Investor Protectionism and Financial Market Size

Admin — Tue, 25 Aug 2009 09:51:48 +0000

No matter whether you have a market-based financial system or a bank-based financial system, the underlying theme of both is the same: investor protection. The market-based financial system is very popular in the USA as property and financial asset value plays a big role in its economy. The stock and bonds market created is a big attraction for investors and companies throughout the world. This takes into consideration the fact that investors play a dominant role in corporate finance and governance. Also equity financing holds high stakes in the market.

But when the bank-based financial system is concerned, the financial assets are usually held by banks, insurance companies, mutual funds, pension funds, etc. Equity is not that important and individual investment is concentrated on the above mentioned funds. Banks play a predominant role but the stock markets take a back seat. Investor protectionism gets more importance in market-based financial systems because of the significance of stocks and bonds market. They constitute a greater part of the GDP. A comparative study of the economy of the USA and Germany shows a much higher financial assets stake in GDP for market-based financial systems. USA leads the world in this.

As a direct result of investor confidence, we see a large number of listed companies and aggregate market value relative to GDP and IPO. At the same time, inability to provide protection rights has a bad impact on the integrity and size of the market in bank-based financial systems. Even market-based financial systems have problems when there is a change in government policy, in spite of the shareholders being well-protected by laws. This is more evident during times of recession when the government tries to become more powerful. But our powers of observation tell us that the US market is also dominated by foreign companies. So the rest of the world suffers when the US suffers.

Tags: bank, financial, financial market, financial system, investor, market

Adjusting Value Propositions in Times of Crisis – Lessons For Banks

Admin — Mon, 24 Aug 2009 18:14:37 +0000

When we talk about deriving customer value, it is imperative to consider two things: customer segmentation and development of value propositions. Value propositions signify what an organization or a customer values the most. This must be done by taking into account features which can reduce cost, hold on to valuable customers, draw new business and further profitability. The present recession has forced the banks to make adjustments in the levels of service and reduce costs by trimming down the lines of credit to keep the risk factor at bay. However, such an attitude can spell disaster for the banks in terms of goodwill. It will stir feelings that the banks are only partners to success and buckle down when the going gets tough.

Since development of value propositions plays a significant part in determining the profits, banks and other financial institutions should make an attempt to find out where the value lies. This will make the delivery mechanism more innovative and will provide the necessary returns to the otherwise unhappy shareholders. But, how about seeing “value” from the customer’s perspective? Sometimes, some customers may be over serviced and some under serviced due to a lack of understanding of value. It is important to understand customer behavior and how technology will affect the customer’s thinking to make good value propositions.

After designing value propositions suitable to both the customer and the financial institutions, it is time to implement them. The value propositions should be integrated into the institution’s configuration, orientation, information and operations. However, the number of value propositions will depend on the capacity of the bank. Therefore, it is wise to take into consideration a large segment of customers and deliver on them. This will lead to satisfied customers who will feel that the bank is truly concerned about them and cares for their well being. This will surely come to the rescue in times of crisis.

Tags: bank, customer, value, value propositions

Financial Planning For the Future » bank

Investor Protectionism and Financial Market Size

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