2.1.1. Organization of a
commercial bank
Organization of a bank depends on the services carried in. Of
course every bank is organized differently, reflecting a somewhat different mix
of services and varying management philosophies. Size also greatly affects the
organizational structure of banks and other financial institutions, with larger
intermediaries typically having more complex organizational charts and more
departments and divisions. Nevertheless, the following are areas and functions
within the modern commercial bank:
2.1.1.1. The owners and
policymakers
At the apex of the bank's organizational chart are its owners;
the stockholders. A bank issues mainly common stock, which gives its holders
the power to vote on all matters affecting the organization as a whole. At the
annual stockholders' meeting a board of directors is elected by majority vote.
It is the bank's board of directors that lays down the institution's operating
policies, select and appoints management to carry out those policies, and
monitors the institution's performance.
2.1.1.2. Senor management
The board of directors delegate authority for the day-to-day
management and the control of the bank to the president (or chief executive
officer) or other members of senior management. Included among the senior
executives of the bank are one or more executive vice-presidents, each of whom
oversees one or more divisions of the bank.
2.1.1.3. The credit
division
The central focus of the credit division is making loans. In a
large bank each major type of loan will be handled in a separate department.
2.1.1.4. Finance division
The finance division is responsible for rising funds that, in
the main, flow to the credit division for making loans. Most incoming funds are
received through the deposit services department, which oversees checking,
time, and savings accounts. Funds are also taken in from correspondent banks in
return for the services they render (such as clearing checks or providing
investment advice). The finance division also may house a bond or investment
department, which trades in both long-term and short-term securities. This
division may also including a planning and marketing department, which sells
existing services, develop new services, and plans for the bank's future growth
and expansion.
2.1.1.5. Operations
division
It is responsible for managing and protecting the physical
facilities owned by the bank and for the daily routine of bookkeeping, posting
and proofing, for thousands of customer credit and deposit accounts.
2.1.1.6. Trust division
It provides the many personal and business trust services.
Bank trust departments are playing a key role today in managing retirement
(pension) accounts for the bank itself and for corporations, proprietorship,
partnership and individuals. (
2.1.2. The goals of
commercial banks
Key goals of commercial banks are:
Ø Satisfactory or maximum profitability
Ø Increased growth rate in assets, sales, fund sources,
or credit accounts
Ø Better service to the community
Ø Maintenance of adequate capital
Ø Larger share of target market
Ø Greater efficiency and productivity in the use of
resources
Ø Greater diversification in services offered and in
market areas served
Ø Minimization of risk exposure to the institution's
net earning's, asset quality, and long-run viability (Rose et al, 1993:182).
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