Capital City Bank Case Analysis
CAPITAL CITY BANK
Capital City Bank (CCB) was a medium sized commercial bank owned by a small group of shareholders. Its total employee force numbered nearly 1,000 personnel. Because of the company 's poor performance in recent years, the owners decided to sell their equity to a group of new investors who felt that CCB could be turned around with more aggressive management. The transfer of ownership of the bank was followed by basic changes in bank strategy as well as changes in many key personnel, many of them at the top level.
The basic changes implemented by the new management of CCB included a more active pursuit of foreign financing activities as well as a heightened emphasis on lending activities to large corporate accounts. To better implement these changes in basic strategy, CCB was reorganized.
NEW ORGANIZATION
The reorganization of the bank involved the creation of two new divisions, namely, the Corporate Banking Division and the Trust Division (See Exhibit 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 medium sized companies which had been the traditional clients of the bank. A wide range of credit lines were offered to these accounts such as Direct Advance Line, Import Letters of Credit, Export Bill Purchases Line, Export Packing Credit Line, Domestic Bills Purchase Line, and others. Mr. Vicente Torres, a new recruit from a similar department in another bank in Metro Manila, headed this new division.
The Trust Division was charged with undertaking trust services for individual and business clients. A major service assigned to this division was the Common Trust Fund. This involved the pooling of funds drawn from various participants, investing this fund in safe and high yielding investments, and sharing the returns from the investments among the participants in proportion to the amounts contributed by each.
Capital City Bank (CCB) was a medium sized commercial bank owned by a small group of shareholders. Its total employee force numbered nearly 1,000 personnel. Because of the company 's poor performance in recent years, the owners decided to sell their equity to a group of new investors who felt that CCB could be turned around with more aggressive management. The transfer of ownership of the bank was followed by basic changes in bank strategy as well as changes in many key personnel, many of them at the top level.
The basic changes implemented by the new management of CCB included a more active pursuit of foreign financing activities as well as a heightened emphasis on lending activities to large corporate accounts. To better implement these changes in basic strategy, CCB was reorganized.
NEW ORGANIZATION
The reorganization of the bank involved the creation of two new divisions, namely, the Corporate Banking Division and the Trust Division (See Exhibit 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 medium sized companies which had been the traditional clients of the bank. A wide range of credit lines were offered to these accounts such as Direct Advance Line, Import Letters of Credit, Export Bill Purchases Line, Export Packing Credit Line, Domestic Bills Purchase Line, and others. Mr. Vicente Torres, a new recruit from a similar department in another bank in Metro Manila, headed this new division.
The Trust Division was charged with undertaking trust services for individual and business clients. A major service assigned to this division was the Common Trust Fund. This involved the pooling of funds drawn from various participants, investing this fund in safe and high yielding investments, and sharing the returns from the investments among the participants in proportion to the amounts contributed by each.
Cited: A CORPORATE CLIENT. THIS SHOULD HAVE BEEN REFERRED TO THE ACCOUNT OFFICER HANDLING THIS PARTICULAR CORPORATE CLIENT. What should CCB management do to avoid similar problems in the future? THERE SHOULD BE DELINEATION OF DEPARTMENTS AND THEIR SCOPE. RETAIL BANKING DIVISION WHICH IS PRIMARILY THE BRANCH, SHOULD NOT 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 AND RETAIL CLIENTS. NEW ORGANIZATION OF CAPITAL CITY BANK President Corporate Banking Banking Division Account Management Credit Group Trust Branch Banking Banking Division Branch Marketing Treasurer Treasury Operations Support Services Controller Personnel