Relationship Management and Financial Service Provider

Factors to develop strong FSP relationships

-open and frequent two -way communications -regular and timely feedback -documentation of expectations of both parties in agreements and legal contracts -fairly priced, efficient, and effective financial services/products -complete, candid, and timely disclosure of information by both parties -compliance with a current legal contract -use of service level agreements
Factors to Price a Bank Loan
-cost of funds -credit rating -total loans committed and outstanding - Service fees -Deposit balances maintained -Range of other services used (FX/Dervi trading) -loan maturity -revenue size and importance of the overall relationship to the lending institution -competition
Factors to Price Depository/CM Services
-transaction volumes -customization -exception handling requirements -cost of providing the service -operational overhead -deposit balances maintained -value of other services uses -credit relationship -revenue size and importance of the overall relationship to the bank
Account Resolutions
basic account or services authorization empowering a representative of the firm to enter into agreements for financial services.
Service Agreements
are contracts/legal documents that describe the requirements and expectations of both the purchaser and provider
Contain -Contract length and adjustments -Information on funds availability -Time Frames during which errors must be reported -The right of offset against accounts resulting from fees owed -Liability clauses defining responsibilities for specified risks -Other terms and conditions of relationship
Signature Card
A card that shows each authorized person's signature for a bank account.
service level agreement (SLA)
formal contract between customers and their service providers that defines the specific responsibilities of the service provider and the level of service expected by the customer
Customer Identification Programs (CIPs)
All broker-dealers must include this in their overall AMP complicance procedures
Verifying IDs
Natural person - name, DOB, street address
Additional: US citizens - tax ID, non-US - anoher type of tax ID (passport)
Not Natural person (corp) - name, address, tax ID #
Scorecard
management tool used to qualitatively and quantitatively measure the FSP's performance.
Request for Information (RFI)
firm provides a formal description of its needs and asks selected providers to provide general information as to how they could meet the firms needs
Request for Quotation (RFQ)
firm invites providers to bid on specific products or services. Similar to an RFP, but best suited to standardized products (off the shelf) which makes each suppliers quote easily comparable
Request for Proposal (RFP)
A type of procurement document used to request proposals from prospective sellers of products or services.
Basic of an RFP
-Define Objective -Determine Business Requirements -Develop the Project Plan
RFP Design
describe the firms basic operating structure, lists the RFP's objectives, describes the expected activity information associated with the product/services required, states the desired outcome delivered by the product/service, and specifies administrative requirements
RFP Administration
-Development of a Long list -Issuance of the RFP -Evaluation of Responses and Creation of a Short List -Meetings and Demonstrations -Selection and Contract Negotiation -Implementation and Post-Project Review
Bank Compensation
refer to the way in which a bank is compensated for the entire set of products and services (complete "book of business") provided to a particular firm
Value Dating System
a bank sets a forward value date when determining the date on which the value of funds is credited to an account and establishes a back value date when determining the date on which the value of funds is debited from an account
Account Analysis
serves as the bank's bill for services and shows the process used to determine the fees charged and the earnings accrued during the period in question.
-Services provided -Balances maintained -Transaction/item volumes processed -Charges assessed -Earnings credit allowances
AFP Service Codes
Six Character, alphanumeric codes that help identify, describe, and report banking services and charges.
(Helps compare prices and services between banks, which is difficult because banks use different explanations for the same services)
Average Ledger Balance (ALB)
sum of the daily ending ledger balances divided by the number of days in the analysis period.
Average deposit float
The sum of the daily dollar amount of items in the process of collection divided by the number of calendar or business days in the analysis period.
Average Collected Balance
sum of the daily ending collected balances divided by the number of days in the analysis period; or Avg. Ledger Bal. – Avg. Deposit Float.
Reserve Requirement
in the context of an earnings credit computation, the reserve requirement represents the amount that the bank must maintain with Federal Reserve
FDIC Fees
banks sometimes charge for services provided by a bank
Service Charges
explicit fees or prices charged for services provided by a bank
Available/investable balance
represents the balances in the customer’s account that the bank was able to invest in income-producing assets during the account analysis period. Available balance is also defined as the amount of funds available for withdrawal from an account, based on the bank’s availability schedule and/or amounts for which availability must be granted under Federal Reserve Regulation CC.
Earning Credit Allowance
total dollar value of credit that can be used to offset the service charges incurred during the analysis period
Earnings Credit Calculation
EC = CB x (1-RR) x ECR x (D/365)
Where: EC = Earning Credit CB = Average Collected balances RR = Reserve Requirement ECR = Earnings credit rate D = Number of days in the month
Average Collected balances required to pay service charges Calculation
CB = SC / ECR x (D/365) x (1-RR)
Where: CB = Average Collected balances required to pay service charges RR = Reserve Requirement ECR = Earnings credit rate D = Number of days in the month
Statement on Standards for Attestation Engagements (SSAE) 16 Report
A report from a third-party vendor written by an independent auditor that describes the vendor's internal control procedures and their effectiveness after testing.
Basel Accords
set of minimal capital requirements for banks
Uniform Bank Performance Report (UBPR)
- Published by Federal Financial Institution Examination Council

- Analytical tool created for bank supervisory, examination & management purposes

- Shows the impact of mgmt decisions and economic conditions on a bank's performance and balance-sheet composition
Counterparty Risk
risk that the other party to the contract will not meet its contractual obligation.
Sovereign Risk
risk that the government may default on its debt
Political Risk
risk of change in political environment or government policy that would adversely affect a company's ability to operate effectively and profitably.
Nationalization
government takeover of all firms in a specific industry
Expropriation
government take over of a single firm, with or without compensation
The Office of Foreign Assets Control (OFAC)
The Office of Foreign Assets Control (OFAC), a division of the U.S. Treasury, maintains and monitors lists of known terrorists. Firms are required to collect identification information from customers to be checked against the OFAC lists when accounts are opened.