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Business process outsourcing and financial outsourcing: Countering the opportunity loss of trillions of cash lying unused with banks
It has been a year since the Federal Government imposed the Supervisory Capital Assessment Program (SCAP), also known as the bank stress test. "By setting reasonably ambitious capital targets, we hoped to hasten the return to a better lending environment," said Ben S. Bernanke, Chairman of the United States Federal Reserve, speaking at an event in Chicago in early May, this year (2010). However, Mr. Bernanke admitted that the objective had still not been met. Business process outsourcing and financial outsourcing can help banks and financial institutions cope with the demands of the policy.
This document is an attempt to understand the depth of the problem and the measures that can be taken to curtail the opportunity loss.
Cause And Effect
Bloomberg's recent analysis shows that U.S. banks have USD 1.29 trillion sitting in idle cash, equal to a record 98 percents for every dollar of existing business loans. The ratio of cash-to-corporate loans has more than quadrupled from 21 percents in June 2008. This implies for every dollar of business loan given out, slightly less than a dollar remains parked in the bank's cash book.
The gradual build-up of cash and decelerated rate of lending has been the outcome of an unstable economic environment; an overtly zealous posture by banking regulators toward banking operations and bank executives; and the overall dislocation in credit markets. Banks have taken a well-deserved cautious approach toward maintaining adequate capital and reserves for absorbing losses without running short on liquidity.
Looking at it from the business borrowers' perspective, the recessionary economy has reduced the loan appetite across the board from small business to large corporations. In effect, banks are today sitting on trillions in idle cash, resulting in gradual opportunity loss and impact on revenue.
The loss of revenue to banks on account of holding cash and not making advances can be stemmed in different ways. This would require a re-evaluation of the lending processes, the lending policy and credit risk management function.
Selectively Opening The Coffers
The need-of-the-hour is to increase the loan book, identify creditworthy customers, and understand their credit needs and negotiate most opportune terms and conditions.
In the present state of the economy, with recovery being gradual, achieving this goal is challenging. Banks will need to locate a sizable number of creditworthy borrowers; assess
their creditworthiness; and if approved, ensure a more rigorous monitoring of their portfolio. There are multiple initiatives that banks can take to achieve this seemingly impossible task as outlined below. Each set of initiatives, however, has its own set of challenges to grapple with.
Read More at http://bit.ly/9oINsh
About the Author
WNS Global Services is a leading global business process outsourcing and financial outsourcing company. Deep industry and business process knowledge, a partnership approach, comprehensive service offerings and a proven track record enables us to deliver business value to companies.
What can I send a relative in a Category C Prison?
I have a relative who is in a mens Category C Prison.
It will soon be his birthday and obviously Christmas.
What can I send him?
Toiletries?
MP3?
Scap Book (Homemade)?
Food?
A book full of little gifts? But like what?
Thanks
Scap Book (Homemade) would be a great idea.. it would have a personal touch which he is sure to love!
Canon Alberic's Scrap-book, a ghost story by MR James
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