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SPECIALIZED BANK SERVICES

9.19.1 International Banking9.2 Insurance and Brokerage9.3 Cash Management9.4 Trusts

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Lesson 9.1

INTERNATIONAL BANKING

Identify three types of financial institutions engaged in international bankingDescribe international services offered by banks

GOALSGOALS

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STRUCTURE OF INTERNATIONAL SERVICESSTRUCTURE OF INTERNATIONAL SERVICESSTRUCTURE OF INTERNATIONAL SERVICESSTRUCTURE OF INTERNATIONAL SERVICES

Foreign banksU.S.-based international bankingOther types of international operationsSpecial considerations

Financial risk – hard to get reliable informationCurrency risk – Value of currency can fluctuateCountry risk – political, social, legal and economic

conditions

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INTERNATIONAL SERVICESINTERNATIONAL SERVICESINTERNATIONAL SERVICESINTERNATIONAL SERVICES

Trade financing Letters of credit – Letter given by bank on behalf of

buyerDrafts and wires – Similar to a check, order given

from one party to anotherInternational collections - Foreign currency exchange – Must exchange money

to do business in another country

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INTERNATIONAL SERVICES - continuedINTERNATIONAL SERVICES - continuedINTERNATIONAL SERVICES - continuedINTERNATIONAL SERVICES - continued

Trade consultingU.S. export-import (Ex-Im) bankOverseas private investment corporation (OPIC)Small business administration (SBA)

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Lesson 9.2

INSURANCE AND BROKERAGE

Explain the effects of the Gramm-Leach-Bliley Act of 1999List typical insurance and brokerage products available from financial institutions

GOALSGOALS

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A NEW ERAA NEW ERAA NEW ERAA NEW ERA

The old world: Glass-Steagall Act: Response to the Great Depression, Banks could not own brokerage firms. Banks could no longer compete with other financial services

The new world: Gramm-Leach-Bliley ACT (GLBA) Banks could now could pursue insurance and securities businesses. Consumers can prohibit sharing of private information to third party. (opt-out)

Limits and regulation: State laws concerning banks are accountable to the nation. Prevents states from making laws that can be detrimental to the interest of the nation

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PERSONAL INSURANCE PRODUCTSPERSONAL INSURANCE PRODUCTSPERSONAL INSURANCE PRODUCTSPERSONAL INSURANCE PRODUCTS

Auto insuranceCredit insuranceDisability insuranceLife insuranceHealth insuranceHomeowner’s insuranceMortgage disability insuranceTitle insurance

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BUSINESS INSURANCEBUSINESS INSURANCEBUSINESS INSURANCEBUSINESS INSURANCE

Commercial liabilityShort-term disabilityLong-term disabilityHealth insuranceOfficers’ liabilityPropertyWorkers’ compensation

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BROKERAGE SERVICESBROKERAGE SERVICESBROKERAGE SERVICESBROKERAGE SERVICES

Brokerage refers to bringing together parties interested in making a transaction, such as buying and selling shares of stock.

A broker charges a fee to execute the transaction.

Banks now offer full investment services.

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Lesson 9.3

CASH MANAGEMENT

Explain why banks are in a good position to offer cash management servicesList several cash management services banks perform for businesses

GOALSGOALS

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SYSTEM IN PLACE FOR CASH MANAGEMENTSYSTEM IN PLACE FOR CASH MANAGEMENTSYSTEM IN PLACE FOR CASH MANAGEMENTSYSTEM IN PLACE FOR CASH MANAGEMENT

Every business needs to disburse and collect cash to complete business transactions.

Banks are in a good position to provide cash management services to businesses for a number of reasons.ExperienceBusiness knowledgeTechnology Industry expertise

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CASH MANAGEMENTCASH MANAGEMENTCASH MANAGEMENTCASH MANAGEMENT

Accounting servicesBank collection servicesInformation servicesCredit card servicesCapital services

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ACCOUNTING SERVICESACCOUNTING SERVICESACCOUNTING SERVICESACCOUNTING SERVICES

Payroll: All functions of payroll are managed

Accounts payable: Short term debt usually 60 days or less

Accounts receivable: services or merchandise sold on credit collected by bank

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BANK COLLECTION SERVICESBANK COLLECTION SERVICESBANK COLLECTION SERVICESBANK COLLECTION SERVICES

Deposit service: Customers can make deposits in various ways

Lockbox service: Accounts receivable are deposited directly to bank

Zero-balance accounts: Accounts are reconciled daily

Automated Clearing House (ACH) Network: Highly efficient electronic banking system

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INFORMATION SERVICESINFORMATION SERVICESINFORMATION SERVICESINFORMATION SERVICES

Electronic Data Interchange (EDI)Computer-to-computer exchange of business

informationBanks can advise and provide services

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CREDIT CARD SERVICESCREDIT CARD SERVICESCREDIT CARD SERVICESCREDIT CARD SERVICES

Credit card processingStored-value card: Also known as smart card, Card itself

holds value with in magnetic strip

Credit analysis

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CAPITAL SERVICESCAPITAL SERVICESCAPITAL SERVICESCAPITAL SERVICES

Capital investments: Expenses incurred for business use, example: printing press, fleet of trucks

Financing: Advise clients on how to keep debt-to-equity ratio low

Factoring: Buying debt at a discount

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Lesson 9.4

TRUSTS

Explain what trust services areIdentify important types of trust services banks provide

GOALSGOALS

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WHAT ARE TRUST SERVICES?WHAT ARE TRUST SERVICES?WHAT ARE TRUST SERVICES?WHAT ARE TRUST SERVICES?

A trust is an arrangement by which one party holds property on behalf of another party for certain defined purposes.

The donor, or settlor, is the person who creates a trust.

The beneficiary is the person for whose benefit the property is held.

Corpus, or res, refers to the property that is held.

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TRUST SERVICE PRODUCTSTRUST SERVICE PRODUCTSTRUST SERVICE PRODUCTSTRUST SERVICE PRODUCTS

Retirement planning: IRA, 401(k), variable annuity

Estate planning: Family arranges transfer of assets

Estate settlement: Value, taxes, filing, distribution of assests

Testamentary trust: Estate is managed for the heirsCharitable remainder trust: Money given to charityLiving trust: Setting up while a person is living. Describes

transfer of property.

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RETIREMENT PLANNINGRETIREMENT PLANNINGRETIREMENT PLANNINGRETIREMENT PLANNING

IRA: Great way to save for retirement. Regular IRA: Money taxed when withdrawnRoth IRA: Money taxed at time of investment

401(k) plan: Employees retirement account

Variable annuity: Similar to regular IRA only more flexible. Tax deferred growth

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ESTATE PLANNINGESTATE PLANNINGESTATE PLANNINGESTATE PLANNING

Estate planning is the process by which an individual or family arranges the transfer of assets in anticipation of death.

An estate is the total property, real and personal, that an individual owns.

The cornerstone of any estate plan is a will, a document by which the individual gives instructions as to what is to happen upon his or her death in regard to property and remains.

Probate is a court proceeding that settles an estate’s final debts and formally passes legal title to property from the decedent to his or her heirs.

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ESTATE SETTLEMENTESTATE SETTLEMENTESTATE SETTLEMENTESTATE SETTLEMENT

Identifying and valuing the estate assetsPaying creditors, estate expenses, and taxesPreparing and filing the necessary tax

documents with federal and/or state authoritiesDistributing assets to beneficiaries

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TESTAMENTARY TRUSTTESTAMENTARY TRUSTTESTAMENTARY TRUSTTESTAMENTARY TRUST

Testamentary trusts are established by a will and take effect at the donor’s death.

They receive the assets of the estate to hold and manage for the benefit of the heirs.

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CHARITABLE REMAINDER TRUSTCHARITABLE REMAINDER TRUSTCHARITABLE REMAINDER TRUSTCHARITABLE REMAINDER TRUST

A charitable remainder trust (CRT) is an irrevocable trust designed to convert the highly appreciated assets of a trustor into a lifetime income stream without generating estate and capital gains taxes.

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LIVING TRUSTLIVING TRUSTLIVING TRUSTLIVING TRUST

A living trust is a legal document that provides an expedient way to transfer property at a person’s death.