The decline and near fall of the Bank of America

Article Abstract:

Since the October 1986 departure of Bank of America's (B of A) chairman, Samuel Armacost, industry experts have been speculating as to B of A's near collapse. In this review of the decline of B of A, reasons for the situation are investigated, and blame is allocated among the following factors: the limited management experience of Armacost, the deregulation of the banking industry, and the bank's overly conservative stance. Due to high overhead expenses and loan losses, B of A posted a $338 million quarterly loss in mid-1985, followed by quarterly losses of $668 million and $146 million in 1986. A.W. Clausen, previous chairman of B of A and retired World Bank president, replaced Armacost. Clausen's management strategies to return the bank to profitable operations include: reducing operating costs, formulating stricter lending policies, and resisting the proposed takeover by California rival First Interstate Bank. Clausen apparently intends to use downsizing to save B of A.

Management, Case studies, California, Bank management, Bank of America National Trust and Savings Association, Armacost, Samuel, Clausen, A.W.W.

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Currency disunion

Article Abstract:

Development of plans for a European Central Bank (ECB) reveals the inherent differences among the individual central banks in Europe. During the undertaking, aimed at implementing a common currency unit, central bank governors found themselves disagreeing on several aspects. One such subject was the role central banks would play in financial supervision. As a result, a compromise was struck: the proposed ECB will not have any supervisory function at the start but may subsequently acquire that role. Another contested topic is the issue of how centralized the execution would be once the ECB becomes operational. The French want the central banks to maintain execution while the Germans wish for the opposite. Meanwhile, agreement has been reached in measuring monetary aggregates, allowing comparison of money supply growth among the EC nations. These developments have already altered EC central banks but the Maastricht treaty will further transform them.

Commercial Banks, Central Reserve Depository, Planning, Evaluation, Europe, Central banks, European Union, European Community

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British banking blues

Article Abstract:

The UK banking industry is being affected by the decision to abandon specialization and offer a wide variety of financial services in 1986. Many merchant banks entered into the investment banking and securities industries as a result of the deregulation of the industry. Too many banks have entered the securities industry, and many banks have had to get out of that business. Bank managers believe that branches will attract new customers, and they are opening branches that offer such products as life insurance and pension plans. The challenge for the UK banking industry is to meet capital adequacy standards and reduce costs without endangering the future of the industry.

United Kingdom, Financial services industry, Financial services, Services, Great Britain

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