Banks offer their customers banking services in exchange for fees and interest. To make smart decisions about capital, portfolio management, and liquidity management, bank managers must be well-versed in complicated financial instruments. Although banks offer many different financial services, a solid organizational framework helps them thrive. In this article, we will see the Bank organizational structure and all about its division.
Bank organizational structure
Banks typically have one top executive and several other senior members of staff to back him up. An average financial institution is generally divided into various departments, from e-banking services to customer support and supervisors of specific divisions. A large institution bank is often highly compartmentalized, with senior executives overseeing each division.
Consequently, the banking industry’s organizational chart is often driven by many factors. All of a bank’s operations are usually run by a chief executive officer (CEO). However, a chief financial officer (CFO), and several managerial executives are assigned to assist the CEO.
To impact a bank’s operational model and also to maintain shareholders’ interests in mind, there is always a specific management structure. Its organizational structure is shaped by several other segments including hazard compliance, wealth management, and trading.
Below are some of the most vital components of its structure:
Front Office
Financial institutions such as investment banks have front office operations that require clients to communicate directly with employees. Some of these features include asset management, economic securities trading, and corporate finance. Revenue is generated in these segments through the marketing functions of these investment managers.
The bank’s organizational structure can broaden to middle office functions. Personnel responsible for risk management ensures compliance with legal and regulatory guidelines in this section.
Back Office
A bank’s back-office staff is another organizational section. Those who work in this area assist the front-desk staff. Individuals in this category may be engaged in managing risk, as well as financial reporting and personnel management, which are essential to the smooth running of a bank’s internal operations.
It is more difficult for banks to organize themselves when dealing with individual account holders who make deposits. There is usually a CEO at the top of the structure, just like in an investment company. Among the other top executives are ahead of retail banking as well as a branch network lead.
Besides overseeing online transfers, a bank’s information systems segment might have a manager assigned to supervise electronic payments. In some cases, customer service initiatives may include marketing activities.
Managing business units through teams
As a general rule, each executive has a small team of experienced directors who work closely with him. There will be a senior leader for the supply chain and another for sales and marketing in a community bank. Different types of consumer loans, such as home loans and credit cards, may be subject to different levels of regulation.
Those who work in business loans will be assigned to work with small start-ups, while those who work in capital management will be assigned to work with large corporations. Strategic vision and direction are owned and implemented by each executive in their business segment.
The shift to decentralized organizations
One of the difficulties banks experience today is deciding whether to concentrate power at one site, in the hands of a few people or, to spread it among multiple persons at several locations. Although there are valid arguments for both models – and it may come as a surprise – both large and small financial institutions face the same dilemma.
Information is stored electronically, it can be viewed and changed by any employee who needs it, as well as quickly sent to others.
Combining both trends means that banks no longer require a stable frame with information and obligation enclosed within division series silos. Action teams, on the other hand, can be formed and reformed as needed. For these reasons, some banks switched to a decentralized system.
More Centralization: The Case
Some banks can advocate decentralization but for the same purposes, others could advocate centralization. Many of today’s banking services can be met from a particular region because clients are less likely than in the past to walk into a bank branch. Also, because managing and analyzing information has become easier in the electronic era, there are fewer decision-makers needed at the top level of the organization.
According to some bankers, centralizing the company’s structure will result in less duplication and reduced expenses as a result of centralized management. Traditional unitary (U-form) organizational structures have been used by large banks, such as Bank of America. More centralization has been adopted by small banks as well.
Some banks in the United States announced in 2019 that they were moving to a more centralized system, which reduced the number of divisions by two. A reduction in its cost-to-income percentage and an increase in its return on capital were the reasons given by the board.
Classes of banks – Based on organizational structure
The bank is now considered an economic term across the board. Certified to handle money and its replacements, banks give duration and demand deposits, make loans and invest in shares. Banks are regulated financial firms.
Banks are divided into five categories based on their organizational system:
- Unit bank: As the name implies, a unit bank is a bank that is directed and managed from one central location (office). None of the banks in question have a branch in another city. In the United States, unit banking is very common.
- Branch bank: There are many banks in this system, and they are located all over the country. Branch banking is the practice of having multiple offices. Branch banking is also known as British Banking.
- Chain bank: The term “chain bank” refers to a group of banks that work together to generate more capital. However, they operate independently and independently of one another.
Scheduling-based classification
- Scheduled bank: Scheduled banks are those that are enlisted with the central bank and are governed by the central bank’s rules. Those banks are governed by laws and regulations set forth by the central bank.
- Non-Schedule Bank: Banking Act of 1991 founded these banks, but they are not mentioned with the central bank. The central bank’s advantage does not apply to non-scheduled hanks.
