How do banks allocate
their costs from the back office to the front
office? On what basis are the costs allocated?
On what basis do you think would be the most equitable
for banks?
The various business organizations and banks are
seeking tremendous challenges due globalization
and its emerging competitive trends. Cost allocation
in banks is also one of these competitive challenges
in the USA market. Now banks are also revising
its polices one after another for an effective
marketing strategy and gaining healthy customer
relations. Therefore, usually banks allocate their
costs from the back office to the front office.
Basically back office means the internal operations
related to cost and management in any organization
or bank, which is not visible to the public. It
is the internal cost allocation policies that
are not accessible to common public. And the front
office is that part of policies that are made
known to the public. Where allocation of cost
means to assign and then reassign cost to one
or more activities from the back office to the
front office and from the front office to the
back office. It seems to be a complicated and
technical process.
Though a simple but important question comes
to our mind when we talk about the cost allocation
of banks from its back office to the front office,
that is what is the basis for these allocations
and what is the most equitable for the banks?
So lets try to find these answers in brief.
In order to enhance its power to manage currency
and channel the money flow and to boost its volume
transaction s from the money changers, they direct
the their money transfers from big economic agents
both internationally as well as nationally. They
therefore, in order to deal with the new market
dimensions they follow a strategy to introduce
new economic packages, including different kinds
of loans etc to meet the demands and patterns
of their customers. So in order to get an equitable
market for the banks, there should be law interest
rates and more flexible policies to secure the
banks interest as well as the interest of its
customers.
Therefore, in order the basis of cost allocation
from back office to front office is to channel
money flow as well as to introduce new investment
strategies for a profitable equity market in banking.
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