BANKING INDUDSTRY Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Banking Industry

Q.1.How would you define the boundaries of your industry? (Banking)

Solution No.1

Central bank of any country governs the banking industry and all the banks have to follow the rules and regulations passed by it. The central bank is entirely authorized by the government to make the policies and rules for other banks. The main purpose of a central bank is to manage the country’s money supply or monetary policy via vigorous responsibilities such as setting the interest rates, manage the reserve requirement and also participating as a moneylender of last resort to the banking.

There are several regulations passed by the government to the banks while operating in the industry. The aim of these practices is to create the transparency between financial institutions and individuals as well as companies. The banks itself pose various restrictions to make the system efficient and transparent, some of the objectives to these bank restrictions are:

To minimize the level of risk and protect the bank creditors to expose.
To lower the level of risk of disturbance from adverse trading circumstances for the bank failures.
The bank always aims to lower the risk of misuse and keen to minimize the risk occurred as a result of criminal activities, for e.g. money laundering.
One of the main objectives of the banks is to ensure the confidentiality and maintain an efficient database of the customers.

Though there are several restrictions and regulations that need to be followed by the banks at global level. Some of the bank regulations imposed by the government are:

Minimum Requirements: these requirements are forced on the banks by the central bank in order to promote the goals and objectives of the regulator. One of the most significant minimum requirements in the banking is to maintain a minimum capital ratio at a certain level.
It is mandatory for the banks to have a bank license from the authorized regulator to enter into the industry as a bank. Regulator oversees the banks and facilitated in the compliance process whenever needed, and in the case of non-compliance the regulator has the authority to sue the banks by imposing financial penalties.
The regulator needs banks to disclose financial as well as other information to the public, depositors, and to the other creditors to utilize the information to evaluate the risk level while making investment decisions.

Q.2.To what extent do firms have market power in your industry? And what are the key sources of market power?

Solution No.2

Now a day's bank contributes a vital part in the economy of a country. The dependence of people over banks is rapidly increasing during the last couple of years. Banks facilitate the people in an efficient manner and offers multiple services. In this age of modernization, security of the money is the most important concern for the people that is one of the reasons they consider banks the great option to opt. The bank provides services to the customers to accomplish their required tasks and responsibilities associated with it. The role of the banks plays a crucial part in the country’s development as well, some of the factors are:

Promote Savings

Banks encourages depositors via a variety of deposit schemes and also provides various rewards and returns in the form of interest. It attracts the customers to practice banking habits among the people for the long term. Consequently, people become keen to participate in the banking activities in order to save the money.

Capital Formation

One of the significant part of any business is the capital formulation. Banks are always eager to promote the activities that can facilitate them in the process of capital formulation. Usually banks collect deposits from the customers and utilizes in different bank operations, such as loans and advances.

Participate in Agriculture Development

Agriculture is one of the most important sectors of any economy. The goal of any country is to provide food to the people at a certain level. Now a day's bank participates in the development of an agriculture sector via loans and advances with an affordable rate of interest compared to other schemes in the region.

Country’ Development

In this modern era of banking, banks diversifying its operations at global level. Banks facilitate the development in a country both in rural and urban areas. Banks contributes to the socioeconomic development of the country with its operations.

Q.3. What are the key incentives (disincentives) to invest in R&D and innovation for firms operating in the industry

Solution No.3

Pros and Cons of Innovations and R&D

Innovations in any industry results in an increased market share and growth in the long term. This is the age of modernization and people preferences are changing rapidly. All the financial institutions depends on banks to make their system organized. Research and development practices are common in the....................

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