Many people think that banks have their work cut out for them. After all, they do not run out of loan applicants and account holders to begin with. Thus, there would certainly be a lot of profit waiting for any person or group of persons considering delving into the operations of banks, right? Wrong. This is because just like any other industry, there are a number of factors to consider in ensuring the success of banks as business ventures. This is precisely why there is a need to incur the proper development of the BSC for banking. BSC here stands for the balanced scorecard.
The balanced scorecard used in the banking industry is different from other scorecards used in other industries. This is greatly attributed to the CTQs or Critical to Quality Standards. Any existing business must have reference standards so as to know what is right from what is wrong. The same is needed in the banking industry as well.
To ensure that the BSC developed is indeed a balanced one, there then has to be KPIs involved. These KPIs may differ from one bank to another, depending on the purpose that they fulfill. However, there are some KPIs that just might be uniformed all throughout. Here are some of them.
The total cash deposits held by the bank is one important KPI that you should never forget to use. Just to keep the figures manageable, go for the monthly total, so that it would not be too hard on your part to analyze the figures. This should be included because this indicates just how effective the bank is when it comes to attracting clients, luring them to make those deposits themselves. After all, banks do earn their profit from the very deposits made by their clients. Related to this KPI, banks should also include the average annual deposits for perusal.
Another KPI that should include is the average number of depositors. This is an easy enough figure to compute when there is just one branch in operation. However, this is not really the likely case because banks are known to branch out and extend its reach to a wider market. Thus, this figure should be computed for each branch in existence. This is still connected to the first KPI, in that the bank’s ability to attract clients and keep them in its grasp is being tested.
We all know that not all accounts in a bank are as active as the bank hope they would be. There would definitely be dormant accounts, just lying there accumulating interest, while their holders are no longer actively depositing money into them every payday. The ration between the active and the dormant ones should be included as a relevant KPI as well.
There are always borrowing risks entailed in banks, especially when it comes to their system of approving loan applications. The rate of borrowing risk would also make a great KPI to be included on the BSC for banking. Banks should exert effort in determining the potential of a loan applicant to default his or her loan. With these in mind, you are now guided on the basic KPIs to include on your banking BSC.
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