Liquidity on a daily basis, a relationship is needed for more cash availability during times of difficulty to access funding and increase their own opportunities to invest excess cash.

Question 2

What is a relationship bank?

Answer 2

Relationship bank is where the bank has a longterm relationship with its client, their operations and banking needs with a holistic offering of products.

Question 3

What are the benefits of having a relationship bank?

Answer 3

1) Understanding of needs, requirements, offerinds and assitance capabilities.
2) Support co in times of need. Short turn around times.
3) Tailor-made solutions.
4) Competitive Pricing from the bank to keep clients (beneficial for clients)

Question 4

What is a transactional bank?

Answer 4

Open market, no relationship between the bank and its client thus no understanding. The client isn’t tied to the bank therefore they can shop around for the best offerings.

Question 5

Benefits of transactional banking are?

Answer 5

1) Allows the client to look for the best offering in the capital markets.
2) When the internal teasury has more expertise than the bank.
3) Under RB, loans can be securitized and sold. While transactional be securitized and sold.
4) There’s no premium paid unlike relationship banking.
5) Better to shop around.

Question 6

Name the 5 operational risks?

Answer 6

1) People
2) Legal
3) System
4) Catastrophe/natural