Financial Services

Assosiate banking Diploma — Option Subject Financial Services
Objective To enable candidates to identify and analyse the factors which are shaping the structure of the financial services market in the Tanzania. In particular, candidates should be able to:
-		Identify the factors which have led to the breakdown of barriers between different types of financial institutions.
-		Evaluate the impact of this change on the organisational structure, technology, culture, strategy, and products of different types of financial institutions.
-		Analyse the impact of this change, and the consequent increased competition between financial institutions, on consumer perceptions of their need for financial services.
-		Identify the nature and type of regulation required in this context and the potential impact of European and international systems of regulation.
SYLLABUS
THE MARKET FOR FINANCIAL SERVICES This addresses the main bases of competition within the industry. It considers product profitability, the use of technology, the evolution of distribution channels, the importance of customer service, the role of economies of scale and scope. Also from the point of view of customers and governments why financial services are of growing importance, e.g. demographics, government expenditure, privatisation, home ownership etc.
1. The Changing Market for Personal Financial Services
	1.1	The Political, economic and social climate for financial services.
	1.2	Outline of market characteristics, competition, customers and market potential.
FROM BANKING AND INSURANCE TO FINANCIAL SERVICES This section explores how and why distinctive institutions - banks, building societies and insurance companies - are now coming to define themselves by the common phrase ‘financial services’. This necessitates analysing their distinctive packages of products, regulation and organisational structures before the move towards financial services and then the process of competition and regulation whereby these boundaries began to break down.
2. Money Transmission and Banking
3. Lending
4. Insurance and Pensions
	4.1	The general principles of insurance and pensions: types of business, i.e. life, general annuities, etc.; insurance broking: reasons for, and implications of taking a stake in an insurance company insofar as they affect the size of the market. Actuarial assumptions and statistics.
	4.2	Personal and occupational pensions; social security and occupational pensions; social security requirements and constraints; comparisons between occupational and personal pensions.
	4.3	Bancassurance, fund management; unit trusts; investment trusts; taxation implications.
5. Property
	5.1	Housing development and property rental.
	5.2	The general principles of estate agency; links with existing agencies; conveyancing; and regulatory bodies; survey and valuation services.
6. Financial Advisory Services
	6.1	The general principles of stockbroking; stocks and shares; investment trusts; unit trusts; personal equity plans; savings advice; taxation advice; financial planning advice.
	6.2	Trustee and executor services.
ORGANISATIONAL STRUCTURE AND OWNERSHIP This addresses the question of the form which financial institutions take. In terms of ownership, it includes the gradual demutualisation of the former building societies and some mutual insurance companies and the impact of the stock market. It looks at the tendency to create large integrated financial institutions which spread over a number of markets with different types of risk and profitability; and whether these large conglomerates can out compete specialised operators, generating distinctive and successful management structures and cultures to serve different sorts of customers in these various markets.
7. General Requirements and Considerations
	7.1	Prudential management and supervision of powers to provide services in relation to their availability; the roles the Bank of Tanzania, the Capital Market and Securities Act and the Department of Trade and Industry.
	7.2	Capital adequacy requirements under the Banking Act 1991 in relation to the provision of services.
	7.3	Business strategy; corporate and marketing planning. Principle information requirements for planning and decision making; general forecasting; financial modelling and target-setting.
	7.4	Budgetary control; cash flow management; profitability and costing in the provision of services.
	7.5	Accommodation, manpower and technological considerations (in the planning process).

8. Delivery
	8.1	Operating structures; group and subsidiary operations; joint ventures; use of agencies; management control.
	8.2	The general principles and implications of adoption of plc status by building societies and the reasons for transfer. Mutual insurance companies.
	8.3	Distribution methods in branches, agents, postal business, telephone business, electronic methods.
REGULATION AND FINANCIAL INSTITUTIONS Why do these institutions require regulation; what are the different forms of regulation - capital adequacy versus conduct of business rules; self-regulation versus statutory regulation. Does regulation achieve its objectives? Public choice versus public good theories of regulation and their relevance for financial services.
9. Regulations
	9.1	The statutory provisions affecting the provision of financial services including: - BAFIA Act 1991 - CMSA Act 1994 - BOT Act 1995
	9.2	The political and media significance of financial services - The growth of consumerism - The development of new products which test the boundaries of regulation - The changing view of regulation and its economic impact.
	9.3	Quasi-statutory regulation; codes of conduct; ombudsman schemes in respect of any financial service; supervision of the banking system by the Bank of Tanzania.
	9.4	Trade associations.
10. Specific Financial Services Controls
	10.1	Roles of the Treasury and the Bank of Tanzania Act 1995 in varying any service or its provisions.
	10.2	The restrictions applying to banks below the qualifying asset holding; prohibition on linking of services.
	10.3	The adoption of powers; liability in respect of subsidiary operations.
THE EXAMINATION Time Allowed: Three (3) hours. Examination Format: The paper consists of eight questions, of which any five are to be answered. Each question carries 20 marks. RECOMMENDED READING CIB/Bankers Books, Financial Services Study Text.