Semester 2 

This module focuses on dealing with business and/or corporate customers.  Financial institutions can differ in how they structure their retail and business areas.  Some include sole traders, partnerships and even small to medium enterprises in their retail operations, and restrict corporate operations to large companies above a certain size.  However, for the purposes of this syllabus, business/corporate customers include all customers who are trading, regardless of their size or structure.  Many financial institutions also segment their corporate customer base, with larger businesses being dealt with by specialist relationship managers, and these types of segmentation policies are discussed within this module.  The module has been designed to provide the student with an understanding of and an ability to analyse the detailed relationship between a financial institution and its business/corporate customer, including both legal and practical aspects of the relationship.  Students will have the opportunity to demonstrate not only their grasp of the principles and technical knowledge required for effective customer relationship management and corporate lending, but also their ability to apply this knowledge and understanding in practical terms to meeting specific customer requirements. 

Financial Services Commercial Environment module. 
Management in Financial Service Organisations module. 

This module has been designed to provide the requisite skills, knowledge and understanding to enable students to effectively manage business and corporate customer relationships and to discuss confidently with such customers the main range of financial products and services available to meet their needs and requirements.  The syllabus is arranged in several ‘sections’ covering the basic banker-customer relationship for different types of businesses; the analysis of lending propositions; taking security; monitoring and controlling risks once the money has been lent; understanding the impact of various insolvency regimes and how they may affect the relationship; and the broader spectrum of products and services available to support and maintain specific types of relationship. 

On completion of this module, students will be able to:
·              Understand the legal and practical principles of effective business customer management. 
·              Assess business-lending propositions using techniques of credit risk assessment in order to reach and justify lending decisions, including: the use of industry analysis, management and financial assessment, security, and conditions attaching to agreements to lend. 
·              Understand the methods of effective credit monitoring, control and recovery and demonstrate how and when to apply them.
·              Explain the key features of services relevant to a business customer’s situation and make appropriate recommendations in specific cases. 
·              Discuss the general principles of security, and define and demonstrate the legal and practical implications of different types of security. 
·              Discuss the general principles of insolvency, and define and demonstrate the legal and practical implications of insolvency. 

Banker-customer relationship This section of the syllabus is designed to provide students with essential foundation knowledge.  The basic concepts contained in this section are fundamental legal principles which students will need during their study of the subsequent sections of this module.  The aspects of the law detailed below will form the syllabus, but only in relation to the banker-customer relationship.  It covers the following issues: basic contract law 
·              concepts of equity 
·              implied and contractual relationships 
·              effects and extent of exclusion clauses (relates to liability) 
·              definition of a customer: duty of care and core account services 
·              types of customer: business and personal 
Understanding businesses 
This section covers the principal elements crucial in the understanding of businesses.  It examines the non-financial elements of a business, such as assessing the management skills of the business, the implications of the business structure chosen and the sector within which the business operates.  The segmentation policies of financial service providers are explored in some detail.  It covers the following issues:
·              types of customer (business) liability: key differentials between types of business structure and the liability of individuals involved 
·              comparisons between the personal liabilities of: sole traders, partners, directors, shareholders 
·              industry sector: attractiveness or otherwise of a particular sector/industry, position of the customer within a sector/industry 
·              management skills of business customers: quality of the management of a business, a key influence on the ability of a business to perform successfully, including leadership, management structure, teamwork, business planning, succession, marketing, operations and financial skills, integrity and reputation
Key principles of business customer relationship management (CRM)
This section focuses upon the key principles of customer relationship management as they apply to the different types of business/customer environment covered in section 2.  It also examines how and why financial services providers choose to apply these principles in different specialist business areas and market segments.  There is particular emphasis upon the rationale behind the heavy reliance on segmentation within this key market.  It covers the following issues:
CRM as it applies to: 
·              types of business structure 
·              industry sector 
·              position of customer within the sector 
·              different levels of management skills and abilities of an organisation 
Services relevant to business customers 
This section of the syllabus highlights that the provision of relevant services in a timely manner is a crucial issue in the relationship between the financial service provider and the corporate customer.  Some of the services covered are common to any relationship between such a provider and its customer, such as current account provision.  Other services are indicative of this unique relationship, such as factoring and international trade finance.  This section of the syllabus highlights where these services are relevant and the best way in which they can be introduced to the corporate customer.  It covers the following: interest bearing accounts, current accounts, insurances, factoring/invoice discounting, asset finance, international trade finance, lending, interest rate management (to include swaps), foreign exchange risk management. 
Financial assessment of a business lending proposition 
This section of the syllabus is designed to allow students to develop their ability to understand and interpret financial statements and evaluate trends in financial ratios that can indicate the health of a business and its ability to meet its debt servicing obligations.  In particular, it focuses upon how cash is generated within a business and its importance to the health of that business.  Through their study, students will be able to critically evaluate business projections, including budgets and cash flow statements, and to complete sensitivity analyses in order to produce a reasoned assessment of the business and its ability to repay bank debt.  It covers the following issues: 
·              corporate reports 
·              traditional ratio analysis: profitability, profit, working capital, gearing, investor performance ratios
·              cash flow analysis: risk assessment ratios, cash performance ratios, operating cash flows, free cash flows, limitations 
·              projections and budgets: basic assumptions, sense check 
Security
This section of the syllabus enables students to understand the strengths and weaknesses of different types of security, how it can be valued, and its suitability as a secondary source of repayment.  It also focuses upon the realisation of security, the issues, effects and problems associated with each type of security.  (NB: Detailed procedures for perfecting security will not be covered or be required in the assessment.)  Ifs focus is learning outcome 5 and covers the following issues: 
·              forms and types of security (nature, legal effect/implications, use and enforcement of each of lien, pledge, equitable charge, mortgage, debentures) 
·              attributes of good security
·              assets as security: land and buildings, life policies, stocks and shares, chattels, company assets (e.g. stock and debtors) 
·              realisation: default, effect of realising different securities, problems on realisation (e.g. undue influence and equitable interest). 
Terms and conditions of lending 
This section of the syllabus focuses upon the identification and evaluation of suitable terms and conditions for lending and how these are incorporated in the appropriate documentation.  It also examines the purpose, rationale behind and implications for both the lender and borrower of such terms and conditions.It covers the following issues: 
·              pricing – both interest rate margin and fees
·              covenants that may attach to the lending, including actions on breach 
·              implications of taking no action on breach 
Structuring, presenting and assessing a lending application
This section of the syllabus is concerned with how to package a lending application in a suitable manner, using a suitable model and covering all relevant elements associated with that lend.  It emphasises that different sectors, borrowers and types of customer all carry different risks that need to be analysed carefully.  In particular, different types of businesses run according to different operating models and have different types of borrowing requirements that pose different sorts of problems for the lender.  For example, the working capital requirement of a shipbuilder is very different to that of a supermarket.It covers the following issues:
·              models available, e.g. CAMPARI, CCCPARTS 
·              the borrowing requirements and credit risks of differing types of business, including: retailing, service industries, wholesaling, manufacturing, property (investment and construction), farming, professionals, franchising 
Credit monitoring, control and recovery 
This section of the module focuses firstly on the monitoring and control that is necessary to ensure that there are no adverse trends in the performance of a business that would impact on its ability to service its debt.  It considers and evaluates the monitoring and control procedures that are part of business management and how those procedures can be utilized to monitor the health of an advance.  This requires an understanding of management accounts, budgets, forecasts and variance analysis.  Students will be made aware of the warning signals that can indicate that business performance may be going awry.  Secondly, this section considers the actions a bank may decide to take when business performance deteriorates and what the alternative strategies may be for both the bank and the business. It covers the following issues: 
·              credit monitoring across a local portfolio basis (e.g. a branch portfolio) 
·              monitoring and control procedures that are part of business management and how these can be utilised to monitor the health of an advance
·              management accounts, budgets, forecasts and variance analysis 
·              warning signals 
·              actions a bank may take when business performance deteriorates
·              alternative strategies for the bank and the business (practical aspects)Insolvency 
This section of the syllabus explores the different insolvency regimes affecting sole traders, limited companies and partnerships, and the implications for lenders and customers alike, including the recent legal changes in this rapidly changing area. It covers the following issues: 
·              core concepts of insolvency 
·              regimes: personal, corporate, alternatives 
·              order of priority/licensing of practitioners 
·              implications, including impact on security
·              outcomes, including disqualification of directors 

The teaching and learning strategy is designed to ensure that students achieve the learning outcomes by the end of the module.  The teaching and learning methods include formal lecture and tutorial, private study of text and other supporting materials, a formal coursework assignment, informal exercises, both individual and group-based and pooling of experience and knowledge through class and individual discussion. 
Assessment Strategy 
The assessment strategy is designed to achieve a balance between testing the student's skills of knowledge recall and understanding and those of analysis, research, reflection and application.  This distinction is reflected in the different assessment instruments and the balance between the coursework assignment and the final written examination.

Essential Reading 
Raby, P. (2007) Corporate Financial Services.  ifs School of Finance. 
Background Reading 
Cranston , R. (2002) Principles of Banking Law.  2^nd edn.  Oxford University Press.
Ellinger, E.P., Lomnika, E. and Hooley, R. (2005) Ellinger’s Modern Banking Law.  4^th edn.  Oxford Univesity Press. 
Payne, A. (2006) Handbook of CRM: Achieving Excellence in Customer Management.  Oxford : Elsvier. 
Roberts, G. (2005) Law Relating to Financial Services.  Global Professional. 
Rouse, C.N. (2004) Applied Lending Techniques.  2^nd edn.  Financial World Publishing. 
Wadley, J. and Penn, G.A. (2000)  The Law Relating to Domestic Banking.  2^nd edn.  Sweet and Maxwell.
Journals
Financial World 
Journal of International Banking and Finance Law 
The Times – Law Reports 
Websites 
www.apacs.org.uk                                Association of Payment Clearing Services 
www.bba.org.uk/public/corporate              British Bankers Association
www.financial-ombudsman.org.uk            Banking Ombudsman
www.insolvency.co.uk                                  Insolvency 
www.freethcartwright.co.uk  

Additional reading sources (and links thereto) will be available through ifs knowledgebank.