THE ROLE OF MODERN FINANCIAL SYSTEM DEVELOPMENT IN ECONOMY Diana Eerma University of Tartu Introduction Today, the European

Union seems an equal if not more challenger to American economic leadership. The historical accounting leads to the question: What did the actual and the would-be economic leaders of the past centuries have in common that made them leaders or contenders for leadership. All of them had what some historians have termed financial revolution leading to the development of strong financial systems before they became economic leaders or contenders for economic leadership. It means in other words that economic leadership grew out of a strong financial base. Also so did, of course, the political power in the world. In modern history, political power and economic modernization have gone hand in hand, and in the cases of the economic leaders and also perhaps in the cases of countries that also modernized, both were rooted in financial system modernization. Besides of introducing groundwork about financial system development the article tries to clarify how the financial system development can influence Central European and Eastern European Countries (CEEEC) preparation process in joining the European Union (EU). Starting with introduction of the key components of modern financial systems and influence of the financial system development to the economic growth ending up to Estonian financial system in the lead-up to EU accession. Considering the experience of recent financial crisis, it will be useful to look at the current financial system development and emphasize the significance of the financial safety nets. CEEEC, including Estonia, are participating in the worldwide efforts to strengthen the global economy by increasing the transparency of their economic policymaking and financial institutions, adopting internationally accepted

standards in order to strengthen their financial system. It leads to the attempt to overview countrys financial system development in the global framework.

Key Components of Modern Financial Systems The considered five essential components for the strong financial base are following: First, strong public finance raising revenues, controlling expenditures and servicing public debts. Second, stable money. Third, the banking system that accepts deposits of money and creates, through lending to creditworthy borrowers, the reliable bank money convertible into the stable monetary base. Fourth, the central bank that serves as the governments bank, as a regulator and supervisor of a countrys financial system, and as an executor of monetary and financial policies promoting economic stability and growth. In history, central banks emerged from so-called public banks that were created as adjuncts of public finance (Kaufmann et al. 2000). Fifth, well-functioning securities market. The final key component of the modern financial system is the securities market that finances governments and business enterprises by facilitating the issue of new securities (bonds, equity shares, and other financial instruments) and gives such securities liquidity by providing trading markets for securities after they are issued. Given ordering of the financial system components is less important than the presence of the all five in some form. Different leading economies have chosen to vary the emphasis given to each component. But all leading economies have had a version of each component at most times in their modern histories. Even more important is that components mesh together in mutually supportive and self-reinforcing ways. This is what is meant by a financial system.

Influence of the Financial System Development to the Countrys Economic Growth It has been observed that a countrys state of development is strongly positively correlated with the state of development of its financial sector. For example, on the basis of data from 35 countries between 1860 and 1963, Goldsmith (1969, p. 48) concludes that a rough parallelism can be observed between economic and financial development if periods of several decades are considered. In addition it has been pointed, that there are even indications in the few countries for which data are available that periods of more rapid economic growth have been accompanied, though not without exception, by an aboveaverage rate of financial development. Later studies suggest that this association is more than simply correlation, and financial development does, in fact, advance the economic growth. In a study of 80 countries over the period 1960 1989, King and Levine (1993) find that beginning-of-decade measures of a countrys financial development are strongly related to the countrys economic growth, capital accumulation, and productivity growth over the subsequent decade. Using deregulation of banking in different states of the United States between 1972 and 1991 as a proxy for a quantum jump in financial development, Jayaratne and Strahan (1996) find that annual growth rates in a state increased by 0.51 to 1.19 percentage points a year after deregulation. Lessons Learned As the recent history of the financial crises shows, there is known a lot less about what makes for good economic policy than recognized. Economies that have done well in the postwar period have all succeeded via their own particular brand of heterodox policies. Macroeconomic stability and high investment rates have been common, but beyond that many details differ. In a world where capital is internationally mobile and short term liabilities have exploded thanks to financial liberalization, confidence becomes the sine qua non of macroeconomic stability, and hence a prerequisite for economic development. (Rodrik, November 1999).

Without confidence, money flees, interest rates shoot up, and the currency plummets. And the culprits are not only just wicked foreign speculators. Domestic investors can crash the economy equally well, by converting their short-term assets into foreign currency and taking them out of the country. But where does confidence come from? For building the confidence it makes sense to justify reforms on the basis of their expected impact on market confidence. There is need to do things that the markets want to see to build 40 the confidence. It does not mean that the markets ideas about what constitutes sound economic policy are entirely arbitrary. Recently one of the most relevant issues has been the new financial architecture, especially international architecture, after the financial crisis of the 1990s. A key lesson from the financial crisis has been considered that information plays a vital role in maintaining the stability of the world economy. The Asian financial crisis has demonstrated that a functioning world economy needs an institutional infrastructure. Markets work well when they are underpinned by institutions that provide three functions: regulating market behavior, stabilizing aggregate demand, and redistributing the risk and rewards of market outcomes. World markets are no different. In particular, a truly global financial market would require an equally global set of institutions that provide regulatory, lender-of-last resort, and safety-net functions (Rodrik, June 1999). One has to consider that with a currency board in place the central banks role as a lender-of- last resort is severely circumscribed. Restructuring the banking system has been a massive task in all transition economies and is still under way in a number of CEEEC. Several countries suffered severe banking crisis during the 1990s as a result of both corporate distress and the absence of regulatory and legal environment. Poor corporate governance and payments discipline exacerbated the problems. (Nord, 2000). The Russian crisis of 1998 exposed the continued vulnerability to external

shocks of some countries, especially those with close trade ties to Russia and those, whose banks had high exposure to Russian debt instruments. Looking ahead to success in attracting high levels of foreign direct investment can also carry risks for these countries banking systems if accompanied by a sharp increase in domestic credit expansion. The objective of the new architecture is to close the cap between the scope of institutions heretofore mostly national and the scope of markets increasingly international. In the framework of the new financial architecture the internationato improvements in many areas, such as data dissemination, fiscal transparency, monetary and financial policy transparency, banking supervision, securities and insurance regulation, payment systems, deposit insurance, accounting, auditing and insolvency regimes. Financial Safety Nets Designing financial safety nets has the crucial meaning in financial system development from national and global perspectives. All real-world economies establish a framework of centralized bank monitoring and deterrent response. Centralizing these functions aims at increasing depositor confidence while solving three coordination problems: avoiding redundant monitoring expense; standardizing contracting protocols; and timing and calibrating disciplinary action. In general the financial safety nets serve not just to protect borrowers, depositors and taxpayers from being harmed by financial-institution mistakes, but also to encourage individual institutions to accept the risks associated with funding economically productive activities. Safety nets for banks may be instructively conceived as a nexus of contracts that help them cope with runs and other economic shocks (Kane, 1995). Each net is a multidimensional policy scheme that is alleged to balance the costs and benefits generated by: protecting bank customers from being blindsided by bank insolvency; limiting aggressive risk-taking by banks;

 preventing and controlling damage from bank runs; detecting and resolving insolvent banks; allocating across society whatever losses occur when an insolvent bank is closed. For strategies of crisis prevention to be maximally successful, the web of contracts must hold top regulators accountable for measuring and managing the social costs and risk-taking incentives generated by their decisions about the nets various design features. Ideally, the design of the regulatory portion of net should tie securely into the characteristics of the particular financial system and economy in which it is embedded. For financial safety-net managing it is not enough to aim at blocking corrupt and unwise flows of institutional credit and avoiding depositor runs. They have to seek also to minimize the social damage caused by temporary bank illiquidity and by lasting bank insolvency. In practice, a safety-net manager must have the expertise to six categories of regulatory instruments efficiently: First, record-keeping and disclosure requirements; Second, activity limitations; Third, capital, loss-reserving and other position limits; Fourth, takeover rights and other enforcement powers; Fifth, lines of credit; Sixth, performance guarantees. (Kane, 2000). The first four categories define the net managers authority to regulate the bank and the two last categories provide credible ways for regulators to bond themselves to exercise their supervisory authority in the interest of depositors and other creditors. To complete the web of contract enforcement, taxpayers must be able to observe and discipline the economic value of their stake in the rulemaking and enforcement activities that regulators undertake. Ideally, taxpayers must impose reporting requirements and establish deterrent rights sufficient to persuade net managers to deploy their examination, supervisory, and lending powers at minimum economic cost to society as whole. These costs must be defined comprehensively and include both the costs of operating the net and the costs of managing its occasional breakdown. Taxpayer-regulator contracting is important because the practical politics of financial regulation tend to make regulatory authorities responsive only to immediate bank and depositor concerns. The ideal or optimal safety net is one that efficiently mitigates the particular monitoring and policing difficulties that present themselves to banks, depositors and taxpayers in the informational, ethical, legal and economic environment of a particular country at a particular time. For the web to establish incentives for bank and regulators that are compatible with the interests of all other parties, net design must be environment-specific. As a rule of thumb, information system and supervisory technology for monitoring bank capital and risk exposures should be made transparent at least to outside experts and regulatory discipline should mimic market procedures. In most countries the major element of the safety net is deposit insurance. Even in times of prosperity (in fact, precisely in those times) it is wise to generate some forms of safety net, to minimize the strength of an anti-market revolt in a time of crisis (Rajan, 2000). This is beneficial even if it has some cost in terms of efficiency. 42 Estonian Financial System in the lead-up to EU accession CEEE countries arrive at different times to EU and EMU route, that is clear, but how the different exchange rate and monetary policies should handled before membership in the

monetary union. New entrants are envisaged to undergo three stages: EU accession, participation in ERM II (with a horizontal currency band) and joining the euro zone. In a case as Estonian, if policies and circumstances remain right, a direct transition from a currency board arrangements to EMU without any transitional period of greater exchange rate flexibility could be the first-best policy for prospective EU membership. However, if country choose to maintain its currency board up to the point of adopting the euro, it will face a number of challenges. Country needs to maintain the strict discipline required by currency board arrangement, which contains conservative fiscal stance, healthy financial system, cautious external debt management, and flexible labor markets. Also country needs to be prepared to deal with possible large capital inflows and asymmetric external shocks. Indeed, for the currency board arrangements countries (for example as Estonia, Lithuania and Bulgaria) the requirements for good economic performance are already very similar to those of EMU participants. Of course, temporary disequilibria are possible, and it is important that exchange rate pegs are not maintained by excessive recourse to foreign borrowing or at the expense of growth. (Gulde, 2000). To temporary switch to a more flexible regime during ERM II would also create a host of legal, institutional, and practical problems for countries with currency board now in place. The laws and regulations forming the legal basis for the currency board arrangement would have to be amended. One should also not underestimate the loss of policy transparency and discipline from moving away from currency board and the impact of greater uncertainty on domestic and foreign investors, and on households willingness to hold savings in the domestic financial system. The structure and development of the financial sector affect the decision to participate in ERM II and subsequently monetary union. Already, the current euro area members themselves have significant differences in their financial sectors. However in many accession countries the level of financial intermediation is still quite low, which make the economies respond quite differently to the common monetary policy. It is also critical from the perspective of the other euro area and EU members that banking and financial supervision is adequately handled in the new member countries. The new member countries must ensure that all banks in their countries are ready to use the euro systems monetary instruments. From point of view financial stability effective supervision of banks domestic and crossborder exposures, also as well the activities of other growing sectors, such as insurance and pension funds are highly relevant. Estonia has considered to have already made substantial progress in building sound banking practices. Estonia and Hungary were among the first countries to participate in the IMFs two-step Financial Sector Assessment Program. The recent banking supervision in context of the Financial Sector Assessment estimated compliance with the Basel Core Principles for effective banking supervision. The assessment showed that Estonia has made strong strides in strengthening its supervisory framework. (Report, 2000). There is mentioned that progress has been particularly strong in the area of banking supervision. Supervision of insurance firms is also improving, but still some concerns remain. Main concerns stay in the weak 43 securities sector. While payment system is viewed as relatively strong, payment system oversight could be improved. Also findings regarding transparency practices were quite favorable. No significant weaknesses were identified with respect to either monetary policy or the deposit guarantee scheme. At the same time the transparency practices in securities

supervision were assessed as somewhat weaker than others. Conclusion Sound financial system is crucial for countrys economic growth and competitiveness and also for the strengthening global economy at the same time. For sound financial system the most important is that all the main components for the strong financial base are in place in mutually supportive and self-reinforcing ways. Lessons from the history of financial crisis of the 1990s showed that information plays a vital role in financial system development. The new financial architecture is considered to contain three key pillars: transparency, standards and sound financial system. Mentioned three are equally important from the point of view the particular country and international perspectives. In the framework of the new financial architecture designing financial safety nets remains relevant. CEEE countries, including Estonia, are envisaged to undergo three stages in the near economic future: EU accession, participation in ERM II and joining the euro zone. The structure and development of the financial sector affect the decision to participate in ERM II and monetary union. Estonia has considered to have already made substantial progress in building sound banking practices. Main concerns are stated in the weak securities sector, which has to be improved in order to achieve the strong financial base.

Top 10 best bank

Banco de Oro (BDO) is now the largest bank in the Philippines, in terms of both assets and total deposits. This is according to a report of comparative sizes of Philippine banks which I got from my bank. Until 2007, Metrobank was the largest bank. As of December 31, 2008, however, Banco de Oro has overtakenMetrobank and has grabbed the title since. BDOs rise to the top is primarily due to its merger with another big bank, Equitable-PCI Bank, in 2006. Clients are also flocking to BDO because of its longer banking hours and presence in most SM malls. In 2008, Metrobank slid to #2 in terms of both assets and deposits. Trailing Banco de Oro and Metrobank is Bank of the Philippine Islands (BPI). Here is the list of the biggest banks in the Philippines in terms of assets and deposits. Figures from the report were taken from the published financial statements of the banks concerned. Top Ten Commercial Banks in the Philippines As of December 31, 2008

1. 2. 3. 4. 5. 6.

Banco de Oro (BDO) Php 808.0 billion Metrobank - Php 758.5 billion Bank of the Philippine Islands (BPI) Php 658.4 billion Landbank of the Philippines (LBP) Php 434.0 billion Development Bank of the Philippines (DBP) Pho 290.9 billion Philippine National Bank (PNB) Php 276.8 billion

7. 8. 9. 10.

Rizal Commercial Banking Corp. (RCBC) Php 270.2 billion Unionbank of the Philippines (UBP) Php 208.2 billion Chinabank Php 207.3 billion Citibank Php 187.8 billion

In terms of DEPOSITS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. BDO - Php 634.3 billion Metrobank - Php 585.8 billion BPI - Php 541.2 billion Landbank - Php 333.6 billion PNB - Php 201.2 billion RCBC - Php 196.4 billion Chinabank - Php 173.9 billion Unionbank - Php 162.0 billion Allied Bank Php 139.8 billion Citibank - Php 121.6 billion

IMPORTANT ROLE OF FINANCIAL SYSTEM IN THE ECONOMY

Category: Finance Article The financial sector provides six major functions that are important both at the firm level and at the level of the economy as a whole. 1. Providing payment services. It is inconvenient, inefficient, and risky to carry around enough cash to pay for purchased goods and services. Financial institutionsprovide an efficient alternative. The most obvious examples are personal and commercial checking and check-clearing and credit and debit card services; each are growing in importance, in the modern sectors at least, of even low-income countries. 2. Matching savers and investors. Although many people save, such as for retirement, and many have investment projects, such as building a factory or expanding the inventory carried by a family micro enterprise, it would be only by the wildest of coincidences that each investor saved exactly as much as needed to finance a given project. Therefore, it is important that savers and investors somehow meet and agree on terms for loans or other forms of finance. This can occur without financial institutions; even in highly developed markets, many new entrepreneurs obtain a significant fraction of their initial funds from family and friends. However, the presence of banks, and later venture capitalists or stock markets, can greatly facilitate matching in an efficient manner. Small savers simply deposit their savings and let the bank decide where to invest them. 3. Generating and distributing information. One does not always think of it this way, but from a society wide viewpoint, one of the most important functions of the financial system is to generate and distribute information. Stock and bond prices in the daily newspapers of developing countries (and increasingly on the

Internet as well) are a familiar example; these prices represent the average judgment of thousands, if not millions, of investors, based on the information they have available about these and all other investments. Banks also collect information about the firms that borrow from them; the resulting information is one of the most important components of the "capital" of a bank, although it is often unrecognized as such. In these regards, it has been said that financial markets represent the "brain" of the economic system. 4. Allocating credit efficiently. Channeling investment funds to uses yielding the highest rate of return allows increases in specialization and the division of labor, which have been recognized since the time of Adam Smith as a key to the wealth of nations. 5. Pricing, pooling, and trading risks. Insurance markets provide protection against risk, but so does the diversification possible in stock markets or in banks' loan syndications. 6. Increasing asset liquidity. Some investments are very long-lived; in some cases - a hydroelectric plant, for example - such investments may last a century or more. Sooner or later, investors in such plants are likely to want to sell them. In some cases, it can be quite difficult to find a buyer at the time one wishes to sell - at retirement, for instance. Financial development increases liquidity by making it easier to sell, for example, on the stock market or to a syndicate of banks or insurance companies. Both technological and financial innovations have driven modern economic growth. Both were necessary conditions for the Industrial Revolution as steam and water power required large investments facilitated by innovations in banking, finance, and insurance. Both are necessary for developing countries as they continue their struggle for economic development. But the effective functioning of the financial system requires, in turn, the precondition of macroeconomic stability. Rashid Javed is an Asian author. He writes articles about various topics of accounting andeconomics such as accounting dictionary and classical versus keynesian economics

Chapter Summary of fin. System in the global economy

(See related pages)

The global financial system of money and capital markets performs the important function of channeling savings into investment. In that process a unique kind of asset in the economya financial assetis created.

Financial assets represent claims against the income and assets of individuals and institutions issuing those claims. There are three major categories of financial assets money, debt, and equities. A fourth instrument, derivatives, is closely related to financial assets, deriving its value from these assets.

Money is among the most important of all financial assets in the economy because it serves as a medium of exchange to facilitate purchases of goods and services, a standard for valuing all items bought and sold, a store of value (purchasing power) for the future, and a reserve of liquidity (immediate spending power). Despite all these advantages, money has a weakness susceptibility to inflation (i.e., a rising price level), because its rate of return is normally so low. In contrast, the financial assets represented by debt or equity securities, and often byderivatives as well, carry greater average yields but, unlike money, may incur loss when converted into immediately spendable funds.

The creation of financial assets occurs within the financial system through three different channelsdirect, semidirect, or indirect finance. Direct finance involves the direct exchange of financial assets for money in which borrowers (deficit-budget units, or DBUs) and lenders (surplus-budget units or SBUs) meet directly with each other to conduct their business. Semidirect finance involves the use of a broker or dealer to help bring borrower and lender together and reduce information costs. Indirect finance refers to the creation of financial assets by financial intermediaries who accept primary securities from ultimate borrowers (DBUs) as their principal earning assets and issue secondary securities to ultimate savers (SBUs) to raise funds.

Financial intermediaries (such as banks, pension funds, and insurance companies) have grown to dominate most financial systems today due to their greater expertise, efficiency, and capability in diversifying away some of the risks involved in lending money.

One of the most serious management problems encountered by some financial intermediaries is disintermediationthe loss of funds from an intermediary to direct or semidirect finance. Much of the disintermediation experienced by modern intermediaries has occurred due to financial innovation. Borrowers have found new ways to obtain the funds they need without going through a financial intermediary.

Finally, financial systems around the world appear to fall into one of two broad categoriesbank-dominated financial systems and security-dominated financial systems. In bank-dominated systems the majority of financial assets arise from the banking system. When banks get into trouble the financial system itself may experience difficulties with risk exposure and slower growth. In security-dominated financial systems, by contrast, security brokers and dealers tend to be leaders in the financial system and often provide the greatest volume of funds to those in need of new capital. Security-dominated financial systems are heavily dependent upon direct and semidirect finance (i.e., the open market), while bank-dominated systems tend to rely upon financial intermediaries (indirect finance) for the raising of funds.

Last year, we posted a list of the Top 10 Banks in the Philippines, based on total assets and deposits at year-end 2008. We now bring you the list of the Largest Banks in the Philippines, in terms of assets, deposits, and net income, as of year-end 2009. The list only includes banks headquartered in the Philippines, meaning other banks based in another country but with local operations are not analyzed. Also, since the basis of the financial figures are the financial statements submitted to the Philippine Stock Exchange (PSE), only publicly-listed banks are mentioned. Government- and privately-owned banks whose financial statements are not available to the public are excluded in the list. Table: Largest Banks in the Philippines (2009) in Philippine Peso

Bank Banco de Oro (BDO) Unibank Metrobank Bank of the Philippine Islands (BPI) Rizal Commercial Banking Corp (RCBC) Philippine National Bank (PNB) UnionBank of the Philippines (UBP) China Banking Corp. - ChinaBank (CHIB) Security Bank (SECB) Philippine Savings Bank - PSBank (PSB) Philippine Trust Company - PhilTrust Bank (PTC) Philippine Bank of Communications PBCom (PBC) ChinaTrust Bank (CHTR) AsiaTrust Development Bank (ASIA) Citystate Savings Bank (CSB)

Total Assets Total Deposits 862,049,000,000 694,678,000,000 854,306,957,000 615,700,389,000 724,420,000,000 579,471,000,000 288,515,577,000 220,277,894,000 283,299,906,000 214,316,861,000 244,361,318,000 194,508,377,000 234,035,615,754 193,290,039,246 146,250,475,000 108,524,971,000 93,087,829,641 85,696,489,000 43,702,179,170 24,107,654,258 10,552,736,005 2,502,711,143 77,390,211,286 73,912,684,000 28,562,575,272 16,968,158,270 8,811,639,364 1,676,492,616

Net Income 6,101,000,000 6,794,787,000 8,665,000,000 3,328,382,000 2,200,153,000 4,325,003,000 4,102,629,321 3,061,923,000 1,240,014,416 1,260,947,000 102,192,994 332,856,561 (51,749,310) 8,437,544

Banco de Oro (BDO) remains as the countrys largest bank in terms of Total Assets (P862.049 billion) and Total Deposits (P694.678 billion). It is trailed by (2) Metrobank; (3) BPI; (4) RCBC; and (5) PNB. In terms of Net Income, however, the Bank of the Philippine Islands (BPI) leads the pack with an P8.6 billion net income for the year 2009. It is trailed by (2) Metrobank; (3) BDO; (4) Unionbank; and (5) Chinabank. The top 10 local banks in terms of Assets, Deposits and Net Income are shown below. Top 10 Philippine Banks, in terms of Total Assets (2009) 1. 2. 3. 4. 5. 6. 7. Banco de Oro (BDO) Unibank P862.049 billion Metrobank (MBT) P854.307 billion Bank of the Philippine Islands (BPI) P724.420 billion Rizal Commercial Banking Corp (RCBC) P288.516 billion Philippine National Bank (PNB) P283.300 billion UnionBank of the Philippines (UBP) P244.361 billion China Banking Corp. ChinaBank (CHIB) P234.036 billion

8. Security Bank (SECB) P146.250 billion 9. Philippine Savings Bank PSBank (PSB) P93.088 billion 10. Philippine Trust Company PhilTrust Bank (PTC) P85.696 billion Top 10 Philippine Banks, in terms of Total Deposits (2009) 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Banco de Oro (BDO) Unibank P694.678 billion Metrobank (MBT) P615.700 billion Bank of the Philippine Islands (BPI) P579.471 billion Rizal Commercial Banking Corp (RCBC) P220.278 billion Philippine National Bank (PNB) P214.317 billion UnionBank of the Philippines (UBP) P194.508 billion China Banking Corp. ChinaBank (CHIB) P193.290 billion Security Bank (SECB) P108.525 billion Philippine Savings Bank PSBank (PSB) P77.390 billion Philippine Trust Company PhilTrust Bank (PTC) P73.913 billion

Top 10 Philippine Banks, in terms of Net Income (2009) 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Bank of the Philippine Islands (BPI) P8.665 billion Metrobank (MBT) P6.795 billion Banco de Oro (BDO) Unibank P6.101 billion UnionBank of the Philippines (UBP) P4.325 billion China Banking Corp. ChinaBank (CHIB) P4.103 billion Rizal Commercial Banking Corp (RCBC) P3.328 billion Security Bank (SECB) P3.062 billion Philippine National Bank (PNB) P2.200 billion Philippine Trust Company PhilTrust Bank (PTC) P1.261 billion Philippine Savings Bank PSBank (PSB) P1.240 billion

Overview for Financial Institutions

Conducting operations domestically or internationally, addressing interest rate changes, ensuring adequate liquidity and managing risk are all essential components of your success. But there are also broader issues that you must address to ensure competitiveness issues such as industry consolidation, business continuity, fraud, stricter regulations and maximizing technology in your environment. Using a highly collaborative approach, BNY Mellon Treasury Services can consult with you to address your challenges. Our significant investments in technology, commitment to innovation and broad industry expertise allow us to provide the sophisticated solutions your institution demands. This overview highlights capabilities that distinguish

BNY Mellon and the reasons we hope youll consider us as your next treasury provider.

Manage Cash Flow, Liquidity & Risk

BNY Mellon combines advanced technology, innovative products and industry expertise to help our financial institution clients optimize cash flow, manage liquidity and mitigate risk while efficiently reaching their customers, vendors, employees and investors around the world. Our clients can make payments worldwide in more than 100 currencies. Global transactions continue to grow as companies and individuals increasingly make cross-border payments in the global marketplace. We enable our clients with an array of domestic and international, U.S. dollar and multicurrency, treasury and commercial, low- and highvalue, one-time and repetitive payment services. Cross-border, low-value, bulk payments pose a challenge for many organizations. As companies expand globally, they need a cost-effective way to make foreign currency payments for salaries, pensions, dividends and accounts payable to other countries. Our simplified global mass payments solution integrates International ACH (IACH) payment capability to provide an electronic alternative for reaching suppliers, employees, customers and investors. Leveraging our correspondent banking network to automate payment flows to the beneficiaries bank accounts, we remove the cost, inconvenience, and delay associated with check payments. Remittances (low-value, person-to-person, cross-border payments) are playing an increasingly larger role in many economies around the world, and represent an increasingly attractive opportunity for financial institutions to leverage a solution to grow deposits and increase revenue. BNY Mellon offers a complete, end-to-end, private-label remittance solution designed to provide sending banks easy access to the growing cross-border money transfer market.

Comprehensive Cash Management

BNY Mellon provides a rich set of cash management products and services. This includes comprehensive accounts receivable and accounts payable solutions, as well as transaction initiation and reporting for the full range of cash management activity. Extending our collections capabilities are our remote check deposit solutions, which give users faster access to their money, shorten the lifecycle of incoming payments, facilitate the potential for improved float and lower transportation costs. Payables capabilities include paper and electronic disbursement methods, imaging solutions and fraud protection tools such as Positive Pay and Positive Payee.

TRADE FINANCE
Efficient Management of Global Trade Flows For financial institutions looking to offer their corporate clients the means to streamline

their global trade operations without having to invest in the technology required to do so, or for those financial institutions that want to enhance their own back-office trade processing capabilities, BNY Mellon Treasury Services offers a comprehensive product suite. This includes online platforms that offer complete, end-to-end transactional and data management capabilities, critical to the proper, efficient management of trade transactions and flows. Our Global Trade Finance solution integrates all the essential functionalities of both letter of credit and open account transactions onto a single online platform. Users can process and manage the full scope of their global trade finance transactions electronically from any Internet location on a 24/7 basis. Our front-end trade solutions can incorporate logos, client artwork, colors and other branding elements for financial institutions wishing to private label the service for resale to their business clients. Our Global Trade platform further enables users to: upload and initiate processing of purchase orders to either a letter of credit or an open account transaction; review documents using scanned images of all underlying trade documentation; obtain full purchase order/invoice data matching capabilities; undertake two-way transaction communication and online approval; transfer funds for settlement of these transactions; initiate payables discounting; and access trade reporting.

LIQUIDITY SERVICES
Integrated Liquidity Management Solutions For financial institutions in todays changing markets, liquidity services are a critical part of effective cash management and financial performance. Risk mitigation, control and profitability depend on the ability to mobilize cash to provide funding for payments and, at the same time, to maximize yields on excess cash balances. Unexpected and critical market or business events contribute to the urgency of meeting obligations quickly. BNY Mellons solutions combine the ability to prearrange parameters for sweep, investment and payment requirements with the flexibility to move cash on your own, in seconds. Hundreds of institutional short-term investment options are available to invest in/redeem from anonymously, safely and virtually instantaneously. Comprehensive audit trails, highly secure user access controls and real-time information reporting tools bring these capabilities together to facilitate accurate cash positioning and adherence to compliance standards. To operate effectively, clients follow liquidity and investment policies to address their needs. Complying with these policies particularly when the firms stability, ability to meet payments or liquidity requirements, and profitability are at stake can be time-consuming and risky. BNY Mellon provides direct, online access to a wide variety of money market funds on a single, centralized investment platform. The funds are managed by an elite group of asset managers who seek to maximize yield while preserving capital and maintaining liquidity. In

addition to dollar-based investments, we offer pound-sterling, Euro, Australian dollar, Canadian dollar and offshore dollar options. Through our industry-leading investment portal, clients can buy and sell at any time throughout the day. Early withdrawal options and late-day trading windows enhance flexibility and help clients meet their liquidity needs. All investments are consolidated and accessible in one place. Only a single account registration is needed, and only a single account statement is issued. Reporting is robust and can be accessed online at any time or delivered directly. Supplementing this, automated daily updates are generated to report on current yield, asset size, weighted average maturity, and the interest factor for each fund offered.