This business plan concerns all business and legal activities, experiences as well as plans in chartering a State Bank in the Oregon State. The State Bank is will be chartered by the Oregon state. The bank would be unlike reserve banks that are necessarily able to control the monetary policy. It main activities would be engraved in offering retail services and commercial services. The plan here is to start a State Bank that has a good charter scheme that would act as an enhancing ground for the banking services within the Oregon State. In order to get into the contractual terms and conditions, there has to be a written business plan that indicates the legal aspects of the bank, the bank ownership, the financial position or the state bank, and the legal issues surrounding any terms of the contract. The location would be established to mark it exact position by state and city.
The Oregon State Bank would receive a charter from the Oregon state authority. In this case, the charter would originate from the Oregon State Bank Department. This State Bank like any other US State Bank will be supervised by the Oregon state chartering authority in collaboration with the state’s Federal Insurance Corporation abbreviated as FDIC or the state’s Federal Reserve System (Board of Governors of the Federal Reserve System, 2012). Since this bank is meant to become a member of the Federal Reserve System, its supervision would preferably come from the Federal Reserve System. The new bank in this States of Oregon would be strictly based on the laws governing its services as well as financial activities. Under this supervision, there are laws governing its services and financial activities would consider the labour issues and management concerns that have to be in line with the Federal Law governing business operations (Benston, George & Kaufman, 1996).
The New Oregon State Bank will be a financial institution whose dealing would be in retail and financial services to the people of Oregon State. The bank is named as The New Oregon State Bank to mark it as distinct from the existing state bank. Its main purpose is to serve the community by offering banking services that are more affordable and competitive than in most other banks within the state. It would be based within Astoria but may eventually establish branches in other Oregon cities such as Bend and Eugene.
The location in Astoria would be because it is one of the leading cities in terms of business and investment activities within the state. The New Oregon State Bank would target various groups of clients, most of whom would be investors. The bank would also have banking facilities to attract banking deposits from customers who would, in turn, earn interest rates at attractive rates. Depositors would consist of both business investors and business investors. Investors would consist or both large firm owners and small scale businesspersons and all other entrepreneurs (Pinson, 2004). The various depositors would be attracted through various promotional and selling activities including good interest earnings from deposited funds.
The bank would also attract borrowers from various scopes and aspects of life. Borrowing is taken as a risky banking practice but for the bank to develop financially and businesswise, it would have to incorporate borrowers of all scales. Every borrower would be entitled to taking loans of specific amount based on their incomes and securities. There would be an extensive analysis of every client wanting to borrow money for various uses (Benston, 1999). The most advocated borrowings would be those used in generating investment activities such as in the micro-business sectors and in large enterprise investments. Any borrower whom the bank management has little or no confidence that they would be able to pay back may not be entitled to loans from the bank. The bank would also issue loans to the youth on condition that they will have organized community development groups. This would be a way of empowering the youth and initiating community development projects.
A youth group would only get loans given that they have a written proposal for an eligible project and that the group has its member ranging within the minimum and maximum number that would be determined. An individual youth individual would be eligible to loan if he or she has an outstanding project that may be unique in all aspect. He or she would also be required to show certification of the project and guarantee of repayment. Any person would be able to save money in the bank, take loans as long he, or she has the legal documents indicating that he or she is a residing citizen in the US (Pinson, 2004). The documents would include an original national Identification card or a legal passport. The borrower of saver would also be required to be conversant with the terms and condition of all transaction activities he or she is engaging into with the state banking institution. This would create a clear understanding of the legal issues surrounding any contractual agreement between a client and the banking institution. In cases of breach of such contract, the subject breaching the contract would be a subject of legal action under the Federal or State Law.
Regulation and Required Documentation
The New Oregon State Bank would be established under the governance of the Federal Law governing business operations and on a more specific aspect, its establishment would be done in accordance with the banking rules and conditions from the US Central Bank. These law, regulations, and conditions would range from taxation, interest rates on borrowed funds, as well as rules governing banking institutions (Benston, George & Kaufman, 1996). The issue and updates from the Federal Reserve Board would be established and the correct measures taken. The same would apply to any ruling from the Central Bank headed by Governor Duke and other programs that govern the banking sector within Oregon and the US in general.
One of the requirements in establishing the bank is Eligibility on independent foreclosure in which borrowers are eligible for independent foreclosures review as long as they meet some specifications. These conditions include the fact that a loan security is the primary residence of the borrower, a mortgage in the prevailing foreclosure process and is serviced by any eligible service company registered by the Federation. Borrowers could always file an independent review of own foreclosure (Benston, George & Kaufman, 1996). The reviews are done free of charge and therefore no borrower has to pass through review charges at any given time. This review by borrowers holds while there are set payment agreements within the state. If there were an agreement on payment with the concerned mortgage service, the borrower would be expected to pay for his or her Independent Foreclosure review. This kind of review would be a case-by-case process as demanded by the Federal Reserve Authority. This aspect would thereof follow a process that would ensure eligibility placed under the payment agreement. Payment process would always be done through an agent appointed by the duly established New Oregon State Bank. In this case, the bank would be secured from cases against any service claim by borrowers. The role of the Federal Reserve is to ensure that there is compliance with all enforcement actions
The other aspects of legal aspect on establishing the bank are from the US Central Bank. The Central Bank controls operations of the US banking sector and to some extent that of the world. The Central Bank is responsible in setting economic conditions within the US banking sector. The Central Bank is responsible for setting interest rates on loans and on savings. The New Oregon State Bank should be ready to comply with any economic changes by the Central bank. The Central Bank is responsible for controlling credit and money supply. In reducing the money supply in the economy, it increase interest rates in order to attract saving and discourage borrowing. The fact behind this action is a reduced rate of investment and increased unemployment although the main economic goal of reducing money supply would have been reduced. All commercial banks are also required by the central bank to maintain a reserve amount in the Central Bank as a security (Benston, George & Kaufman, 1996). These regulations and adjustment are controlled for the benefit of the US and world economy. All conditions and regulations from the Federal Reserve Body and the US Central Bank require that transparency in the banking sector such as on goals, conduct, as well as on the monetary policy stance. These factors are required to be fundamental in achieving the set monetary policies. The new state bank would required to present forms indication response on crisis, financial ground in form of a balance sheet, financial statement on Federal Reserve System, market operations document, and terms of operation documents.
The FDIC insurance
The New Oregon State Bank would be in terms with the Federal Deposit Insurance Corporation that was created by the Banking Act of the year 1933. This insurance would guarantee safety on depositors. The insurance corporation requires a bank to become a member for it to ensure safety on accounts belonging to depositors in that bank. The New Oregon State Bank would have to be insured to secure the accounts of all its clients depositing money in the saving bank accounts. The new bank would have to pay premiums as part of its insurance agreements (Benston, George J. & George G. Kaufman, 1996). The New Oregon State Bank would have place a sign at its business place indicating that deposits have backup from the credit and full faith of the US Government.
Possible Membership in Federal Reserve System
The New Oregon State Bank would have gone through a membership process to become a member of the Federal Reserve System. The membership involves a proof of document on the aspired business within the banking sector. The management would have to present document that prove security of the baking banking institution and that of its clients (Board of Governors of the Federal Reserve System , 2012). These documents would include financial documents, crisis response documents, a Federal Reserve’s balance sheet, and liability documents. The bank would then have to pay the required fee to become a member.
The New Oregon State Bank would get its starting capital from various financial sources. The core source of capital would be from community development funds given to every state by the government. The major concern is that the New Oregon State Bank would be chartered by the Oregon State. This portrays that most of the startup capital would come from government contributions. The State Government would be responsible for all aspects of financial requirements including the money needed for currying out market research prior to the full establishment. Financial support would also come from donations by large investments, Non-Governmental Organizations, and interested individuals. After the State Bank is fully established, it would attract investors would act as shareholders and other stakeholders (Pinson, 2004). These shareholders would purchase shares in exchange for funds that would be used in running and developing the bank.
The Oregon State would be mainly responsible in chartering the bank and implication that the chartering would constitute all the banking operations and requirements. Since this banking institution would be a public institution, most of the activities would be open to the public and donors would be call for their donations (Evan, & Wall, 2001). At the same time, a portion of the State funds set aside for community development project would be used to run the bank during its short run period. The short run period is characterized by poor business returns with the costs of operation being more that the obtained profits. Besides, all profits would be used to run the banking institution in terms of paying for all factors of production that include land, labor, and entrepreneur.
If the bank is stagnated financially at some point, loans are available from other finical institutions. The major lender in this case could be the US Central Bank. This Central financial institution could issue loan at a more reduced interest rate than any other financial institution in the US. The World Bank also exists to help in developing and funding various community activities (Pinson, 2004). The New Oregon State Bank could be placed in the category of community development projects. Apart from financial grants from the World Bank, the World Bank can issue cheap and long-term loan to the State Bank given that there are the required conditions and requirements.
This section is about the terms and conditions in starting a bank. There are various reasons why regulations exist. Another aspect of consideration here is the various regulations that exist in the banking sector. The section would also consider the possible adjustment that could be initiated to influence the existing regulations. Many regulations exist and they are favorable to various banking firms on varying aspects.
Regulations in the banking sector for starting a bank exist in order to benefit some target groups. Regulation is done by the government and various Federal Laws. Regulations usually benefit the government in terms of financial source provision. This happens through the starting license payment and through the provision of their reserve amounts to the Central Bank. There is also tax duty that is set a requirement for starting a bank. All these funds benefit the government in running its public activities. Regulations in starting a bank are also imposed to reduce competition in the banking sector. Most regulations are too demanding that only a few financial institutions can be started at a given time especially due to regulations on capital requirement (Evan, & Wall, 2001).
Avoiding competition involves control of bank numbers and prevents excessive concentration of banking institutions in the economy (Benston, George J. & George G. Kaufman, 1996). Conditions also exist whenever it comes to the payment systems of banks. The retail and wholesale payment systems are more pronounced on commercial banks. These activities are further controlled through lender of last resort that is aimed at improving efficiency and customer protection. There are regulations aimed at improving or ensuring consumer protection. Protection on consumer is ensured through insurance services and conditions that a bank has to be accounted for. There should also be a document indication agreement with terms in fair or equitable treatment among customer. This voids discrimination on the grounds of race, skin color, country of origin, or religion.
Any bank being established is required to comply with terms and conditions concerning safety and soundness. This happen because banks are the most fragile of all business entities and therefore any failure may be a loss to customers. The fragile aspect of banks originates from the existence of high loan demands than deposits, law cash assets ratio, and low capital to asset ratio. Soundness and safety conditions are therefore imposed to ensure safety of customers and to avoid any failure that could easily spread to other banks (Benston, 1999). This problem also calls for another condition that banks have to join known deposit insurance. Bank failure exposes the government directly or indirectly to losses. There is therefore a condition for starting banks to join deposit insurance programs to protect consumers and the government.
Bank regulations have their relative costs and benefits. It is for this reason that some of the regulations have to be changed or done away with. There are the economic costs and administrative costs resulting to some regulations. While some regulations protect the entire industry and consumers, they are a barrier to the development and advancement of the newly established banks (Benston, George J. & George G. Kaufman, 1996). In setting some regulations, policy makers may fail to foresee all the possible cost implications thereby leading to unintended cost. Policies that are harmful to economic wellbeing of the society should be changed. These include policies concerning interest rate changes whenever the market is attractive since the policy affects even customers in the established banks. Reduction in borrowers may lead to reduction of profitability hence increasing management costs in the other banks. Therefore, regulations that affect the entire banking industry should be dropped or changed.
Benston, G. J. (1999). Regulating Financial Markets: A Critique and Some Proposals,. Washington, D.C.: American Enterprise Institute.
Benston, George J. & George G. Kaufman. (1996). The appropriate Role of Bank Regulation. Economic Journal , 688-697.
Board of Governors of the Federal Reserve System . (2012). What you need to know: Independent Foreclosure Review. Retrieved February 7, 2013, from federalreserve.gov: http://www.federalreserve.gov/consumerinfo/independent-foreclosure-review.htm
Evan, D.D. & Wall, L.D. (2001). Reforming Bank Capital Regulation: Using Subordinated Debt to Enhance Market and Supervisory Discipline. Contemporary Economic Policy, Vol.19, No.4 , 444-453 .
Pinson, L. (2004). Anatomy of a Business Plan: A Step-by-Step Guide to Building a Business and Securing Your Company’s Future (6th Edition). Chicago, USA: Dearborn Trade.
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