Capital City Bank Case Analysis Essay

Capital City Bank (CCB) was a strong point sized commercial chamfer owned by a low group of shareholders. Its total employee force numbered tight 1,000 personnel. Because of the accompanys scurvy performance in recent years, the owners unyielding to sell their equity to a group of impertinently investors who felt that CCB could be turned around with to a greater extent hard-hitting anxiety. The transfer of ownership of the bank was followed by basic changes in bank strategy as well as changes in umteen key personnel, many of them at the top level.The basic changes implemented by the new management of CCB included a more active search of foreign financing activities as well as a heightened idiom on lending activities to large corporate accounts. To better implement these changes in basic strategy, CCB was reorganized.NEW ORGANIZATIONThe reorganization of the bank involved the debut of two new divisions, namely, the Corporate Banking fragment and the assert Division (Se e show A).The Corporate Banking Division was given the responsibility of marketing the different loans of the company to large domestic corporations, multinational corporations, as well as to the median(a) sized companies which had been the traditional clients of the bank. A wide range of credit lines were cracked to these accounts much(prenominal) as Direct Advance Line, Import Letters of Credit, Export buck Purchases Line, Export Packing Credit Line, Domestic Bills Purchase Line, and another(prenominal)s. Mr. Vicente Torres, a new recruit from a similar department in another bank in Metro Manila, headed this new division.The intrust Division was charged with intend about trust usefulnesss for exclusive and business clients. A major service assigned to this division was the Common Trust Fund. This involved the pooling of funds worn from various participants, investing this fund in safe and high yielding investments, andsharing the returns from the investments among the participants in proportion to the amounts contributed by each. The Trust Division was nonetheless to perform only the investment function. The marketing of this service to corporate and individual accounts was entrusted to the growth Division. The latter also marketed the services of ten branches of the bank placed around Metro Manila.THE DEPOSIT DRIVEAs a corollary to aggressive selling the various lending and trust services of the CCB, bank management also decided to under mete out an effort to increase savings and other deposits in the bank. A deposit drive was launched involving all the employees of the company. A set of rules was drawn up such that all departments and sections of the bank, regardless of whether they performed marketing functions or not, were given points for new deposits brought in to the bank. The drive was to last for six months and the winners would be awarded attractive prizes and bonuses.THE ORIENTAL posterTowards the end of the year, one of the accoun t officers of the Banking Division approached oriental Company with an offer for working heavy(p) loan. Because oriental person had been banking with CCB for nearly a year, the account officer offered a P10 million working capital loan to Oriental at 18% rate of interest at the time considered a good rate for favored accounts. Oriental considered to take advantage of the favorable interest rate offered and availed of the loan.Shortly thereafter, the Branch marketing group decided to solicit the same account for the Common Trust Fund of the Trust Division. To attract Oriental to participate in the fund, they offered Oriental a 19% return for a P10 million 60-day placement with the Trust Division. The Finance Manager of Oriental was surprised at the disparity amongst the banks lending and deposit rates but decided to take advantage of the Branch Marketing Groups offer by making the P10 million placement with the Trust Division.It was not until later(prenominal) in the year that Vicente Torres discovered the odd situation with Oriental. He called the theatre director of the Branch Marketing Group and asked How could you allow your traders to offer a higher(prenominal) rate than our lending rate to Oriental? We not only recur money but we also look very foolish to our clients The Branch Marketing Group Manager replied that neither she nor her traders knew that the Banking Division had lent to Oriental at 18%.QUESTIONSWhat were the causes of the odd situation in the case?THE round ONE CAUSE FOR THE ODD SITUATION IN THIS CASE IS THAT peg MARKETING GROUP SOLICITED A corporeal ACCOUNT FOR A sell ACCOUNT. IF THEY HAD WANTED TO OFFER THE PRODUCT COMMON TRUST FUND TO THE CLIENT, IT SHOULD give BEEN COURSED THROUGH THE BANKING division WHO MAINLY TAKES CARE AND HANDLES CORPORATE CLIENTS.THE ERROR OCCURRED WHEN retail BANKING SOLICITED A CORPORATE CLIENT.THIS SHOULD HAVE BEEN REFERRED TO THE ACCOUNT OFFICER HANDLING THIS special(prenominal) CORPORATE CLIENT. What should CCB management do to avoid similar problems in the proximo?THERE SHOULD BE DELINEATION OF DEPARTMENTS AND THEIR SCOPE. sell BANKING DIVISION WHICH IS PRIMARILY THE BRANCH, SHOULD non SOLICIT ACCOUNTS BEING HANDLED BY THE CORPORATE DIVISION (BANKING DIVISION).RETAIL BANKING DIVISION SHOULD CONCENTRATE PRIMARILY ON RETAIL CLIENTS EVEN IF A CORPORATE CLIENT HAS AN ACCOUNT IN THE BRANCH. CORPORATE CLIENTS ARE HANDLED BY ACCOUNT OFFICERS.A CIRCULAR/MEMO SHOULD BE ISSUED STRESSING THE HANDLING OF CORPORATE ANDRETAIL CLIENTS.NEW ORGANIZATION OF CAPITAL CITY BANK