The various business organizations and banks are seeking tremendous challenges due globalization and its emerging competitive trends. Cost allocation in banks is also one of these competitive challenges in the USA market. Now banks are also revising its polices one after another for an effective marketing strategy and gaining healthy customer relations. Therefore, usually banks allocate their costs from the back office to the front office.
Basically back office means the internal operations related to cost and management in any organization or bank, which is not visible to the public. It is the internal cost allocation policies that are not accessible to common public. And the front office is that part of policies that are made known to the public. Where allocation of cost means to assign and then reassign cost to one or more activities from the back office to the front office and from the front office to the back office. It seems to be a complicated and technical process.
Though a simple but important question comes to our mind when we talk about the cost allocation of banks from its back office to the front office, that is what is the basis for these allocations and what is the most equitable for the banks? So lets try to find these answers in brief.
In order to enhance its power to manage currency and channel the money flow and to boost its volume transaction s from the money changers, they direct the their money transfers from big economic agents both internationally as well as nationally. They therefore, in order to deal with the new market dimensions they follow a strategy to introduce new economic packages, including different kinds of loans etc to meet the demands and patterns of their customers. So in order to get an equitable market for the banks, there should...