How to Confirm an Internet Banking Company is Legitimate

When you set up your first internet banking account, you may have reservations about it. After all, anyone could set up a website, claim to be a bank, and fraudulently take your money. There are some precautions you can take to be sure your online bank is a legitimate one.

Start by going to the bank’s website. There, you can get the information the bank gives you about their banking credentials. The bank’s official name should be listed. There may be articles describing the history of the bank, including their internet banking history.

There should be an address where the headquarters can be found. There will be a base of operations somewhere, even if it is a virtual bank internet banking operation. If they are on the up-and-up, they will not be hesitant to tell you about their FDIC coverage.

It is easy to check a bank’s FDIC insurance. If you see the words “FDIC Insured” or “Member FDIC” or the FDIC logo, you might be on the right track. However, it is wise to go a step further. Go to the source to find out if the internet banking company is really affiliated with the federal insurer.

The FDIC has its own data base that includes all of the banking institutions, including internet banking companies that are covered by FDIC insurance. Just go to their “Bank Find” site to find out if your bank is one of them. You can start your search with the name of the bank or its address.

If your internet banking company is on that list, the FDIC will provide you with a whole list of helpful information. You will learn when the bank became insured, and the number on its insurance certificate. You will find out the location(s) of your bank and its official name. You will find out what government entity regulates that bank.

If your internet banking company does not appear on the list, it is time to go directly to the FDIC. They will be concerned with the legitimacy and safety of that bank. It is probably not wise to put your money in an uninsured bank. At that point, it is better to look for another internet banking operation.

Once you do sign up with an online bank, be cautious about how you use their internet banking website. Some unscrupulous people will use the internet to get your banking information. They will do this when you log onto your bank’s website.

The trick these dishonest people use is to set up a website that looks like your bank’s website. They have a URL that is very similar to your bank’s URL. Then, they sit back and wait for you or others to make a mistake typing in your bank’s URL that will get you to them.

From there, the fraudster will track all the information you type into the opening page. They will be able to get your user name, your password, and any other information you type. The best way to make sure you are dealing with your legitimate bank is by being very careful when typing in their site address.

If you are to trust your internet banking company, you must take precautions to assure yourself that it is a respectable business. Once you do that, you can bank with ease.

Overview of UAE Banking Sector

The UAE banking sector is still in recovery stage, post the 2008-09 real estate crisis in Dubai. However, the financial performance of the banks has stabilised especially over the past couple of years. The UAE banks, particularly Dubai based banks, are facing asset quality challenges, as reflected in their high proportion of non-performing loans and low level of provisions. On the other hand, Abu Dhabi based banks appear relatively less challenged from these issues due to their relatively lower exposure to real estate and higher exposure to oil based industries, which did well amid favourable oil price environment.

The key concerns related to the UAE banks include i) concentration in loans and deposits, ii) high proportion of related party exposures, iii) limited data transparency/availability, and iv) stiff industry competition. Moreover, the performance of the UAE banks has been constrained by the still recovering real estate and construction sectors. Although the banks maintain a strong presence in their local markets, the banking sector has limited diversification and displays concentration in terms of geographies, products, and customers.

That said, most of the UAE based banks benefit from strong ownership structure backed by local governments. In addition, most of these banks are in the process of restructuring their problem loans. The economy of Dubai has shown encouraging growth in the past two years. All key sectors of the economy including real estate, trade, tourism, and services have shown a considerable improvement. The improved performance of the core sectors would result in re-classification of some of non-performing loans as performing loans, which would reduce stress on the banking sector in the medium term.

Recent political unrest in some countries in the MENA region has benefited UAE, owing to its safe haven status in the region. Dubai has strengthened its position as a regional financial hub and has become a key channel for investment across the MENA region. This has directly helped local banks. The key characteristics of the UAE banking sector are as follows.

i) Strong links to local governments: The UAE banking sector has been strongly dominated by the governments of Abu Dhabi and Dubai. The ruling families are also actively involved through their investments in the country, typically through their holding companies. The government’s significant involvement in the UAE banking system proved beneficial during the global financial crisis. The authorities responded quickly when needed and supported local banks in 2008 and early 2009. The UAE Central Bank has provided liquidity support as well as deposits to banks in the past to alleviate funding pressure. Markets expect a continuous support to the UAE banks from local governments in future, if needed.

ii) Strong capitalization: The UAE banking sector exhibits a very strong level of capitalization. Its capital levels are supported by consistent profitability, strong earnings retention, and equity injections from the government in times of need. Total capital adequacy ratio of the sector has exceeded 20% over the past three years, the highest in the Gulf Cooperation Council countries. However, the high capital levels are also justified by some banks’ high share of non-performing loans, which requires a higher level of capital than the average.

iii) Weak asset quality: The UAE banks are challenged by weak asset quality. Most of the banks based in Dubai have shown very high level of non-performing loans and insufficient provisions. Moody’s expects non-performing loans of the UAE banks to remain in 10%-12% range in 2013. The agency also stated that despite recovery in core industries, the non performing loans are unlikely to reduce rapidly in the medium term due to banks’ large exposure to troubled borrowers, especially in the real estate industry.

iv) Dependence on oil prices and global macro-economic conditions: The performance of the UAE economy, especially Abu Dhabi, largely depends on oil prices. Any sudden fall in oil prices could result in lower public spending by the Abu Dhabi government. This could impact the performance of Abu Dhabi based banks, which have largely been involved in financing government directed projects. Also, in the event of a sharp decline in oil prices, the resulting economic downturn may further impact lending activities of the banks. On the other hand, Dubai largely derives its growth from real estate, trade, tourism, and services industry. The performance of most of these sectors is linked to global economy. Any deterioration in global macroeconomic environment would directly impact Dubai’s economy and its banking sector.

v) Limited credit differentiation: It is hard to differentiate between UAE banks just by looking at their credit metrics. Most of these banks are closely linked to local governments. The differences in asset quality and franchise value are the only primary distinguishing factors for the banks in the country.

vi) High competition: The UAE is an overbanked region. There are 51 banks currently operating in the UAE. This has resulted in stiff industry competition and has pressurized net interest margins of the banks.

Big Banks Shun Small Business

Any small business owner who recently tried to secure a loan will tell you it isn’t easy. Now data clearly shows the broader effects of this struggle.

The Wall Street Journal recently reported that the 10 biggest banks in the country that issue small loans to businesses lent $27.8 billion less in 2014 than the industry’s 2006 peak, according to the Journal’s analysis of federal regulatory filings. (1) This decline has forced many small business owners to turn to higher-cost funding sources.

The response is similar to that of individuals who are turned away by banks and then resort to expensive and risky alternatives. For businesses, these may be nonbank lenders, often in the form of online companies that require little or no collateral but that charge much higher interest rates than banks. While not all of these lenders are predatory, the space is still largely unregulated. For small amounts, some business owners are turning to nonprofit microlenders or crowdfunding to try to fill gaps, though both have serious limitations.

But many businesses are simply turning to credit cards when they cannot secure traditional small business loans. According to the Journal, small business spending on credit and charge cards will total an estimated $445 billion in 2015, compared to $230 billion back in 2006, when conventional lending was readily available. (1)

It may be more profitable for banks, but this solution is bad, and probably unsustainable, for business owners. As Robb Hilson, a small business executive with Bank of America, told The Wall Street Journal, “If someone wants to buy a forklift, it doesn’t make sense to put it on a credit card.” (1) Yet many small businesses have little other choice for now.

This result is not surprising. Large banks generally find small loans unattractive, partly because of their relatively high costs and partly because of tighter regulatory requirements. A Goldman Sachs analysis earlier this year cited the reduced availability of credit as one of the principal reasons small businesses have faltered in the wake of the financial crisis while large enterprises have largely recovered. (2) As regulators cracked down, it became uneconomical for banks to serve clients other than the most creditworthy. Startups seldom make the cut.

My own experience mirrors others. Even with a 23-year-old business that operates across the country, banks want hard collateral before they will make substantial loans. And when the chief assets of a business consist of loyal customers and really smart employees, the only available collateral is personal real estate. And even real estate was not enough at the first bank I approached; geography came into play too. If banks find our established firm too risky to make unsecured loans, many smaller or newer enterprises do not stand a chance.

With big banks out of reach, small community banks should have been ready to step into the gap, eagerly courting new customers. But that has not happened, largely because the number of such banks continues to decline. This trend predates the Dodd-Frank financial regulations, but the regulations sharply accelerated the community banks’ loss of market share.

This is not to say that all community banks are in immediate danger of going under. To the contrary, recent data from the Federal Deposit Insurance Corp. suggests that those that have held on have expanded their lending and narrowed the profitability gap with larger banks.

While this is good news, it’s not enough to fill the gap in small business lending. And it seems unlikely to do so soon, since new bank establishments have dropped nearly to zero, thus cutting off a supply of lenders who are eager for new customers. According to an FDIC report from April 2014, there were only seven new bank charters total from 2009 to 2013, compared with over 100 annually prior to 2008.

The small banks that have survived have largely done so by being just as risk-averse as the big banks with which they compete. Regulation has simply made it foolish to act otherwise. But this leaves all small businesses except those with established history, sterling credit and substantial collateral without the means to secure the capital they need to make their enterprises grow.

Small businesses are crucial drivers of new jobs and new products for our economy; their credit struggles are probably a significant reason this economic expansion has been sluggish by historical standards. We have made it unattractive for big banks to serve small businesses, and small banks are not ready to fill the gap. We all pay the price.

Sources:

1) The Wall Street Journal, “Big Banks Cut Back on Loans to Small Business”

2) Goldman Sachs, “The Two-Speed Economy”

Everything You Need To Know About Banking

Most of us know what a bank is. We know that in order to better manage our financial life; we should have both a checking and savings account at a minimum. We also know their services are similar across the board for most banks. Some of these services include:

o Accepting deposits

o Making auto, home, and business loans

o Reporting what you paid and earned

o Issuing credit cards

o Online bill payment

o Providing investments

The list can go on and on, but those are basic things most banks will offer. However, what vary from bank to bank are the terms and conditions. That is why everyone should consider their unique needs and then select the bank that best meets those needs.

Comparing Your Choices

There are national, regional, and local community banks around the country. These banks are further categorized into the following segments:

o Commercial Banks

o Savings & Loans (S&C)

o Credit Unions

o Mutual Funds and Brokerage Firms

o Virtual (Online) Banks

Commercial Banks

Commercial Banks serve both individuals and businesses. They typically have multiple, well-located branches throughout a region, and offer broad range of services. Deposits are FDIC-insured up to $100,000 per type of depositor’s account. The only con is that fees at these banks can be the highest.

Savings and Loans Banks (S&L)

S&L banks tend to have lower fees than commercial banks. In some cases, service can be better due to the lower number of clients at the especially smaller banks. Most are FDIC-insured. The only con would be that they sometimes require you inform them of a withdrawal you intend to make. They often have fewer branches; therefore you can rack up lots of ATM fees for using non-partner banks.

Credit Unions

Credit Unions typically have the lowest fees and loan rates because they are non-profit. Earnings are paid out to members at the end of the year. The main con is that as few as 1 or 2 percent happen to be federally insured. Like S&L’s, they often have fewer branches; therefore you can rack up lots of ATM fees for using non-partner banks.

Mutual Fund and Brokerage Firms

Mutual Fund and Brokerage Firms often offer very limited banking services with low-cost or free checking linked to some interest-paying money market funds. The most notable con is that they often require larger minimum balances and they are not FDIC-insured, but have private insurance.

Virtual (Online) Banks
Virtual Banks are all online, thus there are no branches. In many cases, they don’t even send paper statements. Clients are emailed their monthly statements to view or print from online. They are FDIC-insured. They have started to lose some of their appeal as many commercial banks and even credit unions offer 100 percent online banking. The primary con here is that there are a limited number of ATM machines. Thus, if clients can’t find partner ATMs they can pay lots of money annually in ATM fees.

Checking Accounts

A checking account is a service provided by most banks which allows individuals and businesses to deposit money and withdraw funds from an FDIC-insured account. The terms and conditions of a checking account may vary from bank to bank, but, in general, a checking account holder can use personal or business checks in place of cash to pay debts. Most checking accounts allow customers to withdraw their money using an ATM machine.

Almost all banks offer some form of checking account service to their customers. Some may require a minimal initial deposit before establishing a new account, along with proof of identification, and a physical address. Students or other lower-income applicants may opt for a low-featured checking account, which does not charge fees for the use of personal checks and other limited services. Other applicants who open traditional checking accounts may benefit from interest payments by maintaining a high minimum balance each month.

Checking Basics

A typical checking account will handle deposits and withdrawals. The account holder has a supply of official checks which contain all of the essential routing and accounting information. When a check is written, the account holder’s account is debited for the amount of the check. The account holder is ultimately responsible for keeping track of their available funds, even though the bank will issue monthly statements.

When a Check Bounces

Checks must represent an actual amount of money in the checking account. If a check is written for an amount higher than the available balance and the bank pays that check, then the account holder that wrote that check will face an overdraft fee and potentially legal action. Further, the recipient of the bad check may also incur fees if the check bounces. Then the writer of the bad check may owe fees to both his bank and the recipient’s bank.

The recipient of the bad check can demand immediate cash payment for the original debt as well as a substantial fee for the returned check. Some banks will protect checking account holders by making the proper payments and notifying the check writer that an overdraft has taken place. Most often the bank will recoup their losses through substantial service charges, so it pays to avoid writing checks when the balance is unknown.

Savings Account

We have discussed the importance of saving back in the section on saving. In this section we will discuss some savings account vehicles.

In the world of Savings Accounts, there are three primary vehicles: Standard Savings Accounts, Certificates of Deposit, and Money Market Accounts.

Standard Savings Accounts

Standard Savings Accounts often allow you to withdraw your money whenever you want without penalties. Though the interest rate is low (rarely above 3%), it is less risky and steadily grows.

Certificates of deposit (CDs)

CDs typically pay a higher interest rate than regular savings accounts. However, you have less flexibility to withdraw whenever you want to. If you withdraw too soon, you could be penalized and lose some or all of the interest earned.

Money market accounts (MMAs)

MMAs also pay a higher interest rate than regular savings accounts. Unlike CDs, however, you are usually allowed to write a limited number of checks or even make a transfer during each month assuming you do not go below your required minimum balance. If you do go below your minimum, you could be assessed fees or lose any interest earned, or both.

Debit Cards

A debit card (often referred to as a check card) resembles a credit card and provides an alternative payment method to cash when making purchases. The card is an International Organization Standard (ISO) 7810 card which is similar to a credit card; however, its functionality is more similar to writing a check as the funds are withdrawn directly from either the cardholder’s bank account or from the remaining balance on a gift card.

Depending on the store or merchant, the customer may swipe or insert their card into a credit card terminal, or they may hand it to the merchant who will do so. The transaction is authorized and processed and the customer verifies the transaction either by entering a PIN or by signing a sales receipt.

The use of debit cards has become widespread in many countries and has overtaken the check and traditional cash transactions. It is very important to be mindful of what is spent by maintaining your check register.

Bank Fees

For both individual and business customers, the primary objective when selecting a bank is to save money. Therefore, knowing exactly what a bank is going to charge to up front can better help you select the account that works best for you. During this process, it is important to pay close attention to the fine print which often reveals hidden charges and fees. For example, if you opt for a free checking account at a smaller bank with limited ATMs, you may actually pay more in ATM fees throughout the month than you would have on monthly fees with a checking account at a larger bank with many local ATMs.

You should pay close attention to the fees that will affect you most. At most banks, the fees that will affect most customers include:

o ATM fees

o Debit card fees

o Stop payment fees

o Check printing feeds

o Overdraft fees

o Bounced Check Fees

o Monthly Checking Account Fees

o Check writing fees

o Balance inquiry fees

o Wire transfer fees

Choosing the right bank is an important financial decision. Be sure that you fully understand all of your banking options, products and services, and ultimately what your costs will be before you open an account.

Swiss Private Banking – Exploring Offshore Banking Services

“Swiss Private Banking” is a term always used with reference to a specialized group of financial institutions based in Switzerland that are entirely dedicated towards managing portfolios of private clients.

Supported by a politically and socially stable economy and a dependable legal system, Switzerland is one of those few countries having a long history of economic prosperity. However, the country has always been recognized as a global leader in banking providing reliable, secure and confidential providing sophisticated, discreet and professional banking services to customers.  

How to Open a Swiss Bank Account? – “Opening an account in a Swiss Bank is only possible if you are a millionaire” – This statement doesn’t hold any truth. Anybody can open a bank account with a Swiss bank, provided he/she meets the specified eligibility criteria.  

Opening an account with any Swiss bank is almost similar to that of opening a bank account in your own country. At present, there are more than 400 authorized banking institutions and securities firms in this country serving millions of customers across the globe. Prominent among these are UBS AG and Credit Suisse, each of them having an extensive branch network within the country and in many parts of the world. All that one needs to do is to find out a good banking institution that allows a non-resident savings account but doesn’t require huge amount of money towards minimal deposit. There are some banks where customers can open an account with a minimum initial deposit of Fr. 5,000 only. Information on such banking firms in Switzerland can be obtained on the internet. In fact there are several websites providing unlimited reviews of Swiss banks. Just contact them and get the conditions required for opening an account.

How to open a Swiss bank account? – There are three ways of opening an account with a Swiss Bank. Just pay a brokerage amount ranging from $400 to $1000 depending on the account type to any online brokerage firm and they can open a bank account on your behalf. However, this method is being strictly regulated under Swiss laws so as to prevent any fraudulent activities. Hence, Swiss banks are ensuring that they are completely aware about the customer’s background before approving any account opening form from non-resident customers. Second method of opening a Swiss bank account is to pay a personal visit. Lastly, one can even opt for opening an account through mail, where the customer needs to contact the local Swiss Consulate, submit a requisition, get the required forms, fill them up, get the signature verified at the Consulate and send across all the documents along with the initial deposit money to the bank via mail.  

Why Swiss Private Banks Are Highly Reputed? – The concept of Swiss private banking services originated for the first time in St. Gallen and Geneva during mid 1700s with the objective of helping customers with aspects such as wealth management, asset protection and investment so that they can pass on their assets to the next generation. Since then, these private banks have been an integral part of Swiss culture.

The most remarkable aspect about private banking sector in Switzerland is its adherence to aspects such as confidentiality and privacy. Due to these reasons, Swiss banks have long been a safe haven for criminals and offenders for preserving their money. In fact, it is not even possible to know that an individual owns a Swiss private bank account until the details are revealed by the individual himself. However, banking secrecy code doesn’t exist on accounts in circumstances where the account holder is undergoing legal proceedings for crimes such as illegal drug trafficking, smuggling, terrorist activities, or money laundering.  

Secondly, Swiss banks offer an extensive range of services to customers depending on the needs and requirements of the customer. These services include checking accounts, savings accounts, custodial accounts, investment options, Swiss bank certificates of deposit and stock certificates. For selected customers, these banks even provide specialized services such as estate planning, wealth management and trust companies.

Thirdly, the interest earned on money deposits present in Swiss Bank accounts is exempted from tax.  Accessing money is easier as most of these banks conduct Swiss online bank operations and provide complete internet banking services. Also, these banks facilitate a variety of withdrawal methods such as credit cards, direct cash withdrawals, travelers’ checks and online bank transfers. In addition, they allow customers to make withdrawals in any currency of their choice.

A Simple Benefit of Offshore Banking is Seen in Offshore Savings Accounts

A simple aspect of offshore banking is seen in offshore savings accounts. In many tax advantaged locations interest on deposits is not deducted. Although the saver may need to declare savings interest “back home” the ability to let savings compound throughout the year on the untaxed balance will increase the return on your savings.

Interest on a certificate of deposit may be paid quarterly offshore but not be taxable in your home jurisdiction until you return the money to your home jurisdiction. Tax laws will vary from country to country and from offshore jurisdiction to offshore jurisdiction. However, banking in tax advantaged jurisdictions will usually save you money.

If you allow your savings account to accrue over the year and pay taxes “back home” only at year’s end you will make a higher compounded rate throughout the year with will in turn accrue over the years ahead of what you would have seen with an account that stayed in your home country.

This same principle can apply to trusts, off shore funds, and investment bonds as well. If you are uncertain about the tax laws in your home country talk to your accountant. If you want to find a stable, trustworthy offshore banking jurisdiction you should talk to an offshore specialists about this.

Offshore funds, trusts, and investment bonds may be treated the same way depending upon your country of origin. In this case interest compounds tax free and is not taxed offshore upon withdrawal which is when the income from the investment vehicle will typically be taxed back home.

These any many other advantages becomes available by going off shore. Then the next question arises, about where and how to invest and save in tax advantaged locations.

Belize Offshore Banking

Opening an offshore bank account in Belize is easy. You do not even need to go to the bank. You can be introduced to a reputable, competent, trustworthy bank in Belize. You can set up your account online and by fax.

Belize has local, Belize banks, and international banks doing business in Belize. An offshore specialist can easily help you with the right banking choice for your needs. The banking guidelines in Belize provide you with unparalleled privacy and security in handling of your accounts and transactions.

In order to open an account in you need only provide your full name and a copy of your driver’s license or passport, proof of your address, a utility bill for your address, and a reference from your current bank. Ideally you will need to have had a two year relationship with the bank that provides your reference.

Although the bank will need this information to open an account your personal information is not available to third parties without your knowledge and consent. You can do all of banking with your Belize offshore bank online from anywhere in the world.

Offshore Banking

This simply means that you bank in a country outside of your own. Banking offshore usually offers tax advantages as offshore bank interest is not taxed in the offshore location. Also offshore locations offer confidential, secure and convenient banking with access to your account from anywhere on earth.

These banks allow you to set up your accounts and do all of your banking on the internet. You never need to visit the bank. Many companies offer services and will help you choose a bank offering exceptional privacy and asset protection. Besides the advantages of banking tax free the banks will guard your privacy so that you can do business anywhere in the world without the world looking over your shoulder.

How Is a Belize Bank Account Taxed?

The answer is that a Belize offshore bank account is not taxed in Belize. Depending upon the tax laws in your home country you may have a tax liability there but income from your Belize account is not taxed and not reported to anyone except you.

Interest on money in your Belize offshore bank account is paid without deducting for taxes. Belize banks deal with you and not the government of your country. As such you may or may not have a tax obligation “back home” but that is not the business of your overseas banking partner.

You can bank online and carry a debit card for your account and use it anywhere in the world. You can transfer money in and out of your account in complete security and privacy. Your business is with your bank and their business is with you.

Offshore Trusts

If you would like to put money in trust for your grandchildren consider an offshore trust. Depending upon your tax jurisdiction there may be a substantial tax advantage in going offshore. Depending upon your home country and the offshore location you choose results will vary.

Offshore banks offering trust services in tax advantaged jurisdictions will typically have minimal taxation on trust income. The value of the trust will be allowed to grow and compound unencumbered by the level of taxes you might see “back home.” When the trust money is made available to your grandchildren is typically when taxes will be taken out.

Talk to your accountant or tax lawyer about tax laws in your home country. Talk to the specialist about the advantages of offshore banking, trust accounts, and other savings vehicles in tax advantaged locations. Another option instead of a trust is an offshore foundation. Again, good planning with good council will reap the best rewards.

Many people see this as a shady operation and many myths comes alive remembering good old James Bond movies where money is transferred in a split of a second by just pressing a button where the bad guys retreat under the palm trees on some desolate island in the Caribbean ocean, for then moments later being caught by the good guy.

Tax planning and saving for the future is legal. Tax evasion is not. There is a lot in it for a lot of private and corporate individuals. It is a myth that this is only for the high net worth of clients. With the age of internet this has become available to people all around the world. And the offshore banks keeps their doors open, welcoming both you and me.

Entry Of Foreign Banks In Ghana

With globalization, advancement in IT and financial liberalization, many countries have seen penetration of foreign banks into their banking industry. On this matter, Ghana is not an exception. Ghana is located in West Africa and shares borders with three francophone countries- Togo (East), Cote D’ Ivoire (West), Burkina Faso (North), and south is the North Atlantic Ocean. The country is blessed with natural resources.

Ghana is seeing tremendous growth in her banking system. This growth is marked by increase in branches, increase in bank size and use of IT to provide services to clients. Contributing to this growth is changes in regulation and supervision and advancement in Information Technology. Of the 26 banks operating in the country, 25 of them are operating as universal banks, and one operating as both offshore and universal bank. The presence of foreign banks in the country exceeds the presence of domestic banks. Out of the 26 banks, 14 and 12 are foreign and local banks respectively.

Globally, many factors influence their entry into host countries. These factors have been identified as location-specific advantages of the host country (e.g. population size, security, market structure and regulatory structure), ownership-specific advantages of the foreign bank (e.g. branding, creditworthiness, size of clients, skilled work force) and internalization-specific advantage. These factors combined together influence the entry motive decisions, entry mode decisions, market orientation decision and management control decision of these banks. Thus, the entry into Ghana is influenced by these factors.

Their entry in Ghana dates back to the colonial era. The first entry was in 1896 by the Bank of British West Africa (BBWA), now known as Standard Chartered Bank (SCB). Its main object was to import silver coins from the Royal Mint to expatriate companies and the colonial administration. In the colonial era, the banking industry was established with the object of providing financial services for the British trading enterprises and the British Colonial Administrative. For this reasons the local people in the Gold Coast were financially excluded from the banking system.

In 1917, another foreign branch was incorporated in the country. This is the Barclays Bank, which was then known as Barclays Dominion, Colonial and Overseas Bank. This introduction increased the presence of foreign banks to two, with indigenous banks absent. In 1975, SSB Bank was also incorporated. Financial liberalization in the 80s and its deepening in the 90s saw the entry of new banks into the industry. From 1990-2000, four foreign banks entered the banking system, thus increasing the presence of foreign banks to seven. Unlike the previous years, seven news banks were incorporated from 2004 to 2010.

Regulating their entry is the responsibility of the Central Bank. Their entry modes into the country are through acquisition, subsidiary and joint venture. Before the issuance of banking license the following are legally required to be submitted by banks: 1. Draft by laws 2. Intended organizational chart 3. Financial projection for the first five years and area of specialization intended. 4. Financial information on main potential shareholders 5. Background/experience of future directors and managers. 6. Sources of funds to be disbursed in the capitalization of new banks. 7. Market differentiation intended for the new bank. The license could be revoked by the central bank on the account of false, or misleading or inaccurate information by or on behalf of the applicant bank; noncompliance with terms and conditions stipulated in the license, and failure of bank to commence business within one year from the date the license was issued.

Though their entry is imperative for a competitive banking, their excessive numbers could bring about macroeconomic instability and unstable legal framework. For this reasons, the Central Bank has adopted an open but selective licensing policies to regulate their entry.

In conclusion, entry of foreign banks in Ghana dates back to the colonial era. Time of entry varies from one bank to the other. Entry is selective and consciously managed. Entry modes are restricted to joint ventures, subsidiary and acquisition.

Introduction to Islamic Banking

The most distinguishing feature of the Islamic economic system is the prohibition of interest. Islamic economic principles have prominently been applied in financial industry especially in banking. Islamic Finance is growing in multiple dimensions and is now spreading in other financial sectors like insurance, structured finance, project finance, mutual funds, syndicated finance, investment banking etc. On the geographical level too, Islamic banking has grown from Middle East to Europe and now is well positioned in South Asian markets as well.

Shariah compliance also ensures Corporate Social Responsibility (CSR) and ethical compliance. Islamic banks do not conduct business with companies producing tobacco, alcohol or engaged in business of gambling, casino, nightclubs, prostitution etc. This mechanism has given Islamic banking the name of ‘ethical banking’ in Europe.

The balance sheet of Islamic banks is capable of taking financial shocks. Islamic banks are not obliged to give fixed return to their depositors and general creditors. The creditors, shareholders and depositors share and participate in the bank’s business. Therefore, if incase, there is a shock on asset side (NPL increasing), Islamic banks will be able to share this loss with their depositors and shareholders.

Islamic banks cannot rollover loans. Therefore, the packaging and repackaging of loans and then issuing more and more debt securities on the back of these non performing loans cannot legally happen in Islamic Banks. Islamic banks are obliged to have backing of assets in all their investments. Therefore, Islamic banks losses even theoretically cannot go beyond the value of the real asset.

Financing Operations of Islamic Banks

For the provision of finance, following modes are used in Islamic banking.

Diminishing Musharakah

In Diminishing Musharakah, the customer approaches the bank for joint purchase of an asset/property. It is referred to as ‘Diminishing Musharakah’ because the ownership stake of the tenant increases and that of the bank decreases or diminishes with the passage of time. The rent decreases as the ownership stake of tenant increases. The share of the bank in asset/property is divided into units. These units are purchased by the customer periodically until he has purchased all the units. After the customer has purchased all the units of the bank, he becomes the sole owner of the asset/property.

Murabaha Muajjal

Murabaha is a deferred payment sale transaction. Murabaha is used in working capital financing, SME financing and trade financing. The Process flow of Murabaha is as follows:

Islamic bank and the client sign a Master Murabaha Finance Agreement and an agency agreement. According to the agency agreement, the customer purchases goods from the supplier on bank’s behalf. The customer undertakes to purchase the asset from the bank. It is a one-sided promise and undertaking. The bank pays the supplier and obtains title and physical/constructive possession of the asset. The customer signs a declaration that he has purchased the goods on bank’s behalf and now he is willing to purchase the asset. After offer and acceptance, sale is executed and the customer pays the agreed price to the bank.

Ijarah

Ijarah means to give something on rent. In Ijarah, right of use of a property is transferred to another person for a consideration. The process flow is as follows:

The customer approaches the bank for obtaining an asset on lease. The customer undertakes to make periodic lease payments for the lease period. Lease agreement and agency agreement is signed. The customer as an agent to the bank buys the asset. Bank receives the title of the asset and pays the vendor. The bank leases the asset and the customer starts using the asset and pays rent for each period. In the end, the customer can purchase the asset from the bank by way of a separate purchase agreement.

Salam

It is used in financing goods and services that are not ready for spot sale and will have to be delivered later. In Salam, payment is spot, but the delivery is deferred. It is used in special cases to facilitate transactions. In current practice, it is used in currency trade as an alternative for bill of exchange discounting and in agriculture financing.

Istisna

It is used in financing goods that are not yet ready for sale and will have to be manufactured. Example includes tailoring services, architect services etc. It is an order to producer to manufacture a specific commodity for the purchaser. It is used in pre-shipment exports financing and usable in all other situations where goods have to be manufactured before sale.

Deposit Side Operations of Islamic Banks

The two main categories of deposits are checking accounts and non-checking accounts. Some accounts are remunerative and some are non-remunerative. For offering deposit products, following modes are used in Islamic banking.

Non-Remunerative Accounts

Current Account is an example of a non-remunerative checking account. The money deposited in such account is considered ‘Qard’ (Non-interest bearing loan). The money is invested in the fund by the bank. Bank utilizes the money to invest in Ijarah, Murabaha, Diminishing Musharakah, Salam, Istisna etc. The money is payable on demand.

Remunerative Accounts

Remunerative accounts can be checking i.e. Savings Account or non-checking accounts i.e. Term Deposits. The money is invested in the fund. The bank acts as ‘Mudarib’ i.e. ‘Fund Manager’ and the customer acts as ‘Rabb-ul-maal’ i.e. ‘investor’.

The money is only invested in Shariah compliant assets. Bank utilizes the money to invest in Ijarah, Murabaha, Diminishing Musharakah, Salam, Istisna etc. The Weightage is assigned to each category of investment that is stated to the customer at the outset. Profit is declared at the start of the month for the previous month based on the weightage previously announced. Profit is paid out of the actual Gross Income.

Barclays International Personal Banking

Barclays’ offshore banking solutions are often chosen by British expatriates who already have a business relationship with the bank before they leave the UK and who are aware of the bank’s pedigree and reputation. All in all Barclays offshore banking division services the main requirements of the individual and corporate client, and because Barclays have a good industry recognised reputation from Standard and Poors, Fitch and Moodys their offshore and international client base is apparently growing. The focus of the private and premier banking services available from the offshore division of the bank is the provision of a first class service for the management, protection and growth of a client’s wealth. Barclays International and Private Banking Division offer offshore and private banking solutions to those with cross border needs, the Division is a part of the 300 year old UK based Barclays financial institution. Offshore corporate banking services available from Barclays offer corporate clients or intermediaries the ability to streamline cross border trading and banking.

For expatriates, international business professionals or those with cross border needs who are seeking a straightforward offshore personal bank account, Barclays International Personal Banking from Barclays International and Private Banking Division offers easy and secure access to funds with telephone and internet banking available, discounts on international money transfers, the ability to bank in multiple currencies, international mortgages, UK tax advice, good interest rates and a safe and secure account are also offered and assured. For expatriates, international business professionals or those with cross border needs who are seeking a straightforward offshore personal bank account, Barclays International Personal Banking from Barclays International and Private Banking Division offers easy and secure access to funds with telephone and internet banking available, discounts on international money transfers, the ability to bank in multiple currencies, international mortgages, UK tax advice, good interest rates and a safe and secure account are also offered and assured. Offshore corporate banking services available from Barclays offer corporate clients or intermediaries the ability to streamline cross border trading and banking. In terms of the Barclays’ offshore banking services available, the group offer personal, corporate and private banking solutions as well as a unique international premier banking solutions for those with in excess of GBP 100,000 to bank and invest. For those seeking private offshore banking solutions there is an international private banking division at Barclays and also the aforementioned premier banking solutions which are available to those who require a more personalised banking and investment service from Barclays.

In terms of the Barclays’ offshore banking services available, the group offer personal, corporate and private banking solutions as well as a unique international premier banking solutions for those with in excess of GBP 100,000 to bank and invest. For those seeking private offshore banking solutions there is an international private banking division at Barclays and also the aforementioned premier banking solutions which are available to those who require a more personalised banking and investment service from Barclays. For those seeking private offshore banking solutions there is an international private banking division at Barclays and also the aforementioned premier banking solutions which are available to those who require a more personalised banking and investment service from Barclays. Offshore corporate banking services available from Barclays offer corporate clients or intermediaries the ability to streamline cross border trading and banking. Their relevant corporate products and services include financing, investing, day to day banking and trading – and as with personal Barclays offshore bank accounts, corporate accounts are also safe and secure as Barclays is a bank with an excellent reputation.

Offshore Private banking is most suited to those with in excess of GBP 1 million and the premier banking service is for those with in excess of GBP 100,000 – either to invest, trade or bank. For those seeking private offshore banking solutions there is an international private banking division at Barclays and also the aforementioned premier banking solutions which are available to those who require a more personalised banking and investment service from Barclays. But because Barclays has a growing international presence particularly across Europe, America, Africa and Asia their presence on the international high street is becoming more high profile. Barclays’ offshore banking solutions are often chosen by British expatriates who already have a business relationship with the bank before they leave the UK and who are aware of the bank’s pedigree and reputation. Their relevant corporate products and services include financing, investing, day to day banking and trading – and as with personal Barclays offshore bank accounts, corporate accounts are also safe and secure as Barclays is a bank with an excellent reputation.

For expatriates, international business professionals or those with cross border needs who are seeking a straightforward offshore personal bank account, Barclays International Personal Banking from Barclays International and Private Banking Division offers easy and secure access to funds with telephone and internet banking available, discounts on international money transfers, the ability to bank in multiple currencies, international mortgages, UK tax advice, good interest rates and a safe and secure account are also offered and assured. For expatriates, international business professionals or those with cross border needs who are seeking a straightforward offshore personal bank account, Barclays International Personal Banking from Barclays International and Private Banking Division offers easy and secure access to funds with telephone and internet banking available, discounts on international money transfers, the ability to bank in multiple currencies, international mortgages, UK tax advice, good interest rates and a safe and secure account are also offered and assured. Offshore Private banking is most suited to those with in excess of GBP 1 million and the premier banking service is for those with in excess of GBP 100,000 – either to invest, trade or bank. All in all Barclays offshore banking division services the main requirements of the individual and corporate client, and because Barclays have a good industry recognised reputation from Standard and Poors, Fitch and Moodys their offshore and international client base is apparently growing. Barclays’ offshore banking solutions are often chosen by British expatriates who already have a business relationship with the bank before they leave the UK and who are aware of the bank’s pedigree and reputation.

Getting Banks Back Into Banking

Banks used to be in the business of gathering deposits and making loans. Today, they are in the business of gathering fees and making trades.

Being an American banker today means living under the thumb of regulators who demand that you lend money at extremely low interest rates, while trying to avoid making bad loans that would reduce your capital and potentially require a federal bailout. The bigger the bank, the greater the pressure.

In this environment, depositors are a nuisance unless you can extract hefty fees from them. You have to track their money and hold part of it in cash so you can meet withdrawal demands, and you can’t lend most of the rest at very high rates anyway. When you do lend money, you must generate reams of paperwork to satisfy your examiners. If things go badly for borrowers, you can expect to be accused of “predatory” lending. And if you try to foreclose on loans in default, you had better make certain that all your paperwork is in order, lest the collateral that secures your capital – and your depositors’ deposits – be lost amid charges of “robo-signing.”

Yet bankers were not forced out of their traditional business by heavy-handed or clueless regulators. Years before the housing bubble burst and the financial crisis began, bankers willingly exchanged much of their slow-but-steady business for the faster-buck pursuit of fee and trading profits. Banking circa 2005 was a race to issue mortgages that could quickly be resold, in the case of high-quality borrowers, to Fannie Mae and Freddie Mac or, in the case of more dicey borrowers (the phrase “anyone with a pulse” was widely used), to private investors in the form of securities that were packaged on Wall Street. Banks could then seek to make additional profits by trading those same securities.

Traditional banking serves a very important economic purpose. By gathering idle cash and lending it to borrowers who can put it productively to work, banking makes society as a whole wealthier over time. It is a risky business model, because only a thin foundation of bank capital supports a big structure of loans and deposits, but the advent of federal deposit insurance and closer inspection bought decades of stability until the fast-buck boom went bust.

Now our post-recession economy is having trouble gaining steam, and one of the reasons is the anti-lending bias in today’s banks.

Lately, however, regulators have started to pressure banks to cede some of their newer revenue sources. This might only inspire banks to find new ways to make quick money, but there is at least a chance that the new demands might lead banks back to their old way of doing business.

One area where banks are seeing restraints on their pursuit of fee revenue is in overdrafts. Regulations issued by the Federal Reserve Board in 2009 prohibit banks from processing debit card or ATM withdrawal charges that put a customer’s account into the red and then charging that customer a fee on the overdraft unless that customer explicitly consents. Since then, many people have done just that, opting into overdraft protection programs that brought in $31.6 billion for banks last year, according to Moebs Services, a Lake Bluff, Ill., research firm. Around 15 million Americans overdraw their accounts more than ten times a year, each time paying overdraft fees ranging from $25 to $35, the firm said. (1)

Richard Cordray, director of the Consumer Financial Protection Bureau (CFPB), has launched an inquiry into these overdraft protection programs, looking at marketing materials that may mislead customers into consenting to “protection” that could cost them hundreds of dollars in avoidable fees every year.

Last week, four people with knowledge of the inquiry told reporters that investigators are examining the practices of nine U.S. banks, including national players JPMorgan Chase & Co., Wells Fargo & Co. and Bank of America Corp.; regional players U.S. Bancorp, Regions Financial Corp., and PNC Financial Services Group Inc.; and three others that were not named.

In another development last week, the Federal Reserve and four other U.S. agencies essentially admitted that the so-called Volcker Rule, restricting banks’ proprietary trading, is such a mess that they will not be able to actually write the regulations needed to implement it until after the planned July 21, 2012, compliance deadline.

According to the Federal Reserve, banks will now have two additional years to comply with the as-yet-unwritten rule. Now they need only make a “good faith” effort to “conform” their activities and investments to the still-undefined standard. (2)

Like most owners of small businesses, I am not directly affected by mega-issues such as the Volcker Rule. I don’t need my bank to provide me with foreign currency hedges or interest rate swaps. I do, however, need my bank to provide me with credit and to hold my company’s cash. And, like many business owners, I am seeing the results of the tighter credit environment firsthand.

Back in 2008, when the financial crisis first hit, I drew down a $50,000 credit line that had been issued to our company at 0.75 percentage points above the prime rate. With credit markets freezing up and the government’s response still uncertain, I sensed that this was a use-it-or-lose-it situation. I kept the money borrowed more or less continually since then, even though the business had more than enough cash (earning close to zero) to pay it off. I was willing to spend about $2,000 a year in net interest cost to ensure that the funds would be available if things got really tight.

Recently, the bank told me it was raising the interest rate on my credit line to 3.25 percent above the prime rate (which is also at 3.25 percent right now), bringing the total cost to 6.5 percent. As any savvy banker might have predicted, rather than paying nearly $3,125 in annual interest costs, I repaid the credit line. My bank’s profit on the transaction went from $2,000 to zip.

In normal economic times, that would have been bad news for the bank. In our present world, however, the bank was probably happy to have my line of credit paid off. It meant one less “risk” in the eyes of regulators, even though the bank (which sees our cash inflows and outflows) knows that our business is good and our cash flow is stable.

In March, Bank of America announced that it was looking into ways to restructure checking account fees in order to charge more. JPMorgan Chase and Wells Fargo similarly introduced new programs, which impose monthly maintenance fees for many customers, in 2010 and 2011. Wells Fargo’s retail division relied on fees, including overdraft fees, for nearly a quarter of its net income, or $4.3 billion, in 2011, according to financial disclosures, Bloomberg reported. (1)

It’s going to be very difficult to get normal economic growth in an abnormal situation, and there is a lot about the financial system that is abnormal. Depositors are paid almost nothing for their deposits, borrowers pay unrealistically low rates for credit that is unreasonably hard to get, and banks are not particularly interested in traditional banking. Just getting things back to normal would be a major step forward.

Sources:
1) Bloomberg, “Nine U.S. Banks Said to be Examined on Overdraft Fees”

2) Bloomberg, “Fed Gives Banks Until July 2014 to Comply With Volcker Rule”