The Financial District, Singapore.
Retail Banking
3rd EDITION
TUTOR SUPPORT PACK
Keith Pond
Retail Banking 3rd edition Tutor Pack
INTRODUCTION
Dear banking teacher
After writing the 3rd edition of Retail Banking as a more up to date and internationally
accessible text I wanted to share some of the classroom exercises and problem sets
that I have used over the years, plus some new ones, with tutors who adopt the book.
Here I record my gratitude to many students over time who have been challenged by
and have learned from my exercises.
There are a number of classroom exercises and discussion questions sorted in
chapter order and drawing on the materials in the book. In the case of chapter 11 on
credit appraisal these augment and extend the materials available in the book itself
and on my website at http://tinyurl.com/keithpond . The website also allows
download of the spreadsheet used in chapter 3.
In each chapter there is at least one classroom or workshop exercise together with
notes to assist tutors on running the exercises in class. I have not provided “model”
answers as these will depend on level of study, teaching and learning styles and on
variations that the tutor may make. However, I am happy to communicate with tutors
if you have any questions about running the exercise in your class.
Illustrations, exercises, spreadsheets and matrices included in this work are
protected by Creative Commons licenses (http://creativecommons.org/choose/).
Typically these licenses do not allow for commercial use nor are derivatives
permitted to be published but legitimate use for educational purposes is welcomed.
However, should you wish to discuss any relaxation of the copyright “for profit”,
please contact: K.Pond@lboro.ac.uk
I hope that your students will enjoy, learn and profit from your use of this support
pack.
Keith Pond
Loughborough, 2014
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© Keith Pond, 2014
Retail Banking 3rd edition Tutor Pack
CONTENTS
INTRODUCTION ____________________________________________________________ 2
CONTENTS _________________________________________________________________ 3
CHAPTER 1 – THE RETAIL BANKING ENVIRONMENT ________________________________ 5
TASK 1: PEST analysis ______________________________________________________________ 5
TASK 2: Prioritising PEST ___________________________________________________________ 5
TASK 3: PEST exam question ________________________________________________________ 6
CHAPTER 2 – CREDIT CREATION ________________________________________________ 7
TASK 1: Bank types ________________________________________________________________ 7
TASK 2: Credit creation ____________________________________________________________ 8
TASK 3: Credit creation exam question ________________________________________________ 9
CHAPTER 3 – BANK PROFITABILITY ____________________________________________ 10
TASK 1: Banking profits ___________________________________________________________ 10
TASK 2: Environmental impacts on banking profits _____________________________________ 11
TASK 3: Non Performing Loans exam question _________________________________________ 11
CHAPTER 4 - MONETARY POLICY ______________________________________________ 12
TASK 1: Monetary Policy __________________________________________________________ 12
TASK 2: Different monetary policies compared ________________________________________ 12
TASK 3: Monetary Policy exam question______________________________________________ 13
CHAPTER 5 – BANK REGULATION AND COMPLIANCE ______________________________ 14
TASK 1: Indian banking code _______________________________________________________ 14
TASK 2: Monitoring compliance_____________________________________________________ 14
TASK 3: Banking codes and supervision exam question __________________________________ 14
CHAPTER 6 – COMPETITION IN RETAIL BANKING _________________________________ 16
TASK 1: Market role play __________________________________________________________ 16
TASK 2: Analysis of banking market “suppliers” ________________________________________ 17
TASK 3: New entrants to banking markets exam question _______________________________ 17
CHAPTER 7 –RETAIL BANKS AND THEIR CUSTOMERS ______________________________ 18
TASK 1: Trust in banking __________________________________________________________ 18
TASK 2: Banking secrecy on-line ____________________________________________________ 18
TASK 3: Secrecy around the world ___________________________________________________ 19
CHAPTER 8 –RETAIL BANKING PRODUCTS ______________________________________ 20
TASK 1: House mortgages _________________________________________________________ 20
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Retail Banking 3rd edition Tutor Pack
TASK 2: Banking products _________________________________________________________ 21
TASK 3: Non-price competition in banking markets _____________________________________ 21
CHAPTER 9 –RETAIL BANK CHANNELS __________________________________________ 22
TASK 1: Banking on-line ___________________________________________________________ 22
TASK 2: Delivery channels for key products ___________________________________________ 23
TASK 3: The future of life assurance _________________________________________________ 23
CHAPTER 10 –PAYMENT SYSTEMS_____________________________________________ 24
TASK 1: The qualities of payment systems ____________________________________________ 24
TASK 2: What shapes payment choices? ______________________________________________ 25
TASK 3: Payments in my locality ____________________________________________________ 25
CHAPTER 11 –CREDIT APPRAISAL _____________________________________________ 26
TASK 1: Technology vs. tradition in consumer credit appraisal ____________________________ 26
TASK 2: Micro business case study __________________________________________________ 27
TASK 3: Technology vs. tradition in credit appraisal exam question ________________________ 27
CHAPTER 12 –BANKING SECURITIES ___________________________________________ 29
TASK 1: The qualities of assets as security ____________________________________________ 29
TASK 2: Signing a mortgage ________________________________________________________ 30
TASK 3: Valuation of land__________________________________________________________ 30
Your chance to contribute ___________________________________________________ 31
Index of illustrations all © Keith Pond, 2013 and 2014
The Financial District, Singapore. __________________________________________________________ 1
Branch of Andrha Bank, Begumpet, Hyderabad, India _________________________________________ 5
Branch of E.Sun Bank, Taipei, Taiwan. ______________________________________________________ 7
United Overseas Bank, Main Office, Singapore.______________________________________________ 10
Singapore Parliament building, Singapore and banking district in the background. _________________ 12
The Gherkin, AXA Re building, City of London. ______________________________________________ 14
National Westminster Bank branch, Prince of Wales Road, Norwich. ____________________________ 16
ATM users at a remote ATM booth situated in a Metro Station, Taipei, Taiwan. ___________________ 18
Axis Bank branch, Begumpet, Hyderabad India. _____________________________________________ 20
Bronze statue of traders outside Maybank Tower, Boat Quay, Singapore. ________________________ 22
ATMs outside UOB Tower, Boat Quay, Singapore. ___________________________________________ 24
Tuk-Tuk Taxi in Chennai, India. ___________________________________________________________ 26
Apartment block in Hyderabad, India. _____________________________________________________ 29
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© Keith Pond, 2014
Retail Banking 3rd edition Tutor Pack
CHAPTER 1 – THE RETAIL BANKING ENVIRONMENT
This workshop aims to illustrate the key
drivers of retail banking strategy and
activity in a selected region / nation.
By the end of the workshop students
should be able to describe and explain
the major drivers of strategy and to
prioritise areas for bank management
attention.
Branch of Andrha Bank, Begumpet,
Hyderabad, India
TASK 1: PEST analysis
a) Divide the students into working groups of 3 / 4 students.
b) Allocate an area for discussion to each group from the mnemonic P.E.S.T.
(there may be multiple groups looking at each area)
c) Ask each group to consider the P.E.S or T influences on bank behaviour /
decisions EITHER of a specific retail bank or the retail banking sector in a
particular region or nation and to be prepared to share their thoughts with the
class.
d) Ask each group to share their thoughts with the class.
e) Capture (whiteboard / flipchart) student output.
TASK 2: Prioritising PEST
Using the list produced in Task 1 ask students to discuss, in turn, each P.E.S and T
factor and to prioritise them in terms of:

Timescale – what is the timeline over which a bank will be affected?

Control – what, if anything can banks do to influence the changes?

Impact – how significant is the impact on the bank’s activities?

Probability – how likely is it that the factor will affect banks?
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Retail Banking 3rd edition Tutor Pack
TASK 3: PEST exam question
Outline the key environmental factors that are likely to drive retail banking in the 21st
Century in Developed nations / South East Asia / India / Africa…..(delete as
applicable).
Tutor Notes:
In tasks 1 and 2 the method of directed group activity is suggested. The duration of the activity
depends on the level of guidance and tutor input needed by students and the facilities and
resources available.
Tutors need to be aware of unobserved groups in longer duration exercises in case there is
unequal effort within the groups. This can be from “free-riders” who do little work or even from
strong leaders who do not allow others to participate.
Getting groups to complete “Peer Review” for each group member, either through ranking or
estimating their share of work in the group can help to allocate marks according to effort where
the exercise is assessed.
Getting students to spend 5 – 10 minutes at the end of the group activity to reflect on their own
and others’ contributions can (slowly) improve awareness of teamwork skills and strengths.
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© Keith Pond, 2014
Retail Banking 3rd edition Tutor Pack
CHAPTER 2 – CREDIT CREATION
This workshop aims to illustrate the key
elements of credit creation by intermediary
retail banks.
By the end of the workshop students
should be able to estimate the level of
credit creation and to analyse the key
facilitators and barriers to credit creation.
Branch of E.Sun Bank, Taipei, Taiwan.
TASK 1: Bank types
Students work as groups / pairs to produce a POSTER in ONE slide PowerPoint or a
ONE page document. The tutor will allocate the bank type from the list below:
Explain the key features of:
A.
B.
C.
D.
E.
F.
G.
Private banks
Investment banks
Islamic banks
Retail banks
Asset Managers
Insurance Companies
Merchant banks
Features that you may want to research and highlight include:












Regulation
Capital needs
Revenue streams
Costs
Activities
Markets
Risk of capital loss
Instruments traded
Size
Profitability
Customers
Borrowers / Lenders
NB: the above is not an exclusive list and may contain elements that are not relevant
to a specific institution type.
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© Keith Pond, 2014
Retail Banking 3rd edition Tutor Pack
TASK 2: Credit creation
Riverside Bank Taipei – starting Balance sheet
NT$000
Liabilities
Customer Deposits
Assets
50,000
Loans from banks
Corporate Bonds
NT$000
40,000
Cash
50,000
Loans to banks
20,000
Govt. Bonds
20,000
Loans to customers
Equity / Reserves
10,000
Physical assets
100,000
10,000
100,000
Assume the following and answer the questions:
a) The Reserve Ratio is 12% - What would the theoretical maximum credit
creation be?
b) The bank estimates to see a return (as new deposits) of 20% of all loans
made - How much credit will be created based on the initial deposits?
c) Riverside Bank embarks on a risky new strategy to loan at least 90% of all
loans to SMEs - What changes to its balance sheet would you expect to see?
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© Keith Pond, 2014
Retail Banking 3rd edition Tutor Pack
TASK 3: Credit creation exam question
Explain the concept of credit creation by retail banks. In your answer indicate the
key drivers for increasing deposits and demand for credit.
Tutor Notes:
Posters are an excellent (and fun) way to communicate research findings or group discussions.
Posters can be physical (using lots of paper, stationery items, printed graphs and pictures) or
virtual / digital, using Powerpoint, Word or similar packages.
If the posters are assessed tutors should not only use content / research based criteria for marking
but also aspects such as visual impact, communication and structure.
In Task 2 tutors are able to change balance sheet figures, currencies and assumptions at will.
Different groups of students can be given different assumptions to work with.
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© Keith Pond, 2014
Retail Banking 3rd edition Tutor Pack
CHAPTER 3 – BANK PROFITABILITY
This workshop aims to illustrate the
components of Return on Equity (ROE) in
retail banks.
By the end of the workshop students should
be able to determine the key factors affecting
retail bank profitability.
United Overseas Bank, Main Office,
Singapore.
TASK 1: Banking profits
This exercise is based on the illustration of bank profitability at Figure 3.4 of the
Retail Banking text.
The Excel spreadsheet shown HERE allows manipulation of the parameters. In
certain versions of Word you can Double CLICK on the image below to access the
spreadsheet. Alternatively the spreadsheet can be downloaded from
http://tinyurl.com/keithpond - Click on Books and then Book Resources
Bank profits calculator
Assumptions
%
Capital requirement
0.0%
Interest spread
Loan fee
Cost Income ratio
Loan losses
Taxation rate
0.0%
0.0%
0.0%
0.0%
0.0%
ROE
4% for secured and 8% for
unsecured
Typical spread for the
mark et
Typical fee for the mark et
Research local bank s
Research local bank s
Corporate Tax rate
#DIV/0!
£
Loan amount
Capital requirement

£
£
-
Use a typical loan amount
as an illustration
Research the records of retail banks in an area / region / country and build a
set of parameters to populate the above model.
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Retail Banking 3rd edition Tutor Pack
TASK 2: Environmental impacts on banking profits
Using the parameters in Task 1 vary each of them individually and note the effect on
resultant ROE. Students should be asked to explain what is happening.

Reduce the interest spread by 0.5% as a result of increased competition

Increase loan fees by 1%

Reduce the Cost / Income ratio by 10%

Increase loan losses by 1%

Reduce the corporate tax rate by 5%
TASK 3: Non Performing Loans exam question
Analyse the Non-Performing Loan (Bad Debt) records of a retail bank of your choice.
What can retail banks do to reduce their Bad Debt losses?
Tutor Notes:
The spreadsheet in tasks 1 and 2 is able to be downloaded from http://tinyurl.com/keithpond (go
to Books and then Book Resources page).
Essay or exam questions can be assessed using a standard set of criteria. The weightings of the
criteria will change as the level of study changes. At level 4 (UK first year undergraduate) the
following equally weighted criteria would be used:
Content
Facts, description, definitions, explanations
Concepts / Models
Basic concepts such as Adverse Selection / Moral Hazard
Research
Level and quality of sources used and readings cited
Application / Analysis Interpretation of above concepts in respect of the bank
Presentation
Structure, spelling, grammar, diagrams etc.
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© Keith Pond, 2014
Retail Banking 3rd edition Tutor Pack
CHAPTER 4 - MONETARY POLICY
This workshop aims to illustrate the features
and outcomes of Singapore’s exchange rate
based monetary policy.
By the end of the workshop students should
be able to explain the key tools, aims and
outcomes of monetary policy in Singapore.
Singapore Parliament building, Singapore
and banking district in the background.
TASK 1: Monetary Policy
Prepare a short PowerPoint (or poster) presentation illustrating how the Monetary
Authority of Singapore operates monetary policy.
In your presentation consider all aspects of MAS’ operation of monetary policy,
ensuring that you cover:




The aims of the policy
The key tools used
The way in which the policy is transmitted to the markets
The behaviour of market participants (especially financial institutions) to the
operation of the policy.
References to Singapore can be replaced with any nation / currency area
TASK 2: Different monetary policies compared
Prepare a short PowerPoint (or poster) presentation comparing and contrasting the
monetary policy in two different countries / currency areas.
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Retail Banking 3rd edition Tutor Pack
TASK 3: Monetary Policy exam question
Write a brief paragraph analysing the impact on a retail bank of your choice of
changes in monetary policy in the relevant country / currency area.
Tutor Notes:
Presentations (including Posters) can be assessed not only for the research and factual
information provided but also against the following “Five P’s” guidelines for “perfect
presentations”:
The Five P’s
Purpose
People
Problems
Professionalism
eye contact etc.
Patterns
What is the point of the presentation?
Who is in the audience?
What could go wrong?
Thinking about body language, clothing, stance, what to do with hands,
Structure and memorability (just like the Five P’s)
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© Keith Pond, 2014
Retail Banking 3rd edition Tutor Pack
CHAPTER 5 – BANK REGULATION AND COMPLIANCE
This workshop aims to illustrate key
aspects of regulation that impact on retail
banks.
By the end of the workshop students
should be able to explain and discuss the
practical implications of specific regulatory
issues.
The Gherkin, AXA Re building, City of
London.
TASK 1: Indian banking code
The Banking Codes and Standards Board of India launched a Reserve Bank of India
initiative in 2013 to rank banks based on their compliance with and adherence to
banking codes.

In groups or individually research and summarise the key areas for
compliance that the Indian banking codes cover.

Produce a Powerpoint presentation of the code’s key areas for a training input
on a bank staff training course.
TASK 2: Monitoring compliance
Select one area of the banking codes (e.g. Micro business lending / Advertising and
marketing) and outline how a bank might monitor and control its adherence to the
code.
TASK 3: Banking codes and supervision exam question
Analyse the part that codes of conduct play in the overall supervision of financial
services firms.
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Retail Banking 3rd edition Tutor Pack
Tutor Notes:
Many of the exercises in this pack rely on the students’ ability to research via the internet.
Research via the web is deceptively easy but what search engines rarely do is to help us select the
best sources of information for a piece of work.
When searching for information students should be guided to REFER:
1. Review what they need to know
2. Establish where to search
3. Find the information
4. Evaluate what they find
5. Record what they find
In evaluating information the following diagram can help to determine quality. The higher the
academic quality the higher on the pyramid:
One further way to evaluate academic literature is to apply Kipling’s “six wise serving men”1:
WHO – author
WHEN - currency / date of publication
HOW - type of publication
WHERE – publisher
WHY - intended audience (academic /professional)
WHAT - content
1
Kipling R, The Elephant’s Child
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© Keith Pond, 2014
Retail Banking 3rd edition Tutor Pack
CHAPTER 6 – COMPETITION IN RETAIL BANKING
This workshop aims to illustrate key
aspects of retail bank competition.
By the end of the workshop students
should be able to explain and discuss
various responses to competition in retail
banking.
National Westminster Bank branch, Prince
of Wales Road, Norwich.
TASK 1: Market role play
Competition in banking is a mixture of strategic direction, available resources and
acknowledging the drivers and barriers represented by the external environment.
1.
2.
3.
4.
5.
6.
7.
8.
9.
Split the class into groups of 4 or 5 students.
Nominate one or two groups of students as “customers”
Tell the remaining groups that they are individual retail banks
Give each “bank” a few sheets of paper and a marker pen.
Announce that the Central Bank base or reference rate is 2% and that
inflation is running at 3% (vary the rates to suit current local conditions).
Now ask the banks to design an offer for a savings account or range of
savings accounts for the market (10 minutes)
At the same time ask the “customer” groups to consider the key features that
they, as “buyers” seek in a savings account.
Now ask each “bank” group to announce their offer to the waiting customers
by holding up the paper that they have written the offer on.
Ask the “customers” to choose one bank to open an account in.
10. Once choices are made take the opportunity to ask the customers why they
made the choice that they did and the banks why they made the offer that
they did.
11. Some banks will have customers but some will have none – point this out.
12. Go back to stage 6 but allow only 5 minutes for the “banks” to come up with
an offer to entice customers in the second period of the role play.
Continued on next page
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Retail Banking 3rd edition Tutor Pack
13. The role play could go on for a long time but 2 – 3 iterations should be
sufficient to illustrate different behaviours for discussion and to link these to
either Porter models or supply and demand models.
TASK 2: Analysis of banking market “suppliers”
Using Porter’s 5 Forces model consider the different ways in which “suppliers” into
the retail banking market can influence competition in the market.
TASK 3: New entrants to banking markets exam question
Analyse the competitive strategy of a new entrant to a retail banking market of your
choice – in the UK this could be Secure Trust plc or Metro Bank.
Tutor Notes:
In task 1, where students struggle to stray beyond the simple interest rate (price) factors offer
hints regarding short and longer term deposits, free gifts, prize draws (Premium Savings Bonds /
Islamic Banking).
Role play exercises work well when students are fully briefed and, perhaps, incentivised to act out
the role of their given part.
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© Keith Pond, 2014
Retail Banking 3rd edition Tutor Pack
CHAPTER 7 –RETAIL BANKS AND THEIR CUSTOMERS
This workshop aims to illustrate key
aspects of retail bank relationships with
their customers.
By the end of the workshop students
should be able to explain and discuss
various aspects of the banker / customer
relationship.
ATM users at a remote ATM booth situated
in a Metro Station, Taipei, Taiwan.
TASK 1: Trust in banking
TRUST is an important (vital) element in maintaining a relationship between banks
and their retail customers. In Victorian England (1800s) Banks showed their power
and solidity by building huge Head Office buildings lined with marble and fronted by
imposing Grecian columns. They installed impregnable vaults and advertised the
fact that they possessed secure premises where customer cash would be safe.


In groups discuss how banks seek to establish trust in the 21st century.
Make a list of all of the ways in which banks can (and sometimes do) lose the
trust customers have in them.
TASK 2: Banking secrecy on-line
Secrecy, or more particularly, the identification of customers becomes a very
important task when banks are remote, direct, internet based and never actually
meet the customer face-to-face.
Using examples of types of internet security (passwords, questions etc.) from the
class, discuss the various ways in which internet banks ensure that customers are
protected from the problems associated with ID theft.
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Retail Banking 3rd edition Tutor Pack
TASK 3: Secrecy around the world
How secret is a secret? Part of the appeal of retail banks is the contractual duty to
maintain confidentiality about the affairs of customers. Select a country and
research the legal and practical framework within which secrecy must be maintained.
Tutor Notes:
In task 1 tutors may wish to prompt students by asking certain questions:
Are there customer satisfaction rankings complied by Trade Bodies or Consumer Bodies?
Does the Bank have an ethical policy?
What can you find out about the bank’s Corporate Social Responsibility (CSR)?
Has the bank been tainted by scandal?
This is not an exhaustive list and local knowledge will guide.
In task 2 there are many variants on security systems that students may mention:
Mother’s Maiden (unmarried) name
First Pet
Colour of first school tie
In the above examples, however family members will know the answers. Security can appear
tight but it is never without risk.
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© Keith Pond, 2014
Retail Banking 3rd edition Tutor Pack
CHAPTER 8 –RETAIL BANKING PRODUCTS
This workshop aims to illustrate key features of
retail bank products and services
By the end of the workshop students should be
able to explain and discuss various aspects of
key banking products offered in the retail
market.
Axis Bank branch, Begumpet,
Hyderabad India.
TASK 1: House mortgages
House Mortgages are a key retail banking product not only for the relationship
benefits with customers but also in terms of profitable long-term lending.

In groups or individually research and summarise the key features /
assessment criteria used by banks in your locality.

Present your findings in the form of a poster.
Tutor Notes:
In task 1 tutors may wish to prompt students by suggesting:
Loan to Value ratio
Affordability computation (Total Debt Servicing Requirement – TDSR in Singapore)
Multiple of basic salary
Regulation
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Retail Banking 3rd edition Tutor Pack
TASK 2: Banking products
Populate the following matrix by questioning the class on their understanding of
different banking products.
Product
Current
Account
Complexity
(High /
medium / low)
Frequency of
use
Importance to
customer
Engagement
of customer
LOW
OFTEN
VITAL
TOTAL
Savings Bond
Personal Loan
House
Mortgage
Life
Assurance
Investment
portfolio
Pension

The first line is completed.
TASK 3: Non-price competition in banking markets
Competition for banking products (largely financial products) in many markets would
appear to be coloured by price (interest / fees) considerations. Using a basic
product such as a current account, deposit account, loan, insurance or credit card
suggest how a bank might differentiate its product offering using non-price methods.
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© Keith Pond, 2014
Retail Banking 3rd edition Tutor Pack
CHAPTER 9 –RETAIL BANK CHANNELS
This workshop aims to illustrate key features of
retail bank channels.
By the end of the workshop students should be
able to explain, discuss and analyse bank
delivery mechanisms and structures and link
these to the products discussed in Chapter 8.
Bronze statue of traders outside
Maybank Tower, Boat Quay,
Singapore.
TASK 1: Banking on-line
The Internet is a powerful tool for banks to market their products and to effect
transaction based cost reductions through automation of simple tasks. In groups or
individually:

Research as many different examples of internet usage / presence by banks
in your local market.
Tutor Notes:
The journal article Li F, 2001, The internet and the Deconstruction of the Integrated
Banking Model, British Journal of Management, Vol 12, pg 307-322 is a good starting point
for tutors. The article describes the following:
“Add on” distribution channel; Fully integrated banking; “Baby e-bank” with new brand;
Internet only bank; Web portal strategy; On-line alliance; “White labelling” and “Brand
stretching”.
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Retail Banking 3rd edition Tutor Pack
TASK 2: Delivery channels for key products
Use the matrix of different banking products generated in chapter 8.
Product
Current
Account
Complexity
(High /
medium / low)
Frequency of
use
Importance to
customer
Engagement
of customer
LOW
OFTEN
VITAL
TOTAL
Savings Bond
Personal Loan
Pension

Once populated get the class to discuss the implications for product delivery
and resourcing.
TASK 3: The future of life assurance
Using local demographic data from a source such as The CIA World Factbook
available at https://www.cia.gov/library/publications/the-world-factbook/ discuss the
future of the market for life assurance in any chosen country.
Tutor Notes:
In task 2 the activity can be extended by allocating groups a particular customer perspective:
Young Child
Student
Family
“Empty Nest” family
Pensioner
A variant on task 2 would be to consider the bank perspective too, largely related to costs.
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Retail Banking 3rd edition Tutor Pack
CHAPTER 10 –PAYMENT SYSTEMS
This workshop aims to illustrate key features of
retail bank payment systems.
By the end of the workshop students should be
able to explain, discuss and analyse bank
payment mechanisms and structures and link
these to the products and networks discussed in
Chapters 8 and 9.
ATMs outside UOB Tower, Boat
Quay, Singapore.
TASK 1: The qualities of payment systems
Using the table below ask the class, individually or in small groups, to consider the
attributes of a popular payments mechanism (such as Cash, Plastic card, Cheque,
Mobile transfer) from the perspectives of Retailers, Banks and Consumers. The
exercise can be broken down so that each group presents one column in the grid.
Criterion
T – Time
Explanation
Duration of
transaction
including value
date.
E – Expense
Cost in terms of
operational and
opportunity costs
(interest lost).
S – Security
Safety and legal
redress.
C–
Convenience
Acceptability,
divisibility.
O – Other
Other attributes.
Customer
Retailer
Bank
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Retail Banking 3rd edition Tutor Pack
TASK 2: What shapes payment choices?
Using the latest World Bank review of payments:
World Bank, (2011), Payment Systems worldwide – A snapshot - Outcome of the
2010 global payments survey [online]. Available at:
https://openknowledge.worldbank.org/handle/10986/12813
Determine the relative shares of non-cash transactions for a selected set of countries
(up to FOUR countries). Present your findings in the form of a poster.
TASK 3: Payments in my locality
Using the data collected and analysed in task 2 discuss the key factors driving the
pattern of payments systems in any chosen locality.
Tutor Notes:
For task 2 tutors can use the following data if they do not have internet access:
Coun
try
Austr
alia
Brazi
l
Thail
and
Unite
d
King
dom
Unite
d
State
s
Zam
bia
Cheques
Direct
Credits
2006
200
6
(per
capi
ta)
Direct
Debits
2006
200
6
(per
capi
ta)
Debit
Cards
2006
2006
(per
1,000
inhabi
tant)
Credit
Cards
2006
2006
200
6
(per
capi
ta)
2006
(per
1,000
inhabi
tant)
448,233,
291
22
1,289,03
1,682
63
513,556,
707
25
1,328,47
2,666
65
1,311,11
8,128
64
1,707,00
0,000
9
1,197,00
0,000
6
1,014,00
0,000
5
1,600,00
0,000
9
2,000,00
0,000
11
84,093,0
00
1
122,803,
000
2
53,277,0
00
1
6,738,00
0
0
253,243,
000
4
1,237,98
7,000
21
108,309,
000
2
3,927,00
0,000
65
4,512,00
0,000
75
746,000,
000
12
30,557,0
00,000
102
6,145,00
0,000
21
8,664,00
0,000
29
26,038,0
00,000
87
22,357,0
00,000
75
n/a
n/a
2,290,26
7
0
515,531
-
188,420
-
256,149
-
25
© Keith Pond, 2014
Retail Banking 3rd edition Tutor Pack
CHAPTER 11 –CREDIT APPRAISAL
This workshop aims to illustrate key features of
consumer lending.
By the end of the workshop students should be
able to explain, discuss and analyse typical
lending requests using a number of lending
technologies.
Tuk-Tuk Taxi in Chennai, India.
TASK 1: Technology vs. tradition in consumer credit appraisal
Amon Basilevic (45) is a Russian national who has lived in Singapore for
fifteen years. He has a Singaporean wife and two children and lives in an
Housing Development Board (HDB) flat at Toa Payoh. Both the flat and
the mortgage are in Amon’s wife’s name (she is a Receptionist for HDB
earning S$16,800 annually). The couple have lived in the flat for three
years.
Amon works in the shipping industry as a senior deckhand and has been
in full time employment for the whole of his time in Singapore. He
changed jobs to work for his current employer, at a higher rate of pay, a
year ago.
Amon’s annual salary is S$22,600 (including bonuses) and this is paid
weekly in cash. Amon has had a current account with a debit card at
Riverside Bank for the past ten years. The couple have no other loans
and a clear credit record. They also have a total of S$5,000 in a joint
savings account at Riverside Bank.
Amon now wishes to have a credit card with an overall limit of S$10,000.





Split the class into two sections “A” and “B”.
Then split each section into groups of 3 – 4.
Ask groups designated “A” to consider the above proposal using the Riverside
Bank Pte credit scoring template at Appendix A of the textbook.
Ask the groups designated “B” to consider the above proposal using the
CAMPARI and ICE methodology.
Once decisions are made ask each group to indicate not only whether they
will lend the money but also to detail the reasons for their decision.
26
© Keith Pond, 2014
Retail Banking 3rd edition Tutor Pack
TASK 2: Micro business case study
Arjun Bhaskar (25) has been driving a Tuk Tuk taxi in the coastal city of
Chennai, India for ten years. He started by driving for his Uncle and soon
was able to rent a vehicle of his own. Arjun now wishes to purchase his
own electric Tuk Tuk taxi and requests a loan equivalent to US$300 to do
so.
The purchase price of the vehicle is US$450. Arjun has saved US$150
over the past two years and has a savings account passbook to show that
he was able to deposit an average of US$30 per month during this time.
Arjun is an experienced driver and earns on average US$6 in fares and
tips per day. He works from 6am to 11 pm each day to be able to achieve
this in a very competitive market.
His fuel expenses amount to US$2 per day and he currently pays US$10
per week for vehicle rental. Living with his parents his personal expenses
are reasonably low (US$ 50 per month).
Using an electric, rather than an LPG vehicle Arjun hopes to have lower
maintenance bills and much lower fuel costs (approximately US$1 per
day).



Estimate a typical monthly cash flow for Arjun’s planned purchase and the
amount available for repayment.
What questions would you want to ask Arjun to help you reach a decision on
the loan?
After completing the above tasks make a recommendation to the lender.
TASK 3: Technology vs. tradition in credit appraisal exam question
Using the two examples above and those in the textbook discuss the advantages
and disadvantages of the two lending technologies represented by CAMPARI and by
Credit Scoring.
27
© Keith Pond, 2014
Retail Banking 3rd edition Tutor Pack
Tutor Notes:
Task 2 gives enough information to be able to construct a basic cash flow for each month for
Arjun’s business:
$OLD
$NEW
180
180
Fuel costs
60
30
Vehicle Rental
40
0
Drawings
50
50
Leaves $ for repayment / savings
30
100
Monthly revenue ($6 * 30)
LESS
Loan repayments for a $300 loan over 2 years would be $14 per month. This falls to $10 per
month for a 3 year loan (assuming a 10% interest rate). The useful life expectancy of the taxi
would determine the term required by the bank.
Task 2 can give rise to a CAMPARI analysis and a set of questions to fill information gaps:
C
A
Do you belong to any clubs or associations?
Do you have any regular customers?
Do you have any qualifications?
Do you have any driving or other convictions?
What is your sickness record?
Have you been able to pay debts on time?
Have you ever had a loan before?
M
What is the overall level of your savings?
Is the $100 contribution for the taxi from savings?
P
Will you be the only driver of the vehicle?
A
Are there any other costs such as licensing to be covered?
R
What other debts do you have?
What are the maintenance costs estimated to be?
Can you work from 6 to 11 each day and still have time to re-charge your
taxi?
I
Can anyone guarantee your loan?
Are you able to insure the taxi for damage?
28
© Keith Pond, 2014
Retail Banking 3rd edition Tutor Pack
CHAPTER 12 –BANKING SECURITIES
This workshop aims to illustrate key features of
banking securities.
By the end of the workshop students should be
able to explain, discuss and analyse bank
securities and consider their effectiveness as
security for bank advances.
Apartment block in Hyderabad, India.
TASK 1: The qualities of assets as security
Using the mnemonic MAST (p.156) ask students to discuss and populate the
following table in respect of common assets offered as security. The example of
Land is already completed in the textbook:
Criterion
Quoted Shares
Motor Car
Gold jewellery
Marketability
Ascertainability of
Value
Simplicity of Title
Transferability of
Title to Bank
29
© Keith Pond, 2014
Retail Banking 3rd edition Tutor Pack
TASK 2: Signing a mortgage
In the UK banks suggest and recommend that individuals signing a mortgage,
charge or guarantee form will take Independent Legal Advice (ILA) before signing.

In groups consider what the signing of a mortgage actually implies.

Discuss how banks should warn security givers of these implications.
TASK 3: Valuation of land
Valuation of an asset is a vital part of the security taking process. Good security
(see task 1) should not only have a value that is easily found and achieved in the
market but one that is sustainable, consistent and, better still, rising.

Choose ONE type of land (such as farming land / industrial premises /
domestic property) and research the changes in value over time for your
locality or a locality where data is available.

Discuss how banks protect themselves against variations in value during the
life of a loan.
Tutor Notes:

In task 1 contrast the practical / commercial issues (M and A) with the legal (S and T)

In task 3 banks determine their own discount values for assets held as security
to give a loan value.
30
© Keith Pond, 2014
Retail Banking 3rd edition Tutor Pack
Your chance to contribute
If you have found these exercises and workshops useful for your students please let
me know at K.Pond@lboro.ac.uk . If you can suggest any improvements to the
contents of the tutor support pack or offer additional exercises and cases that you
have found to work well with your students please share them with me and I will
upload a selection to my website – with the appropriate acknowledgement.
I would be particularly interested in receiving brief credit appraisal cases that reflect
your locality and legal / commercial system. If these are used in a future edition of
the textbook or this guide an appropriate reward will be offered.
Keith Pond
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© Keith Pond, 2014