Most people know that the organizational structure of a bank is different from that of other institutions. Some people may even be aware of how it is different.
But, what do these organizational structures actually mean? And what are the most common structures in each industry? In this article, we’ll explore the basic organizational structures used by financial institutions.
What Is an Organizational Structure?
An organizational structure is a framework that defines how certain tasks are directed to fulfill an organization’s objectives. Rules, roles, and obligations may apply to these actions.
The organizational structure also impacts the flow of information between firm levels. In a centralized structure, for instance, decisions are made from the top down, but in a decentralized structure, decision-making authority is dispersed among the different organizational levels.
Having an established organizational structure enables businesses to stay focused and efficient.
What Is the Typical Organizational Structure of a Bank?
The organizational structure of a bank normally consists of a chief executive backed by several senior staff members.
The organization of a retail bank is often segregated by the numerous operations, such as electronic banking services, customer support, and management of certain divisions. Frequently, top managers oversee each section of a highly divided institutional bank.
Banking’s objective is to provide as a solid foundation for financial transactions. By fostering trust and predictability in a currency, banking services support the expansion of business, which in turn generates demand for financial services.
For its consumers, commercial banks provide payment services such as checking and credit card accounts. They gain income by lending client deposits in a variety of methods, including installment loans, such as mortgages and credit lines. Investment banks facilitate company growth by providing firms with the capital they need to launch or expand.
Common Banking job titles: Chief Executive Officer (CEO), Chief Operating Officer (COO), Chief Financial Officer (CFO)
Lines of Busines
Lines of Business (LOB) refers to the particular goods and services given to both individual and business customers by the bank. Mortgage Lending, Consumer Lending, Commercial Lending, Credit Cards, Investment Management, and Investment Banking are often among the most important lines of business.
These employees are responsible for designing and pricing these products/services, attracting new business, and maintaining customer relationships. Back office employees assist LOBs by doing non-customer-facing duties including loan processing, transaction processing (deposits, withdrawals, etc.), fraud detection, and credit evaluation.
Common Lines of Busines job titles: Loan Officer, Investment Specialist, Financial Advisor, Personal Banker
Business Banking products and services are intended primarily for small and medium-sized enterprises. Checking accounts, credit cards, savings accounts, and transfers are a few of the retail goods and services that have been adapted to suit corporate clients. Customers of Business Banking often anticipate specialist customer care and account maintenance-related assistance.
Common Business Banking job titles: Business Banker, Business Documentation Analyst, Commercial Banking Representative
It is the responsibility of the Commercial Lending Group to originate loans for companies, corporations, and other non-individual customers. Commercial loan officers and sales personnel work with borrowers to assess working capital, establish lines of credit, and create other sophisticated financial solutions to fulfill the business’s long-term objectives.
In circumstances when the loan amount and associated risk exceed the lender’s comfort level, commercial loans may also be obtained from many borrowers (syndication). Common reasons for obtaining commercial loans include capital expenditures (‘CAPEX’), equipment finance, real estate purchases, debt refinancing, and company acquisitions.
Common Commercial Lending job titles: Commercial Loan Officer, Commercial Banker, Commercial Banking Associate, Commercial Lending Analyst
It is the responsibility of the Consumer Lending Group to originate consumer loans (not including mortgages). In order to ensure that risk is handled effectively, borrower applications must be extensively investigated and evaluated.
Consumer loan officers and sales professionals engage with prospective borrowers with lending options and collect loan applications and supporting materials. Consumer Loan Operations takes information from borrowers and loan officers, then processes the loan (underwriting, closing, etc.) according to the bank’s criteria.
After a loan has been closed, loan servicing and customer relationship managers engage with borrowers to handle loan payments, modify loan information, and answer queries about the loan. Auto loans, personal loans, and student loans are common examples of consumer loans.
Common Consumer Lending job titles: Consumer Loan Officer, Personal Loan Consultant, Consumer Lending Sales Representative, Personal Banker
Credit Cards includes both retail and business credit card-related items. They create, design, issue, and service items linked to credit cards. These firms function as an intermediary between the buyer and the vendor.
Through the issuance of credit cards and collection of interest, monthly/annual service fees, and payment processing fees, banks gain money. The Automated Clearing House (ACH) network in the United States supports all computerized financial transactions.
Common Credit Cards job titles: Processing Specialist, Credit Card Risk Analyst, Teller, Card Services Operations Advisor
The Investment Banking division collaborates with institutional clients to develop strategic advisory assignments (mergers and acquisitions), divestitures, corporate defense activities, risk management, restructurings and spin-offs, and debt and equity underwriting of public offerings and private placements (domestic and international transactions), as well as derivative transactions related to these activities.
Investing Banks also provide major institutional customers with a sophisticated array of investment services, often referred to as Prime Brokerage services.
Top professionals (usually senior vice presidents and managing directors) within an investment banking operation are responsible for maintaining connections with major customers and identifying new business prospects for prospective high-net-worth investors and partners as they rise through the ranks.
Common Investment Banking job titles: Business Banker, Business Documentation Analyst, Commercial Banking Representative
Investment Management (also known as ‘Private Banking,’ ‘Wealth Management,’ and ‘Private Wealth Management’) refers to a combination of services often provided to high-net-worth individuals, families, and corporations.
Portfolio management, estate planning, financial consulting services, retail banking, retirement planning, legal resources, and tax strategies are generally included in the coordination of investment management services. Large businesses may also be Investment Management clients, although they are normally served by the Investment Banking division (i.e., Prime Brokerage, etc.).
Common Investment Management job titles: Wealth Advisor, Financial Advisor, Trust Officer, Wealth Management Associate, Private Banking Associate
The Merchant Services feature provides business clients with a secure (encrypted) route for processing credit and debit card payments. Banks let firms to deposit these payments directly into their bank accounts in a timely manner and deduct a nominal transaction processing charge.
In addition to gift card/rewards program administration, buying point-of-sale (POS) equipment, online/mobile payment systems, fraud monitoring, and online sales analytics, the merchant services function provides more supplementary goods and services.
Common Merchant Services job titles: Merchant Services Sales Representative, Merchant Services Client Representative, Merchant Retention Specialist, Transaction Analyst
The Mortgage Lending Group is responsible for originating mortgage loans for retail customers (individuals and families). Mortgage lending sales personnel deal with borrowers to determine their eligibility and gather any personal information necessary to execute the mortgage application (W-2 forms, tax returns, account statements, etc.).
After the application has been filed, appraisals, credit reports, and other inspections are conducted so that the underwriting team may make a judgment (approve/reject/counter) on the application.
If the mortgage application is accepted by underwriting and finalized, mortgage loan servicing and account managers work with borrowers to process mortgage payments, modify account information, and respond to mortgage-related queries.
Mortgage lending organizations may also collaborate with correspondent lenders to obtain mortgage loan applicants and/or sell mortgages on the secondary market.
Common Mortgage Lending job titles: Mortgage Loan Officer, Mortgage Lender, Mortgage Loan Servicing Specialist, Mortgage Analyst, Underwriter
Online & Mobile Banking
The Online and Mobile Banking department creates and maintains the infrastructure and apps that enable bank clients to conduct electronic financial transactions (such as deposits, transfers, loan applications, bill payments).
Customers of every big bank (and the majority of small and mid-sized banks) have access to a comprehensive suite of online and mobile banking services; the vast majority of consumers expect to be able to do basic financial transactions promptly and without human intervention (i.e., without going to a branch or calling the customer service center).
Online and mobile banking organizations prioritize security above anything else. Web-based assaults are prevalent, and the sensitivity of banking account information necessitates strong, cutting-edge electronic banking security procedures.
Common Online & Mobile Banking job titles: Electronic Banking Specialist, Payment Operations Analyst, Electronic Fraud Detection Analyst/Specialist, Processing Specialist, Application Developer, Security Analyst
Treasury & Cash Management
The Treasury and Cash Management Group assists business clients in managing short-term investment strategy, cash flow, and liquidity through a variety of treasury-related services, such as controlled disbursements, automated clearing house (ACH) system setup and processing, lockbox payment processing, accounts receivable management (account collections and reconciliations), investment’sweeps,’ risk management, and payroll services.
Common Treasury & Cash Management job titles: Cash Management Analyst/Specialist, Treasury Analyst, Business Banking Associate, Business Banker
Retail Branch Operations
It is the responsibility of the Retail Branch Operations section to manage the operation of a bank’s retail branch network. They handle frequent responsibilities such as platform operations, loan openings, account maintenance, and account terminations.
Brick-and-mortar retail branch facilities let individuals and businesses to conduct financial transactions and establish connections with personal bankers. Typically, the bulk of a bank’s workers dwell in the retail branch network, making it a strong option for cost-cutting measures such as process improvement and restructuring.
Common Retail Branch Operations job titles: Retail Branch Manager, Manager of Branch Operations, Regional Retail Banking Director/Manager, Bank Teller, Personal Banker
The Platform Operations department is responsible for duties at retail branch locations that bank tellers cannot accomplish.
These activities and services include the origination of loans, the opening, maintenance, and closure of any type of account (checking, savings, business, etc.), the application for (and management of) lines of credit (commercial and consumer), the application for (and management of) credit cards, and the provision of investment advice.
Common Platform Operations job titles: Personal Banker, Banker, Consumer Banker, Banking Associate
Retail Branch Management
The Retail Branch Administration role is accountable for the supervision and management of all customer- and internally-focused retail bank branch office activities.
These responsibilities include hiring employees, managing teller functions, monitoring personal banker performance levels, approving loans and lines of credit, marketing the branch, fostering relationships within the local community, and assisting customers with account issues that cannot be resolved by tellers or personal bankers.
Common Retail Branch Management job titles: Branch Manager, Branch Operations Manager, Retail Banking Manager, Retail District Manager
Teller responsibilities include fundamental banking operations such as deposits, check cashing, withdrawals, loan payments, money orders, and foreign currency swaps, which are conducted by teller line staff or bank tellers in retail branch locations. Teller transactions are the activity category with the highest frequency at retail branch network sites.
Common Teller Tasks job titles: Teller, Retail Banker, Bank Teller, Banking Representative
Back Office Operations
Banking Back Office Operations refers to a collection of crucial administrative and support services that do not interact directly with customers. Back Office responsibilities include credit operations, loan servicing, deposit operations, item processing, trade processing, collections, cash vault operations, and wire transfers.
Back Office employees support the retail branch network and specific business lines, such as Mortgage Lending, Commercial Lending, Merchant Services, and Investment Management.
Common Back Office Operations job titles: Operations Specialist/Analyst, Customer Service Representative, Banking Service Representative, Deposit Operations Associate
Credit Operations is accountable for analyzing all credit-related interactions (consumer loans, credit cards, mortgages, commercial loans, construction loans, etc.), developing controls to limit the bank’s risk, and monitoring the bank’s loan portfolio (and other credit-related products).
Credit Operations staff members help loan underwriters, originators, and processors in making credit judgments by providing the necessary tools and paperwork for the assessment of loan papers and documentation.
They also implemented procedures to guarantee that the necessary paperwork is gathered, examined, and saved in the company’s loan servicing system for future review and upkeep (i.e., quality control).
After a loan has been closed, Credit Operations personnel will analyze the bank’s loan portfolio to identify credit risk and submit reports to management documenting portfolio performance and health; these studies often dictate future underwriting needs and standards.
Common Credit Operations job titles: Credit Analyst, Credit Compliance Specialist, Credit Specialist, Credit Operations Specialist, Loan Documentation Specialist
Fraud Prevention & Management
The Fraud Prevention & Management Group is responsible for ensuring that all organizations within the bank adhere to all standards, rules, and laws established by industry regulating bodies, as well as providing guidance and assistance to business units within the enterprise.
Know your customer (KYC) analysis, anti-money laundering (AML) activities, and financial crime monitoring/investigations are typical responsibilities of the banking Fraud Prevention & Management Group.
Common Fraud Prevention & Management job titles: Compliance Officer, Compliance Specialist/Analyst, Fraud Prevention Specialist
Direct Banking Operations is responsible for handling transactions and customer contacts that occur outside of a bank’s retail branch network, often through a customer contact center.
In addition to online and mobile transactions, Direct Banking may comprise all online and mobile transactions. In recent years, the direct banking channel has grown in significance due to the decrease in operating expenses for banks and the growth in the usage of mobile, Internet-enabled devices.
Common Direct Banking job titles: Customer Service Representative, Call Center Agent, Account Support Specialist
Loan Operations is responsible for all duties between the submission of a loan application and the loan’s ultimate financing (pending approval). Application processing, underwriting (approval or rejection of loan application), closing, and post-closure are the phases in between.
This step’s primary objective is to analyze the creditworthiness (i.e., risk level) of the potential borrower in order to decide if the bank should lend to them and, if so, under what conditions.
After the loan has been completed, authorized, and financed, borrowers interact with the loan servicing function to process payments, update account information, and answer queries about the mortgage’s conditions.
Mortgages, consumer loans (car, personal, home equity, etc.), and commercial loans may be separated from this category.
Common Loan Operations job titles: Loan Originator, Loan Operations Specialist, Loan Closing Specialist, Loan Processor, Underwriter, Loan Support Specialist
After the approval and first loan disbursement, the Loan Servicing Group handles all interactions between the borrower and lender (after closing). During the life of a loan, they collect payments, assist borrowers with repayment plans or loan consolidation, and assist with other customer service-related activities (address change, billing inquiries, etc.).
Mortgage servicers are rewarded with monthly servicing fees, which are typically a tiny fraction (less than 1 percent) of the loan’s outstanding principal amount.
When a loan goes into default, Loan Servicing personnel may work with the borrower to renegotiate payment schedules and prevent foreclosure or further action.
Common Loan Servicing job titles: Mortgage Servicing Specialist, Consumer Loan Servicing Specialist, Commercial Loan Administrator, Escrow Loan Servicing Analyst
Trade Operations & Support
Trade Operations and Support is responsible for the middle and back office procedures associated with the exchange of securities and other financial instruments (commodities, derivatives, fixed income, FX, etc.).
Trade confirmation, trade verification, trade matching, settlements, collateral management, and reporting are typical tasks performed by the Trade Operations and Support Group.
In certain instances, this department may also include subgroups responsible for risk management, liquidity management, technological support, and client services (customer service).
Typically, this team provides assistance for the Investment Banking, Treasury Services, and Investment Management business lines.
Common Trade Operations & Support job titles: Trade Compliance Analyst, Trade Support Analyst, Transaction Capture Analyst, Securities Operations Specialist
Transaction Processing & Support
The Transaction Processing & Support function is responsible for any back office processing and documentation required for transactions and actions performed by retail and institutional banking customers through various lines of business, such as credit/debit card purchases or payments, wire transfers, deposits, withdrawals, checks, online bill payments, transfers, etc., as well as account openings/closings.
In addition to ensuring the timely and proper execution of these transactions, back office personnel also execute adjustments and reconciliations as necessary to fix mistakes or satisfy client demands.
Typically, Transaction Processing & Support team employees have tight ties to the customer service and contact center activities of a bank.
Common Transaction Processing & Support job titles: Cash & Treasury Analyst, Cash Management Treasury Analyst, Corporate Treasury Analyst, Treasury Analyst, Payments Analyst, Credit Analyst
Types of Organizational Structures
In the actual world, four main organizational structures are used. The first and most prevalent structure is a functional one. This is also known as a bureaucratic organizational structure and divides an organization according to the specialty of its workers.
The majority of small and medium-sized firms use a functional structure. Using a bureaucratic organizational structure entails dividing the company into divisions for marketing, sales, and operations.
Divisional or Multidivisional Structure
The second kind is prevalent in big organizations with several business divisions. This system, also known as the divisional or multidivisional structure, organizes a company’s executive team depending on the products, initiatives, or subsidiaries they oversee.
Johnson & Johnson is an excellent illustration of this system. With hundreds of goods and business lines, the corporation is structured such that each business unit runs as a separate company with its own president.
Flatarchy, a more recent structure, is the third form and is used by a significant number of businesses.
As implied by the name, it flattens the structure and line of command and gives its workers a great deal of autonomy. Companies using this sort of organizational structure have a rapid rate of adoption.
A matrix structure represents the fourth and final organizational structure. In addition, it is the most perplexing and least used. This arrangement distributes workers between many bosses, divisions, or departments.
An employee in a matrixed organization may, for instance, be responsible for both sales and customer support.
Benefits of Organizational Structures
Organizational structure implementation may be quite useful for a business. Not only does the structure establish a business’s hierarchy, but it also enables the organization to choose the compensation structure for its personnel.
By implementing the organizational structure, the company is able to determine the pay grades and ranges for each job. The structure also increases the effectiveness and efficiency of activities.
By splitting personnel and functions into distinct departments, the business is able to undertake many processes simultaneously in a coordinated manner. Moreover, a clear organizational structure instructs personnel on how to perform their duties most effectively.
In a hierarchical company, for instance, workers will have to do more effort to curry favor with those in a position of authority or to court them. Employees in a decentralized company must be more proactive and inventive in their problem-solving.
This may also help establish expectations for how workers can measure their own advancement within a firm and highlight a particular set of abilities, as well as assist new employees determine whether the company is a suitable match for their own interests and work styles.
Banks are organizations that provide a service. They issue money in exchange for goods and services. These goods and services are assets owned by the bank. They also collect money from clients. Banks issue loans to people in return for collateral.
The typical organizational structure of a bank is like a pyramid. At the top is the CEO. He or she makes all the decisions about where to put the money. Then come the President, Vice President, Treasurer, and so on, down to the branch managers.
Because the organization is based on a pyramid, it is always at risk. If one of the levels starts making bad decisions, then the entire organization could collapse.
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