Problems And Challenges Faced By The Banks And The Ways to Overcome

In current times tough competition every financial organization needs proper evaluation of their potentials and weakness. The consistent evaluation of performance can only let them achieve their desired goal of profit as changes and adaptation is the key to successful business in current economic situation. Here a financial organization Bendigo bank is taken into consideration to evaluate the problems it is facing in the current market situation. Bank like others financial organization is just not a financial firm runs on profit and loss but is a social institution which controllers the market economy to nation’s welfare.

Thus the problems and challenges faced by the banks are categorically different from other financial institution.

Problem, its nature scope and impact

The current market condition all over the world is significantly proving to be a hardship for all the financial institution including Bendigo bank Australia. The subdued spending and low interest rate is proving to be threatening for the bank as people are taking advantage of the lowered interest rate and paying their loan back to improve their financial situation.

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Though the lending demand is reasonable judging by the new lending approvals but the competition for paying down the debt is making growth hard to come by. The small lenders again are one of the biggest problems the bank is facing. The competitive disadvantage is suffering due to deposited takers which are not accredited under the Basel II advanced model. Also the internet based banking and billing technology is proving to be a threat to the bank and shareholders financial security.

The fall in Australian economy which have change the consumption behavior of the consumer is also a threat faced by Bendigo banks. After the great economic crisis faced all over the world the financial institute of Australia forms an oligopolistic structure which saves them from internal competition but makes them weak for external competition. The major institutes get the benefit of credit rating. All properly functioning financial market has an inexorable tradeoff between risk and returns, the maximum the amount of risk is the maximum is the scope of return but in case of Bendigo Bank due to economic structure of Australia prohibits the bank for any risk which lowers the hope of return.

The lack of competition in the financial market is the primary reason for the banks to not to perform up to its full potentiality. The financial system of Australia is suffering from the moral hazard writ large. Taxpayers are being guaranteed billions of dollars of banks deposited for free and many of them have artificial fund raising advantages through their credit rating and new devices like covered bonds. The APRA is being significantly a back lash for the growth the banking sector in Australia and this is applicable for the Bendigo Bank too.

Solutions to a problem

Bendigo and Adelaide Bank needs to complete the structural changes required in the balance sheet deal with current market condition. The retail deposit needs to increase and to achieve and sustain growth various measurements can be applied. For the long term benefit initiative must be taken in various other fields.

Initiatives to attract, retain, and build skilled labor:

Scholarship programs:

The scholarship program should be opted by the institution to address the students lacking advantages from regional areas face in attending tertiary education compared to their metropolitan counter parts. This not only helping the community based work atmosphere to grow but creating a stronger generation of future labor to boost up the growth process.

Work experience or internship program:

Through the work experience program or internship program the students in intermediate or college level should get introduced to the bank or financial sector to get glimpse of the working structure of the bank or financial institution and experience the working environment and training.

Industry based learning scholarship program:

The scholarship should provide the students to get an opportunity to take up computing or information technology. The institution should also provide one year learning experience included in the curriculum

University community bank model:

The financial institute must take up a partnership between the institute and tertiary education provider. This will develop sustainable community outcomes.

Initiative to improve access to capital:

Social impact loans:

The social impact loan enables banks to support business and projects that have wider community benefits. The social outcomes of the loan are boarder than the individual. It provides apprenticeship to the school leavers, the young people do not need to leave to seek gainful employment. The successful apprentice will eventually commence their own business and employ others. The program not only generates employment in the community but also creates future leader the community.

Small business program:

Lending loans to the small business holders to grow will eventually work in favor of the bank’s benefit to expand its business in every corner of the country and community.

Community banking:

The financial institute should emphasize upon the development and creation of access to the rural part of Australia. The share value business model could be a beneficiary business scheme for the bank. Community banking has long history of fully funding for many important infrastructural project work worth of millions of dollars. The community banking plays a vital role in developing and diversifying local economy, as they create new public companies. It provides several ways for local people to become shareholders so they can invest and grow as well as the bank.

Summary of the options:

From the above evaluation of each point it is clearly significant that one of the main challenges that are currently being face d by Bendigo and Adelaide Bank is growth. Due to the revised banking policy and current economic situation and low interest rate the bank is unable to generate any further profit. In the above section we have discussed the probable measures to prevent the situation which consists attracting and maintain a trained labor force which is possible by introducing scholarships and industrial training facilities for the unprivileged students, inducing technical literacy and absorbing the fresh and trained labor force in the institute.

The other option discussed above was initiative to improve access to capital which is possible by inducing community based debt lending, social loan lending and loans for small business. Also encourage investment in agricultural industry and agricultural research. This would not only create the availability of the loans but also leads the bank to the market expansion. The third process discussed as solution was to encourage community based banking which emphasize upon banking expansion in rural community and encouraging investment in agricultural industry.

Evaluation of the option to arrive at the Best solution

The discussed solutions are suitable for various situations but in the context of growth the most suitable solution is inducing of community based banking. The community based banking not only crate now investment opportunity for the bank but also has an expansionary effect over the business.

Though creating and maintaining skilled labor is an important task for business expansion but the no growth situation in the market can restrict the bank to invest on scholarship and training. Whereas the bank needs new market expand. The new banking policies of Australia make it had to gain profit from loan able funds. Thus the only way left to assure investment flow and market expansion is through community banking. The rural and agrarian economy of Australia creates a huge impact over social and economical situation. Concentrating on this aspect of the economy could be beneficial for the Bendigo and Adelaide Bank. The investors are much likely to invest with a hope of higher return from the bank which is only possible by market expansion within and outside the country. The diversity of local economy is the field to be emphasized on.

Implementation and communication of the decision

The implementation of community banking is not that easy for a commercial bank like Bendigo and Adelaide. The proper market survey is the key factor to implement community banking. Training and educating the employees about the community banking is another key factor to implement community banking. Some of other implementation processes are discussed above

Restructure and scale back the branch footprint:

With the exaggerated migration of shoppers from branches to electronic channels, even the foremost profitable banks like Bendigo and Adelaide needs to remodel their branch strategy to cut back the overhead burden. This is often accomplished by analyzing client’s behaviors and competition; playing a strategic analysis on physical branch network; and staffing models. Develop a strategic arrange to consolidate or eliminate older branches and build smaller ones. It’s conjointly essential to reinvent the branch expertise supported client desires and wishes. For instance, if the bulk of bank customers use self-service channels, the branch ought to embody additional self-service choices. If the bank focuses on business disposal, perhaps they will be able to place a business center in each branch.

Attract and retain prime talent, and have a succession set up in situ:

Whereas several banks square measure reducing head count, prospering banks have the tools and processes in situ to draw in and retain prime talent, solely cutting employees wherever they have to. Particularly as banks implement changes in their in operation models, the correct folks should be in situ to make and manage client and prospect relationships effectively.

The previous model of gap up a slot for a selected position and solely searching for talent after you have a requirement cannot be relied on nowadays. The more practical strategy is to systematically develop and maintain a lively network of colleagues. Illustrating, the bank participate in bank trade shows and affiliations in native space. At these events, it's vital to have interaction with bankers of all types, as ne’er apprehend once someone might want to form a career amendment. Additionally connect with folks on social media networks, adore LinkedIn. Then, as changes occur and a sharp rent is required, you'll not be taken all of sudden and compelled into a fast call.

Expand the merchandise combine:

We’ve all seen however quickly markets will amendment. Product that worked well simply five years past might now not be relevant. Some banks we have a tendency to work with have gotten obviate phone banking, since many folks now not use this selection, or charging a fee for those that do decision in a trial to lift fee financial gain whereas stimulating customers to maneuver to less costly channels like on-line or mobile. Several have additionally eliminated bankbook savings accounts, since they're time overwhelming to administer and most of today’s technologies don't support passbooks.

A broader mixture of product can cut back the impact that market cycles will wear revenue generation, whereas keeping bank’s target market interested and up-to-date from a technical perspective. It additionally permits the bank to serve a broader spectrum of its client’s core money desires, encompassing financial gain generation, investment growth and alternative core competencies. New services that we have a tendency to area unit seeing embraced by banks embody card less ATM access (using bank’s mobile application to receive cash from AN ATM through a generated, secure code); video ATMs, therefore a client service worker may be obtainable to customers 24/7; mobile wallets, that deliver payment convenience; and person-to-person (P2P) payments delivered via the smart phone.

Conclusion

The financial industries all over the world are facing a tough challenge to cope up with worldwide economic crisis. In this situation introducing new policies and implementing them is the key to survive. The above discussion emphasized on the different ways and policies that can help the financial industries to come out of the low growth crisis.