With the global economic crisis worsening more than ever, it becomes more and more vital for banks to establish a reliable set of banking metrics. Outside the banking industry, it is so easy to assume that operating or managing a bank is an easy task. All you really have to do is compile reports of banking transactions that take place in a week, a month, or a year, and you are good to go already, right? As nice as this assumption of the typical bank manager job is, nothing could be further from the truth. There are actually so many aspects that bank managers have to deal with day in and day out, which is primarily why bank managers do extend their working hours from time to time, just to deal with whatever backlogs there may be. Thus, it is indeed important for banks to implement reliable metrics – now more than ever with the impending doom brought about by the global recession we are currently facing.
Metrics, by definition, are quantifiable performance measures that show just how well or how bad a certain enterprise is performing. In the industry of banking, this metric would then be a balanced and unbiased gauge of how the bank is performing when you match it against the very and objectives that it wishes to achieve. Just how far along – or how far off, for that matter – is the bank currently at when it comes to achieving its own goals and objectives? Should the bank pursue its current path? Or would it be better to take another path so that more goals and objectives would be achieved? These are just some questions to be raised and the implementation of metrics in the banking industry can help you get the answers to these rather elusive questions.
Going into the metrics to be used, you must remember that it is important to use metrics that are relevant to the bank’s standards, goals, and objectives. It would be unwise to use metrics that are not of any relevance whatsoever to the nature of the bank’s operations and that of the bank itself. The overall performance of the bank should be the focus of the activity here as well.
One important banking metric that you can use is the monthly total of cash deposits. You should include this metric on your scorecard because it gives you an accurate view of just how effective your bank has been in attracting clients to making deposits with your bank. After all, banks depend greatly the cash deposits of their clients for profit. A related metric could be the annual total of cash deposits.
The ratio of active depositors to dormant depositors can be a useful metric as well. You have to remember that making deposits is not enough to ensure profit. The accounts of your clients should be active as well to ensure profit generation. Unfortunately, some clients just leave their accounts after making the minimum deposit required to create their bank accounts. The ratio here should be as low as possible so monitoring this metric is important as well.
These are some examples of banking metrics you might want to consider adding onto your scorecard. Remember that these metrics are important to have when it comes to ensuring the successful performance of your bank.