Strategies Used by the Banking Industry Essay Example for Free

Strategies Used by the Banking Industry Essay In depressed economic times, Banking is an industry that is prone to substantial financial losses, from customer’s closing their depository account to an increase in outstanding loan delinquency. An increase in consumer and commercial loan defaults can damage the integrity of a Bank’s outstanding loan portfolio. Such deterioration can lead to an increase of â€Å"Non-Performing Assets†. Once a loan is nonperforming, (usually when a debtor has not made their scheduled payment for at least 90 days, but there are other reasons why a loan can be deemed â€Å"non-performing†) the odds that it will be repaid in full are considered to be substantially lower. The non-performing asset is therefore not yielding any income to the lender in the form of principal and interest payments. Banks have spent the last several years grappling with nonperforming assets, but perhaps working out problems with bad loans is best left to entities that do not have to answer to a Federal Regulator. This year, more banks have escalated efforts to sell nonperforming assets, and industry experts say the volume of such deals is only going to increase. Meanwhile, a new deal structure is calling for sellers to retain the problematic assets to work them out on their own. (Barba, 2011) But, even if a loan pays in accordance with its Terms Conditions, it still can be categorized non-performing for several reasons. Deterioration in financial ratios can cause a loan to be classified non-performing, one of those financial ratios is Loan to Value or â€Å"LTV†. LTV is the outstanding principal balance of the loan divided by the appraised value for real property pledged as collateral for a loan. When the appraised value of the pledged collateral decreases faster than the principal of the loan, the LTV will increase, thereby making this loan a greater risk in case of default. The benchmark LTV ratio will usually not exceed 75%, the rationale behind this threshold is if the loan does default and, subsequently, the asset disposed of, that the 25% of equity can be used to reimburse the bank for legal fees, court cost, and expenses incurred with liquidating the collateral. This strategy is incorporated in the bank’s lending policy in the effort to â€Å"make the bank whole† in a loan default scenario. When the loan request is not collateral based, the key financial ratio used to determine the borrower’s ability to repay is Debt Service Coverage or DSC. This ratio is calculated using the existing company debt, plus the new loan obligation, divided by the businesses existing cash flow to determine if the total debt can be supported. Covenants in the loan documentation will require the business to furnish Tax Returns and Financial Statements annually to review the borrower’s financial condition to ensure sufficient DSC. If it is determined that the DSC is not sufficient or if the borrower is not in compliance of the Loan Covenant by not supplying the required financial information, the loan can be classified as non-performing. An increase in the level of non-performing assets increases risk and impacts capital levels that regulators believe are appropriate in light of the ensuing risk in the loan portfolio. Regulators request that the level of non-performing assets be reduced. If these problem assets are not reduced through loan sales, workouts, or restructuring or the level of problem assets continue to rise through decreases in the value of the underlying collateral, or in these borrowers’ performance or financial condition, whether or not due to economic and market conditions beyond our control, could adversely affect the bank’s operations and financial condition. This is why banks are so interested in getting these assets off the books. Banks that’ve held on to some loans in hopes of a rapidly increasing economic recovery are starting to lose hope. Moreover, the Euro Zone Debt Crisis and, locally, the $1.2 billion dollar debacle and former New Jersey Governor Jon Corzines MF Global, plus the decline in Moodys index of commercial property values, which reached around 200 in late 2007 and early 2008, before taking a complete round trip back to 100 as of the beginning of this year and leveling off to about 120—but has been largely treading water since late 2009. After that bounce, its gone back down a little, and looks to be flat for the foreseeable future, says David Tobin, one of the two principals of Mission Capital Advisors. Its a smart time to sell. (McDonald, 2011) Another reason for the converted interest in selling these assets is the challenge that banks are having in making new loans. â€Å"Analysts and investors are demanding balance sheet improvements out of the banks†, says Tobin, â€Å"and if the banks cant show strength by adding new, solid loans, then theyll do it by unloading legacy assets that are a drag on capital†. And thats just what has happened. But when they can sell, they do. The best thing a bank can do is sell properly marked assets that help fix the balance sheet. The more you can sell, the better you are perceived. says Tobin. (McDonald, 2011). So, how do bank’s dispose of these assets and what is done with those assets that cannot be sold on a Secondary Market? There are several loss mitigation alternatives used by banks in both scenarios. Typical Strategies used in the sale of non-performing loans are usually Note Sales, Short-Sale or Short-Payoffs, or a Deed in Lieu of Foreclosure. A Note Sale is just as it sounds. A Bank will assign all its rights and interests in the subject Note and Mortgage (or a group of Notes and Mortgages) to an interested party for an appropriate price. A Short-Sale or Short-Payoff, again, is just as it sounds, is a method whereby the bank examines the value of the collateral, financial condition of the borrower, and will determine the amount of acceptable loss that the bank would be willing to incur â€Å"just to make the borrower go away† instead of involving themselves in a, potentially, protracted Foreclosure process. Lastly, the Deed in Lieu of Foreclosure is the process whereby the borrower surrenders the Title to the property instead of going through the, potentially lengthy and expensive, Foreclosure process. This method allows for the bank to receive a maximum price for the collateral since they, in essence, are owners of the property since they are in possession of the Title and the buyer does not have to take assignment in any Legal action initiated by the bank. More often than not, with this option, borrower’s will also insist on the release of any personal guarantors on the Mortgage, so the bank doesn’t have an option of pursing any potential deficiency balance on the loan after the sale of the collateral. When a bank can’t sell their criticized and classified loans on the secondary market and has no other choice that to keep those loans on their books, there are several methods that can be used to modify the existing terms and conditions of a loan to, possibly, strengthen the credit in hopes of a possible upgrade in the loans classification by the bank’s Risk Managers. The first (and most preferred) of these methods is the Reinstatement. The borrower will pay all loan arrears (past-due Principal and Interest) and continue paying as agreed through the term of the loan. As an incentive to the borrower, the bank has the option of waiving accrued Late Charges and Default Interest amounts as part of the terms of the agreement. Typically, if the loan performs as agreed (usually for six to twelve months) after reinstatement, the bank’s Risk Managers will agree to re-classify the loan back to a performing status and resume taking in the interest income on the loan. The remaining methods are several types of Forbearance Agreements. A Standard Forbearance is often consideration (the bank’s delay in enforcing its legal rights and remedies under the Note) for a promise by the debtor to pay an added amount to the current Principal and Interest payments to cure the loan arrears. A Refinance Forbearance is an option whereby the borrower intends to refinance their loan with the bank in order to satisfy the obligation. Lastly, a Graceful Exit Forbearance allows the borrower the time to market and sell the mortgaged premises in order to satisfy the underlying loan obligation to the bank. The time allowed by the bank in any forbearance scenario will, usually, not exceed twenty four months. In good times or bad, deciding how to manage nonperforming assets is never easy. Loan workout can be intricate and costly, both in time and resources spent on deciding whether to work out an asset or focus on what can be salvaged. Moreover, it also requires the bank to evaluate whether the borrower can recover and still remain valued customer. (Trauner 2009) But, if the decision is made to sell the credit, then the decision is how to maximize the consideration received for the asset. Selling assets can often be perplexing and nerve-racking and the reality is that if you take time to evaluate and think purposefully about your portfolio, selling these assets can be a very effectual and fruitful tool to help manage your portfolio through the ups and downs in credit cycles. (Trauner 2009) REFERENCES Barba, R. (2011, November 14). Toxic assets turn into opportunity for community banks. Retrieved from http://www.americanbanker.com/issues/176_221/loan-sales-nonperforming-assets-private-equity-1044055-1.html. (Barba, 2011) McDonald, D. (2011, November 04). Good news? It’s a buyers market for bad loans. Retrieved from http://finance.fortune.cnn.com/2011/11/04/bank-bad-loans/ (McDonald, 2011) Trauner, S. (2009, April). Non-performing assets: The keep versus sell decision. Retrieved from http://www.wib.org/publications__resources/article_library/2009-10/mar09_assets.html (Trauner, 2009)

John Lennon :: essays research papers fc

John Lennon   Ã‚  Ã‚  Ã‚  Ã‚  October 9, 1940, John Lennon is born into a dysfunctional family in Liverpool, England. After John’s father left him, his mother left him to stay with his Aunt Mimi. At a young age John started writing short stories. The young John Lennon was always a leader. John had his own little gang as a child in England. Nigel Whalley, a friend of John’s, said,† John was always a leader. He was the one to dare you. He never cared what he said or did.†(Corbin13). John and his friends were troublemakers; however, the only people to ever get in trouble were John’s friends and not John. Even though John Lennon died at a young age, he inspired people through his music with the Beatles, his solo career, and through his death.   Ã‚  Ã‚  Ã‚  Ã‚  John’s music career began with the look. John wore tight jeans, a leather jacket, and his hair was slicked back (the â€Å"greaser† look). John idolized Elvis and Buddy Holly and the Crickets. After John begged his aunt to buy him a guitar, the first song he learned how to play was Buddy Holly’s â€Å"That’ll be the Day.† John then decided to organize his own band. He gathered up people from his â€Å"gang† in grammar school: best friend Pete Shotten, washboard; Nigel Whalley, tea-chest; Ivan Vaughan, tea-chest; Eric Griffith, guitar; Colin Hanton, drums; and Rod Davis, banjo. As the leader of the band, and the only person with any musical talent, John played lead guitar. The band, Quarrymen, was named after the school they attended. The band had a positive affect on john; he wasn’t getting in any trouble. If John were to get into trouble the band wouldn’t be able to play at school events, dances, parties, or weddings. They played popular rock ‘n’ roll songs like â€Å"Blue Suede Shoes.† John did not like to memorize the words to songs, so he often made up his own lyrics as he was going along.   Ã‚  Ã‚  Ã‚  Ã‚  A double affect of inspiration happened when Ian Vaughan introduced John to Paul McCatrney. John was impressed by Paul and he even admitted that Paul was as good at the guitar as he was. However, John wanted to be a leader and if Paul joined his band he would have to share his leadership. Then John, a few weeks later, came to his senses and asked John to join the band. Pete left the band after John smashed the washboard over his head; however, they still remained friends. Paul started writing songs and this made John jealous. This was probably a good thing, because then John started writing songs.Then they started collaborating songs and they credited them to â€Å"Lennon/McCarthy.

Best Practices in Training and Development Essay

Training and development is the keystone of successful company’s operation. There are a lot of training methods today that can be used for staff training. Many of the training options that are easily available take too much time, are too high-priced, are curriculum and course oriented and do not match the needs of the company or enterprise. That is why it is very important to realize all pros and cons of these methods. Instructor – Led Classroom Training. Pros: High quality delivery; Immediate Q & A; Leverage student questions. Cons: Costly student/trainer expense; Costly one-to-few training; Training often too soon/too late; Trainer must be knowledgeable of multiple applications. Best for: Multiple students of similar skill level; Training in single location; Observable performance Interpersonal skills/feedback; Highly interactive knowledge sharing. Worth for: Students of widely-varying skill levels; Training for large system/process rollout; Consistency across learner groups. Asynchronous Web – Based Internet/Intranet Training. Pros: Just-in-time training; No travel costs; Self-paced learning; Remedial training at no cost; Consistency; Possible increased retention; Easily distributed/updated training materials. Cons: Self-directed motivation can be problematic; Lack of classroom collaboration; May be viewed as â€Å"done on your own time†. Best for: Basic training; Students in multiple locations; As part of instructor-led training course. Worth for: Observable interpersonal skills/feedback; Real-time knowledge sharing. Synchronous (real-time) Web – Based Internet/Intranet Training. Pros: High quality delivery; Immediate Q & A; Leverage student questions; Rapid, low-cost content. Cons: Cost-per-student higher than asynchronous training; Network connection needed. Best for: Basic training; Students in multiple locations; Highly interactive knowledge sharing; Hands-on application training. Worth for: Students of widely-varying skill levels Observable interpersonal skills/feedback. What training method is the most useful and productive? Jim Campbell, Hudson’s Bay Company’s organizational management senior manager, said on the Canada’s Learning and Development Conference, that e-learning is not the be-all and end-all solution. His preferred approach is blended learning, where technology-assisted learning is integrated into more traditional training methods. â€Å"E-learning staff learned an important lesson when 5,000 binders of material meant as support for the online courses were distributed to employees†, said David Wright, TD learning and development senior manager. â€Å"About a year later, when we’d travel to the different branches, we’d still see people holding on to those binders. † Wright said some employees were simply choosing to print out all of the online material and study it in paper form anyway. He says the company acknowledges that not everyone learns in the same fashion, adding e-learning is best combined with peer-assisted training and one-on-one coaching. A blended approach to learning is not always an easy sell. Banks are conservative organizations and many TD employees had a hard time getting over a â€Å"computer-phobia,† Wright said. To this day, the company has to use scare tactics to get some of its employees to complete online courses, for example, when an online course is a pre-requisite for a seminar. In most midsize or large companies, internal training and development is viewed as a strategic imperative. â€Å"I’m all for the renaissance person,† says Lee Dailey, director of executive and management development at United Technology Corp. Dailey heads the Hartford, Connecticut, conglomerate’s Employee Scholar Program, a legendarily generous plan under which every one of UTC’s 200,000-plus employees is eligible for 100 percent reimbursement of all educational costs, including tuition, registration fees and books. Courses do not have to be directly related to the participant’s job. â€Å"If you’re an engineer for our Pratt & Whitney division and you want to study Middle Eastern religion, go ahead,† Dailey says. In addition, employees are given three hours off each week to work at their studies or attend class. When employees earn a degree, they are awarded $10,000 worth of company stock. Currently, 15 percent of UTC’s workforce is enrolled. Last year the company paid out $60 million, and it has spent $400 million since 1996, when the scholar program was instituted in its current form. The program, Dailey says, has never been evaluated for ROI. â€Å"Inherently, people understand that a better-educated workforce is a more productive workforce. † This is the philosophy of longtime UTC CEO George David, Dailey adds. â€Å"He wants the best-educated workforce on the planet. † Training and continuing education are tracked at General Motors, says Jeff Johnson, director of benefit operations worldwide for the auto company. Under the firm’s Salaried Employees’ Tuition Assistance Plan, managers must get approval from their supervisors before enrolling in courses that will earn them a desired undergraduate degree or advance their technical or managerial skills. â€Å"They’re very rarely turned down,† Johnson says, adding that few employees want to waste their time or GM’s money on irrelevant courses. The yearly limit at GM is $6,400 per individual for undergraduate education and $10,000 for postgraduate courses. Generally, large companies are the most generous with tuition dollars, but small and medium-sized companies do their best to keep up. Washington Trust Company, a 16-branch bank in Westerly, Rhode Island, gives tuition assistance to 70 of its 450 employees. Undergraduates must obtain a grade of at least C in their courses, and graduate students a B. Last year the company spent $73,000, and Kristen DiSanto, vice president for human resources, considers it money well spent. 1. Workforce Management on the Web 2004. Pros and Cons of Training Modes. 17 Oct. 2004 2. Rola, Monika. â€Å"Don’t forget the human touch: enterprises swap horror stories and best practices with their e-learning initiatives – IT Training & Careers. † Computing Canada 25 Apr. 2003. 17 Oct. 2004 3. Meisler, Andy. â€Å"A Matter of Degree. † Workforce Management May 2004. 17 Oct. 2004

How Cell Phone have Impacted the World - 787 Words

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