Financial Sector Essay

• Areas of product-line weakness It remains weak in investment banking when compared to its competitors. The bank is trying to make it up by strategies like the acquisition of Wachovia. It needs to use its strength in commercial lending to build up its client base in this area. • Opportunities for Wells Fargo A big opportunity for Wells Fargo is presented by Wealth management of ultra-high-net-worth individuals, institutions, families, and endowments represents. With subsidiary Abbot Downing, it has got a good start in this area and has captured a decent market share till now.

(5 points) The activity by bank is called money creation because the central bank and the Fed both rely on banks to implement and enhance the effects. Even though the banks are not directly involved in money supply or money market policy conduction, it does work as a important money creation. 4. If a bank becomes worried about the future, it may decide to increase the level of excess reserves it holds in hopes of avoiding a trip to the Fed's discount

Banks boosted the economy by making loans to people such as manufacturers and increased the monetary supply. Banknotes were used as loans, and became the currency for transactions. Federal and state governments didn’t use paper money, which lead to a dependency on banknotes. However, that also meant that there were counterfeits and people taking advantages over others. Banks would therefore decide on who to have loans, as well as discount rates, leading to a large increase of power that banks would have.

Moreover, the financial institutions could earn higher return if dealing with markets that have high interest rates and a steady economy. A secure market provides room for more investment.

The adoption of new technologies and trends is being facilitated in the industry for the competition and the customer’s overall experience. Many suppliers that are having similar strategies face a strong competition. The barriers for exiting the markets are high. Products and services of are undifferentiated leading the customer to focus on the prices offered. Low market growth, so it can be increased only by taking another firm’s market share.

Total Asset Turnover Measures the efficiency of a company's use of its assets in generating sales revenue. 2.2.1 On average BCX the asset turnover ratio for the 5 years, proves that BCX generally utilises its assets efficiently for revenue generation. The proof on this, is in the consistency, which proves that there is a working business formula for the BCX operations. 2.2.2 It is fitting to point out that the average BCX asset turnover is very low, but 2011 was one of the worst. What is meant, when taking the 2011 as the casing point, in the BCX business for every R1 spent, BCX makes back R1.70 cents.

However, when looked at the angle of the retailers, it is apparent that the company has strong buyer power. Supplier Power There is a huge level of dependence between Proctor and Gamble and its suppliers. In order to improve its revenues, the company needs high quality raw materials for its production activities. The fact that the company has a wide network of suppliers presents it with an opportunity to improve its operations. Threat of new entrants Over the years, P&G has dominated the consumer goods industry in the world.

This would mean transforming from their present position where they simply operate in the money market into a deeper involvement in the country’s overall financial infrastructure. The discount houses would be transformed into an unquestionable pathway through which monetary policy actions can be carried out and also contribute to the overall growth of the financial sector.  The viability of discount houses on the long run would depend on their capability to obtain plausible money market based products that would exceed what banks can provide. This kind of venture would be profitable with the involvement of treasury securities-based products and the liquidity profile of discount houses. Having High Net worth Individuals (HNI’s) and corporate organizations invest in treasury securities backed instruments could dictate impending survival of discount houses.

Direct and indirect effects could happen as the money supply increases; the direct effect being that people will demand more goods and services and the indirect effect being that people will save more money, depositing this in banks (Monetary Policy, n.d.). Therefore, excess reserves will also increase and the banks will be able to lend out more. Banks will motivate borrowing by lowering interest rates and this will increase the demand for investment and consumption and therefore aggregate demand will increase. Businesses respond to increased sales by producing more, thus increasing production. An increase in production would require more labor, thus lowering unemployment, and raises the demand for capital goods.

• The clash of rights is between the mortgage lender and the mortgage borrower. The main aspects of subprime mortgage crisis involved low credit quality loans given at decreased interest rates and were scrutinized. They were sold to the investors who were interested in investing in this sector. Some of the rights involved in the case study are mentioned below: • The banks have the right to accessibility of their retail operation so that they can finance their investment operation. • The small businesses have right to get loans with an optimum or bearable interest rate.