Notes

Analysis and Forecast of Interest rates
As interest rates are an ever-changing factor of the finance industry, there needs to be a solution for the bank to cope with the implications of fluctuating interest rates. The first recommendation is to form a team which functions to monitor the interest rates and the factors which might affect the rates. This understanding of the interest rates would help forecast the movement of local interest rates in the near future.
Whenever there is an event that might affect the interest rates badly, the team can take immediate action and notify the relevant teams to minimise the impact on the bank. For example, when there is a sudden excess of funds in the system, it is expected that interest rates would drop. Therefore, if interest rates were to drop, it would be less beneficial for the bank to give out loans. In this case, it would require them to boost other sources of revenue or to increase the number of loans given out to make up for the loss in income.
On the other hand, if there is a prediction that the interest rates are going to rise, the bank would potential see a drop in the demand for loans. Therefore, the bank can come up with more flexible loans to maintain profits.
This would benefit the bank as it allows the bank to stay ahead of its competition. By being the first to react, it would provide the bank with ample time to shift the focus in its operations and put itself in the most beneficial position according to the situation.
For this idea to take effect, it would require experienced staffs which have high analytical skills and are familiar with the interest rate environment in Singapore. This would pose an issue has it is not easy and costly to hire someone with such experience. However, if there were to be a wrong move done by the bank due to incorrect forecast of the rates, it might in turn bring harm the company’s profits and put the company in a much riskier position.