CBM · 2019-07-19 · This module deals with business ethics and compliance. Specifically, it considers the moral principles underlying business ethics where motives matter most when

CERTIFIED BRANCH MANAGERPROSPECTUS 2019

CBMwww.rba.international

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BRANCH MANAGEMENTCERTIFICATION PROGRAMME

This programme focuses on the requisite skills and

expertise for effective bank branch management.

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MODULES

LEARNING OUTCOMES• Analyse the key elements of a sound and rigorous Know Your Customer

policy as well as Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) policies that includes Customer Due Diligence (CDD), Enhanced Due Diligence (EDD) and Politically Exposed Persons (PEPs)

• Examine and identify the key roles of bank employees and their associated ethical and professional stance in relation to creating positive customer experience

• Identify the key attributes of products and services in both conventional and Islamic banking and their respective roles in meeting customers’ needs across life-cycle stages

• Understand the predominant role of data, processes and systems in creating omni-channel customers as well as the fundamental principles of effective queue management in bank branches and call centres

• Analyse the role of minimal Key Performance Indicators (KPIs) as well as Funds Transfer Pricing (FTP) in effective performance management

• Effectively, examine the role of the five key dimensions of customer service quality and their link to customer loyalty and customer success

• Measure customer service quality through the application of measures such as Net Promoter Score (NPS), Customer Effort Score (CES) and Customer Life-Time value (CLV)

• Identify the unique approach for effective relationship marketing and sales of banking products and services as well as the key role of (long-term) relationship management underlined by CRM

• Identify the sources of principal banking risks including unique Islamic banking risks

• Apply the CAMELS model and associated ratios to bank financial statements to identify and interpret key information content

1. Retail Banking Overview

2. Business Ethics and Compliance

3. People Management

4. Performance Management

5. Products

6. Operations

7. Customer Service Quality

8. Marketing

9. Effective Sales Management

10. Relationship Management

11. Financial Management

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• Explain how retail banks function to deliver financial intermediation, support asset transformation and create money supply.

• Describe the sources of risk that a retail bank manages in delivering these functions for customers and the wider economy.

• Describe the core services of a retail bank and explain the value of these services to customers.

• Explain liabilities on a retail bank’s balance sheet and their associated risks, including core deposits, interbank funding, certificates of deposit, repurchase agreements and unsecured debt.

• Explain assets on a retail bank’s balance sheet and their associated risks, including cash and cash equivalents, loan products in the trading book and banking book, mortgages, investments in bonds and mortgage-backed securities, goodwill and fixed assets.

• Calculate and interpret retail banking ratios from information in the balance sheet and income statement, including the cost income ratio, the loan to deposit ratio, the net interest margin and spread, the return on equity and assets, and the leverage ratio.

After completing this module you will be able to:

RETAIL BANKING OVERVIEW

This module covers an extensive overview of retail banking, from viewing banks as financial intermediaries to considering the roles that a retail bank serves in the real economy.

We also consider the typical sources of funding (i.e., the liability side of the balance sheet) that include retail deposits and wholesale funding. Later, we consider the asset side of the balance sheet that includes products and the risks embedded in the banking book and trading book. Next, we present an analysis of the income statement showing that net interest margin is the main source of income for a retail bank.

We also show, as is typical for any people business, that staff costs dominate operating costs. Finally, the module concludes with the calculation of common retail banking metrics such as net interest margin (NIM), net interest spread (NIS), return on equity (ROE) and cost income ratio (CIR).

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• Give definitions on morality and ethics, and distinguish between ethical models based on motives, behaviors and consequences.

• Identify an appropriate ethical model for customer-centric retail banking.

• Apply this model to recommend appropriate courses of action in retail banking when faced with choosing between ‘right and wrong’ and between ‘right and right’.

• Explain how business ethics encourage trust, and so improve financial performance.

• Analyse the principal–agent relationships between different external stakeholders in retail banks and the managers, and explain the role of organisational culture in preventing misuse of these relationships.

• Define compliance and explain the role of the compliance function in retail banks, including mitigating risks of laundering money and financing terrorism.

• Describe the impact on customers of ethical breaches in retail banking, and recommend what could be appropriate remedial actions.


BUSINESS ETHICS AND COMPLIANCE

This module deals with business ethics and compliance. Specifically, it considers the moral principles underlying business ethics where motives matter most when the bank adopts a customer-centric strategy. It also establishes a link between business ethics and customer trust, which is a determinant of customer loyalty.

The module also deals with the separation of ownership (shareholders) and control (managers) and the resulting information asymmetry which provides an opportunity for managers to pursue self-interest objectives. This creates agency costs for shareholders. Unlike non-financial firms, there is a complex web of agency relationships in retail banks which requires an ethical bank culture that provides a moral compass for all employees.

Finally, sources of compliance risk that include data security, money laundering and terrorist financing are identified, while the crucial role of the compliance department is highlighted in relation to its obligation to identify sources of compliance risk; take actions to mitigate these risks; and provide timely reporting on compliance lapses to senior management and the bank board.

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• Outline the Harvard model of HR management

• Compare the relevance to retail banks of the Harvard model and the Resource-based View (RBV) approach to people management which proposes that employee skills and expertise are the bank’s predominant source of competitive advantage.

• Analyse how a retail bank’s HR Department can affect the bank’s profitability through actions that promote employee engagement, knowledge management, and relational capital

• Identify the three main drivers of employee engagement and analyse how different HR policies will enhance or detract from these drivers

• Analyse content-based and process-based theories of motivation, and evaluate the design of compensation and reward systems in relation to motivating, retaining and engaging employees.


PEOPLE MANAGEMENT

This module emphasises that People Management is based on the Resource-Based View (RBV) of the firm. It also considers the effects of moral hazard that manifests from the principal-agent problem arising from the separation of control and ownership. We consider how to design compensation and reward systems to achieve fair and just rewards for effort at the individual level to reduce the costs arising from agency relationships.

We show that effective people management can have a positive effect on the bank’s income statement. Employee engagement increases employee productivity and employee productivity increases economic profit and hence shareholder value creation.

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• Explain the fundamental role of performance management in linking a bank’s strategy with its strategic objectives.

• Calculate and evaluate Return on Equity (ROE), economic profit and Risk-Adjusted Return on Capital (RAROC) as measures of long-term value creation in a bank.

• Identify different issues involved in evaluating a team’s performance as compared with an individual’s performance in isolation.

• Determine how to keep Key Performance Indicators (KPIs) to a minimum and related to both results and behaviour, and identify hidden traps in people performance.

• Calculate and interpret profit margin, which is determined by the Funds Transfer Pricing (FTP) rate, customer rate, operating cost and expected credit loss, and evaluate the effect of FTP on RAROC.

• Create balanced scorecards and dashboards that can be used to evaluate branch performance.


PERFORMANCE MANAGEMENT

This module considers performance management and measurement in retail banks with special emphasis on the following topics:

• the relationship between performance management and long-term value creation

• various approaches for measuring performance and examples of key performance indicators (KPI’s) in retail banking

• goal setting and the key element of performance appraisals and the linkages to overall business and strategy plans

• methods for managing divisional performance where the key role of transfer pricing is emphasised and explained.

We demonstrate that transfer pricing has a direct bearing on the performance of divisions and business units where performance measurement must be guided by a limited number of KPIs that are based on results and behaviours. The Balanced Scorecard summarises the four key areas of emphasis when it comes to organisational performance.

Finally, we present a branch dashboard for a retail bank that serves to monitor performance as well as key considerations when managing performance in digital banking.

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• Describe how FinTech startups are unbundling the traditional retail banking value proposition, and suggest strategies by which retail banks might respond.

• Describe the 4Ps process of digital product development in a retail bank, including ‘pretotyping’, and explain its rationale

• Describe the ‘15 Percent Rule’ to determine the optimal rollout timing for innovative banking products, and explain its rationale

• Evaluate the potential advantages and disadvantages of creating Banking Innovation Labs by reference to global best practices.

• Explain how ‘intrapreneurship’ can help to retain creative, entrepreneurial talent within a traditional retail bank.

• Categorise digital product innovation sub-areas within banking into four overarching groups: emerging payments, personalised products and interfaces, better loans, and easier access.

• Analyse the threat to retail banks of falling behind FinTech startups, Tech Giants and Mobile Network operators in terms of innovation, by reference to cutting-edge payments innovations and their technologic backgrounds.


PRODUCTS

In this module we review the reasons why customers demand services and products, linking the product/service to the usage. New forms of payment emanating from the development of the smartphone are also identified. We introduce the family life cycle and note the types of products demanded at each stage, making the point that this is a moving feast in the modern world.

We consider how savings and loan products may be priced relative to a benchmark rate. We then move on to discuss the traditional product development and approval process before considering the significant ‘disruption’ being evidenced through the emergence of FinTech and the resultant trends in product development, highlighting that innovation and pace of delivery are now all-consuming and critical when bringing banking products to market.

Finally, we consider product development in the digital age, noting four areas of innovation, and conclude by identifying eight levels of payments innovation vying for a share of the customer wallet.

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• Describe the challenges faced by retail banks in making use of existing customer data, and suggest strategies to address these challenges.

• Characterise the operations of a retail bank’s front, middle and back offices in terms of operations, processes and functions.

• Describe how retail banking processes can be optimised by applying lessons from:

• Queuing theory, including Little’s Law, the law of non-value-added activity and its relationship to complexity, and the Pareto principle

• Lean Six Sigma approaches to process efficiency, including the importance of talent management

• The theory of constraints and its application in resolving bottlenecks.

• Describe how the customer experience can be optimised by applying lessons from:

• The theory of waiting time, including the peak-end rule, end-of-wait experience, and the appointment syndrome

• Flexible and timely resource planning, applied to the management of branches and call centres.

• Outline how to manage change by applying the 3D model of IT project management, including:

• Planning change by reference to the iron triangle of budget, schedule and scope

• Monitoring progress by simple Earned Value Analysis, utilising the Earned Value Method.

• Describe the operational challenges introduced by digital disruption across a retail bank’s front, middle and back offices.


OPERATIONS

We begin this module by focusing on the activities carried out in the front, middle and back office. These are viewed holistically, as the activities carried out in each function form part of the complete operation from both a risk and customer service perspective. We present a practical example of how the activities of each office work collectively in the deposit gathering process. We then identify the importance of optimising bank processes in terms of process efficiency through introducing the findings in operations management that possess empirical regularity. These are most useful for management when seeking to reduce operational costs (OPEX) and improve the cost income ratio (CIR) as well as improving the customer experience. Next we define operations using three essential properties: predictability, transparency and measurability. We then consider the concept of lean principles in the reduction of complexity in banking process through process simplification. This module then examines and proposes solutions to process bottlenecks through value-stream mapping, and concludes by revisiting the importance of viewing banking processes from an end-to-end perspective, being constrained by the weakest link. We then turn to the application of queuing theory solutions. This part of operations is of sensory importance to customers, and execution is vital both in terms of satisfaction and advocacy (in both branch and call centres).

Finally, we introduce the three-stage model of project management, noting that modern retail banking is highly technologically dependent. Efficient and effective IT project management is an enabler in optimising bank branch, call centre and digital operations.

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• Describe the historical evolution of customer service quality as a key differentiator, using examples such as Amazon.com, Singapore Airlines and Umpqua Bank.

• Explain how customer service quality is driven by the dimensions of reliability, responsiveness, assurance, tangibles and empathy (Parasuraman et al.’s R-RATE model).

• Analyse the links between customer service quality, customer satisfaction (defined in terms of customers’ perceptions and expectations) and customer loyalty.

• Describe how to apply the Gaps model (or Distances model) to assess defects in customer service quality and to resolve customer service failures.

• Calculate Net Promoter Scores (NPS) and Service Quality Metrics (SQM), and evaluate their usefulness and deficiencies in measuring customer satisfaction.


CUSTOMER SERVICE QUALITY

This module begins with a brief historical account of customer service quality in retail industries such as hospitality, aviation and retail banking. We then consider the antecedents of customer service quality, such as core dimension (reliability) and four others – tangibles, assurance, empathy and responsiveness. We cite several academic and professional references that have supported the choice of these five drivers of customer service quality. We then consider the important link between customer service quality and customer satisfaction.

Finally, from the perspective of a successful cross-selling strategy, we consider the link between customer satisfaction and customer loyalty. We present several research studies that support the proposition that customer satisfaction leads to customer loyalty. We consider how retail banking executives should resolve customer service failures via a Gaps model and discuss the so-called ‘service recovery paradox’. We conclude that the most important recommendation for retail banking executives is to strive for error-free and better-than-expected service the first time.

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• Define the marketing function, and describe how it has been impacted by recent changes in the market environment, demographics, social behaviour and technology.

• Compare different models of the marketing mix in terms of their relevance to retail banking, including:

• McCarthy’s 4P model

• Lauterborn’s 4C model

• A combined 4C+P model

• Additional factors arising from digital innovation.

• Compare different models of buyer decision making in terms of their relevance to retail banking, including

• Kotler’s typology of buyers’ behaviours

• The stimulus-response model

• Johnston’s 5 stages of buying

• Analyse the challenges faced by retail banks in making use of existing customer data, and recommend strategies to address these challenges.

• Describe appropriate qualitative and quantitative customer research techniques, taking advantage where appropriate of new digital channels.

• Outline how to apply the marketing process in the context of retail banking, including the distinct stages of analysis, strategy, planning, execution and control, and evaluate the impact of digital innovation on each of these stages.

• Outline the social and commercial benefits of improving financial inclusion, and suggest ways in which financial technology can help to deliver these benefits.


MARKETING

In this module we explore a range of topics that will provide you with a good understanding of marketing within the context of retail banking.

First, we take a look at the changing nature of marketing, particularly how things have evolved over the last few years. It is apparent that the financial services sector is not immune to disruption as the rising Fintech movement gains pace.

We then look at how we define a business vision and mission within an organisation. Within the context of retail banking, the need to communicate a clear vision and purpose to one’s customers is becoming increasingly important, particularly as customer relationships in many geographies have suffered due to a lack of trust between the customer and their bank.We go on to explore the marketing mix and see how it has changed over time. The addition of People to the traditional 4P model is quite important in retail banking – which is truly a people business. It is clear that Price, Product, Place and Promotion can be replicated by a competitor in retail banking. But people make the difference, since their unique skills of professionalism are not easy to replicate.

We determine the key methods used to understand customers and digital marketing opportunities by evaluating some of the latest tools and techniques in this area. Finally, we look at data management before considering financial education and inclusion.

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• Characterise an effective sale in the context of retail banking, and analyse how effective and less effective sales will impact on the retail bank’s relationship marketing.

• Describe the Seven Step Sales Process and explain how it can be applied to increase the value of sales, both to customers and to the retail bank.

• Describe how to appraise the effectiveness of salespeople, using a Balanced Sales Performance Scorecard and related key performance indicators (KPIs).

• Describe how to apply the GROW (Goal, Reality, Options and Will) model in coaching salespeople.

• Outline the responsibilities associated with the role of Sales Manager in a retail bank, and describe how these responsibilities can be addressed, including the use of individual performance plans for salespeople who are underperforming.

• Identify risks to clients and staff of retail banks, and to the banks themselves, that can arise from prioritisation of unrealistic sales targets, drawing on analysis of the Wells Fargo Fake Accounts Scandal.

• Suggest specific sales strategies for digitally innovative services, drawing on the theory of information cascades and recent initiatives to overcome resistance to onboarding.


EFFECTIVE SALES MANAGEMENT

This module examines the importance of maintaining a disciplined sales process in order to facilitate effective sales management through the introduction of the Seven Steps Sales Process, the component parts of which we describe in detail.

Next, we present the Sales Performance Scorecard, adapting Kaplan and Norton’s Balanced Scorecard for retail bankers and building the links to individual performance and development plans. Successful implementation should result in improved processes, better educated and more competent staff, increased sales to customers (based on their needs) and greater customer satisfaction.

We go on to consider the skills crucial to the role of the Retail Banking Sales Manager in delivering effective sales management, with a particular focus on the practical application.

Finally, we evaluate the significant impact of digital, such as ‘Selling the UX’ and the ‘Network Effect’.

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• Define relationship management as it applies in the context of retail banking.

• Explain the theory of relationship exchange as the basis for relationship management in retail banking, distinguishing between episodic and relational value.

• Explain Habryn’s two-dimensional model of customer intimacy, highlighting the importance of bank adaptability and the quality of the customer relationship as the basis of trust in customer–bank relationships.

• Describe the components of customer relationship management (CRM) as a process, and analyse the expectations of relationship customers.

• Identify the roles of bank staff responsible for creating high-quality customer relationships in both the personal and Small and Medium-sized Enterprise (SME) sectors, and analyse the personal attributes required of these staff.

• Analyse the changing roles of channels in delivering effective customer relationship management (CRM) and their implications for organisational structures, including:

• Forward-looking trends affecting such systems

• Predictional-behavioural CRM systems

• Differentiated value propositions from different major CRM vendors.

• Describe the transition from customer relationship management (CRM) to customer-managed relationships (CMR), analyse the challenges this presents for retail banks, and suggest how these challenges might be addressed.


RELATIONSHIP MANAGEMENT

This module integrates several issues raised in the previous nine modules of Retail Banking I. Relationship Management is based on the creation of an optimal long-term bank–customer relationship that serves the long-term needs of the customer and, as a result, the long-term profitability of the bank.

In order to develop a model that will identify the drivers of a long-term customer–bank relationship, we define Customer Relationship Management (CRM) and its link to customer intimacy, positing the question about what customers may want from a relationship with their retail bank. We go on to examine Customer Relationship Management (CRM) through the lens of the bank staff whose role it is to deliver operational CRM. We then consider the role of the banking consultant and specialist advisor before identifying the equivalent roles for bank staff operating in the SME environment.

However, innovative channels raise an array of open questions in relation to CRM and relationship management in general. This module also considers the emerging Customer Managed Relationship (CMR), where the customer owns their personal information and the bank’s offerings are designed with the customer’s needs having priority.

Trends in Customer Relationship Management (CRM) also consider the wide array of forward-looking incremental improvements in CRM. Current trends are making CRM systems more intelligent: providing a single client view, visional excellence, predictional-behavioural insights, third party and social media integration, voice enabled functions and more. We take a look at ten defining trends of innovation within CRM.

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• Explain the meaning and significance of the main entries in generic income statements, balance sheets, loan books and maturity analyses for retail banks

• Conduct risk analyses of generic balance sheets for retail banks by calculating the banks’ cumulative maturity positions.

• Explain the meaning and significance of the six CAMELS dimensions (Capital adequacy, Asset quality, Management soundness, Earnings and profitability, Liquidity and Sensitivity to market risk)

• Compute, from information supplied, and interpret bank accounting ratios that demonstrate the CAMELS model, including Tier 1 capital adequacy ratio, leverage ratio, Risk-weighted Asset (RWA), Asset quality via the Loan Book, Loan loss provisions, Return on Assets (ROA), Return on Equity (ROE), Cost to Income Ratio (CIR), Liquidity ratios, and Cost of funds.

• Identify extraneous drivers of ROE.


FINANCIAL MANAGEMENT

The scope of this module covers five areas: key principles of bank financial statements; structure of bank financial statements; analysis of bank financial statements using the CAMELS framework (Capital, Asset Quality, Management, Earnings and Profitability, Liquidity and Market Sensitivities); drivers of bank profitability; and the importance and relevance of bank capital.

While some financial analysis was conducted at a higher level in Retail Banking Overview, a more detailed financial statement analysis is conducted in this module with the familiar CAMELS approach as a guideline. This leads to a discussion of maturity (gap) analysis, capital adequacy, liquidity ratios, profitability ratios and soundness of balance sheets with reference to nonperforming loans and impairment charges.

The module concludes with a case study requiring a complete financial statement analysis.

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REGISTRATION FEES

1–20 exams US $899

21–100 exams US $799

101–250 exams US $699

251–500 exams US $649

500+ exams US $600

For more information on the blended learning fees (which includes a classroom learning component), please email us [email protected]

Fee per Candidate per level

The fee per Candidate includes access to the RBA Learning Centre,

a hard copy of the coursebook and one computer-based examination. Each

re-sit fee is $300.

Stephane DuboisFormer Head of HRSociété Générale

“Get your team’s level of knowledge, skills and ethics certified.”

123 Buckingham Palace RoadLondon SW1W 9SH

www.rba.international

Documents

CBM · 2019-07-19 · This module deals with business ethics and compliance. Specifically, it considers the moral principles underlying business ethics where motives matter most when