Adamson University
900 San Marcelino St., Ermita, Manila
Marketing and Management Department
In Partial Fulfillment of the Requirements in Strategic Operation’s Management
"A Case of Golden Opportunity Commercial Bank”
Submitted by:
Lugnasin, Jessica E.
Malibiran, Kathleen
Fong, Kimberly
Co, Kimberly
Besana, Blasie
Jonota, Myrine
Ruiz, Danielle Lorenz
Submitted to:
Prof. Rodel Pomentil
Faculty
Class Schedule:
MF 3:30 – 5:00PM
Date Submitted:
October 5, 2013
Viewpoint: New Management of the GOCB
Time Context: December 7, 2008
I. Problem Statement:
1. How can GOCB renew their strategy?
2. How can GOCB deal with their unstable status?
3. How GOCB will resolve the problem of the ethical
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| • Aggressiveness in engaging into risky mortgage market and financial products.• GOCB’s questionable investments, unusually high salaries of its officers and payment of unusually high interest on its term deposits.• Distrust throughout the financial system.• Competition is always present in the corporate world. |
IV. Assumption
Investing to a non-performing assets and loans and engaging to mortgages will not make the company profitable.
V. Alternative Courses of Action:
Alternative Courses of Action 1
The GOCB must downgrade the status from commercial bank to thrift bank.
Alternative Courses of Action 2
The GOCB must undergo liquidation to pay their debts and request loans from BSP.
Alternative Courses of Action 3
The GOCB must conduct a seminar that studies b.
VI. Analysis
Alternative Courses of Action 1:
Advantage: * It test’s stress of the bank to solve potential problems that may arise. * Allowed to offer higher rates on saving deposits. Also they were offered funding from a government agency, the Federal Home Loan Bank, to make it easier for them to offer mortgages to a wider range.
Disadvantage: * Tend to bring down an entire system if their operations are not sufficiently monitored. * Revenues/ profits and number of customer are much lesser.
The consequences of having a large footprint of unreliable / misconfigured hardware is pretty significant in that through one single action of hardware failure, the system can be brought to a standstill pending diagnosis and
The bank at some point received negative attention for issuing credit to arms companies, including companies like Boeing, Lockheed Martin, General Dynamics, Textron, Colbun, BAE Systems and EADS. Some companies within the bank’s portfolio have also been involved in environmental and labor rights violations scandals, for instance Wal-Mart and Total USA. This negative attention may lead to loss of investor confidence in the bank.
As for implementing these changes can cause some problems and issues, moreover this is time consuming process.
The conflict arise and the management felt the pressure because Eagleeye and the investors threatened them that they will sell all of their shares and large institutional will left the bank. The reason is they do not want the firm to spend too much financial capital into the growth plan. Their purpose for the bank is to become an ideal target for other companies to acquire so they can earn the profit from selling the bank.
The opportunity for power and competition seems to also be one of the largest intersecting parts of this whole debacle. In the film, I heard and saw that these bankers placed bets on the crash of all the loans. These bankers knowingly put countless families and individuals in
Pay options were also available allowing the borrowers to choose lower payments and the balance of what you should pay and what you actually paid was added to the loan to have a negative amortization. The introductory low rates were called Teaser Rates. The goal was to make home ownership more affordable for more people. Michael Francis and other brokers in Wall Street knew that some of these loans are bad loans but they didn’t cared because they transferred all these loans to whoever wanted to buy them such as pension funds. They are just the intermediary or the pipeline. These pension funds could only buy AAA mortgage loan. The investors wanted to sell their loans to the pension funds but they needed to be rated AAA by these agencies. Their job was to evaluate the risk of the securities. What was the ethical issue here with the agencies? The riskier BBB looked as good as the triple AAA and they looked much safer than they used to be and they started to look more like a AAA security. So AAA requirement got lower as the market got smart. Moodies, S&P, and Fitch are the three rating agencies. They didn’t give price but based on their ratings they got priced. The suggestion is that these agencies would come with the investment bankers. The business was getting more competitive so you just wanted to get more business or more business than the other agencies. When Anne Arundel was asked if standards lower she
It relaxed rules in banking and savings and loan industries to help encourage loans for people to buy houses and start businesses.
Lawsuits seem to be coming from all directions, federal and state investigative probes are launched against them, stock price tumbled to 1/5 of its value, even desperate lenders demonstrated outside their offices. 2007 has definitely not been Countrywide 's year.
Ginnie Mae, Frannie Mae, and Freddie Mac were U.S. government agencies that guaranteed various types of mortgage loans. They allowed mortgage lenders to obtain a better price for their mortgage loans in the securities market. Lenders used the proceeds to make new mortgage loans available.
Before the 1970s the banking was not a business that you went into to make money. That was until Louis Ranieri came around. Louis Ranieri had one idea that changed the housing market forever. His plan was to have a mortgage back security. A mortgage back security is an assist based security backed by a mortgage. For example, if you use your mortgage to start a business, your business is backed by that mortgage. The average mortgage loan has a fixed rate loan and takes thirty years to pay off, but then he thought to bundle them all together. They thought these would still be less risky because who would not pay their mortgage. They were doing hundreds of million dollars in mortgage bonds a year, but that all changed when they ran out of mortgages to put into the bonds. If there were no bonds then there was nothing left to make money, and the banking world was going to back to the way it was. Rather than letting that happen, the banks made a loan called a subprime loan.
The ‘sub-prime’ crisis triggered by the meltdown of the US mortgage backed-securities market in 2007 was a precursor to the global financial crisis. It would drastically change the competitive landscape for all firms in the financial services sector, including Campbell and Bailyn (C&B), one of the world’s five largest investment banks.
The banking industry is highly competitive. The financial services industry has beenaround for hundreds of years and just about everyone who needs banking servicesalready has them. Because of this, banks must attempt to lure clients away fromcompetitor banks. They do this by offering lower financing, preferred rates andinvestment services. The banking sector is in a race to see who can offer both the
The banks then created a new idea—linking investors to homeowners through mortgages. Ordinarily, a mortgage broker would connect a house-buying family to a mortgage lender, who would then supply them with a mortgage. In this system, everyone is happy—the mortgage broker earns a handsome commission, the mortgage lender earns a new mortgage, and the family is now a homeowner in a market of increasing housing prices.
Loans at the time were nonamortizing and required a balloon payment at the expiration of the term. Mortgages were available to a limited client base, with home ownership representing about 40 percent of U.S. households. Many of these short-term mortgages went into default during the Great Depression as homeowners became unable to make regular payments or find new financing to pay off balloon payments that became due. The United States government intervened in the housing market in 1932 with the creation of the Federal Home Loan Bank (FHLB). The FHLB provided short-term lending to financial institutions (primarily Savings and Loans) to create additional funds for home mortgages. Congress passed the National Housing Act of 1934 to further promote homeownership by providing a system of insured loans that protected lenders against default by borrowers. The mortgage insurance program established by the National Housing Act and administered by the Federal Housing Administration (FHA) reimbursed lenders for any loss associated with a foreclosure up to 80 percent of the appraised value of the home. With the risk associated with default on FHA-backed mortgage loans reduced, lenders extended mortgage loan terms to as long as 20 years and LTVs of 80 percent. In 1938, Federal National Mortgage Association (FNMA) was established
On the liabilities and equities side, the most noticeable aspect is the revolving line of credit spike in 2004. Revolving lines of credit are typically used to provide liquidity for a company’s day-to-day operations so this is very concerning.