Service
Expertise
Integrity
Windy City Summit
CTP Review
Chapters 3
Presented by: The Northern Trust Company
Dan Carey, CTP
© 2012 Northern Trust Corporation
Chapter 3
Managing Relationships with Service
Providers
Dan Carey, CTP
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Windy City Summit CTP Review
Service
Expertise
Integrity
Financial Institutions, Functions and Services
■ Global Financial Institutions
■ US Commercial Banks
Deposit Accounts
Credit Services
Investment Banking Services
Payment and Collection Services
Trade Services
Foreign Exchange Services
Risk Management Services
Fiduciary Services
■ Investment Banking and Brokerage Firms
Investment Banks
 Origination
 Underwriting
 Distribution
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Windy City Summit CTP Review
Service
Expertise
Integrity
Financial Institutions, Functions and Services
■ Other Financial Services
Savings Institutions
Credit Unions
Mutual Funds
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Service
Expertise
Integrity
Financial Service Provider Selection Process
■ Selection Criteria
■ Soliciting Information from Financial Service Providers
RFI and RFP
RFQ
■ Selection Decision
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Expertise
Integrity
Bank Relationship Management
■ Number of Bank Relationships
■ Documentation
■ Performance Measurement and Evaluation
Bank Scorecard
Relationship Review
■ Bank Compensation Practices
Fee versus Balance Compensation
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Service
Expertise
Integrity
Global Account Management
■ Sovereign and Political Risk
■ Value Dating
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Windy City Summit CTP Review
Service
Expertise
Integrity
Account Analysis in the US Commercial Banking System
■ Account Analysis Standards
■ Account Analysis Terminology
Average Ledger Balance – sum of daily ending balance divided by
number of days in analysis period
Average Deposit Float – sum of daily dollar amount of items in
process of collection divided by number of calendar business days in
analysis period
Average Collected Balance – sum of daily ending collected balances
(+ and -) divided by number of days in analysis period
Reserve Requirement
Service Charges
Available or Investable Balance
Earnings Credit Allowance
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Service
Expertise
Integrity
Account Analysis in the US Commercial Banking System
■ Account Analysis Calculations
EC = CB x (1-RR) x ECR (D/365)
EC = Earnings Credit
CB = Average Collected Balances
RR = Reserve Requirement
ECR = Earnings Credit Rate
D = Number of Days in Month
CB = SC / ECR x (D/365) x (1-RR)
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Expertise
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Monitoring Financial Service Provider Risk in the United States
■
■
■
■
Monitoring Financial Risk
Managing Confidential Information and Conflicts of Interest
Assessing Financial risk for Financial Institutions
The Camels Rating System
Capital Adequacy
Asset Quality
Management Capability
Earnings
Liquidity
Sensitivity to Market Risk
■
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Basel 1 and 2
Windy City Summit CTP Review
Service
Expertise
Integrity
Other Topics in Managing Service Provider Relationships
■ Benchmarking Bank Pricing
■ Counterparty Risk
■ Off Shoring of Financial Services
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Windy City Summit CTP Review
Service
Expertise
Integrity
Questions for Chapter 3
1. Describe 7 reasons why companies initiate the process of
selecting a financial institution.
2. Describe 5 factors that increase the mutual benefit and
profitability of a bank relationship.
3. Describe 3 characteristics of value dating.
4. Describe 5 components of the account analysis statements that
the U.S. banks provider to commercial customers.
5. What are 2 ways that Banks present service charges.
6. Describe 2 reasons for the development of non-bank and third
party financial service providers.
7. Describe items typically requested in a Request for Proposal.
8. Differentiate among 6 components that make up Camels rating
system.
9. Describe 4 types of political risk.
10. Describe 6 types of non-bank financial institutions.
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Windy City Summit CTP Review
Service
Expertise
Integrity