Does it make sense to split a Bank's costs into variable vs fixed? Or is there a better segmentation?
(edited)
Cost Structure of Banks?
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Hi Anonymous,
fix and variable is a feasible way to divide costs for a bank. You may also use other ways (eg value chain or operational functions), the important thing is that:
- Your division is MECE
- Your division helps to brainstorm easily the main types of costs
Best,
Francesco
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Hi! There are many many ways how you can structure costs. You can do it according to business lines (for example interest vs non interest), business processes, functional groups, logical categories (e.g., fixed and variable), or many other. There is no "best" option! You have to just be aware of the fact that there are many possibilities, and that it is your task to find out, which kind of categorization makes most sense given the context and data available. This is done by means of clear communication with the interviewer.
Cheers, Sidi
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I would split it into interest and non-interest expense. Makes much more sense... You can also have a look at a 10-k of a bank ;)
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Hello!
Yes, makes sense, but I would advise you to look at each cases prompt to see what approach makes most sense.
Hope it helps!
Cheers,
Clara
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Hi,
Don't forget to add Cost of Capital, Provisions (cost of risk) and of course the classic FC, VC
Best
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You can do so - banks also have variable and fixed costs. What goes into those buckets e.g, fixed = CCAR/Regulatory, Real Estate or Administrative costs is what differentiates it from other industries
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