Banks, like any organization, should have a business/strategic plan which sets forth the objectives and strategies of the board of directors. The plan should provide basic priorities and guidance for internal management and should be approved by the board of directors. The plan should not be a static document but should allow for change and flexibility as circumstances may require. Changes in objectives or strategic goals should be approved by the board of directors and then incorporated into an amended plan.
The Reserve Bank will review an institution's business or strategic plan at periodic examinations or when other regulatory issues arise. Organizing groups applying for a banking licence must submit for review a detailed business plan as part of the application process. When establishing a branch or making a significant change in operations, an institution may also be requested to submit an amended business plan.
A suggested format for preparing a business plan is attached; however, any alternative format may be used provided all pertinent information is included. The plan should identify the proposed market(s) to be served, products and services to be offered, projected profitability, capital adequacy, and managerial resources and capabilities. The plan should include at least three years' operating projections and should contain sufficient information to demonstrate a reasonable likelihood of success. Appendix A ("Business Plan Checklist") provides a list of factors which will be assessed and is enclosed for guidance.
The Reserve Bank may request additional information depending on the adequacy of the original materials submitted and/or on the results of any review or examination.
I. Identifying Information.
- Name and location. State the name and location of the institution including location(s) of any branches.
- Corporate structure. Describe and provide a diagram of the institution's corporate structure including any parent company, subsidiaries, or affiliated entities.
- Origin and basis. Briefly discuss how the organizing group came together and the reasons for wanting to start a bank.
II. Market Analysis.
- Market. Identify the market(s) to be served by the proposed institution.
- Economy. Describe the economic characteristics of the target market(s). Include any anticipated changes in the market, factors influencing such changes, and possible effect(s) on the institution.
III. Business Strategy and Objectives.
- Services. Briefly describe the services to be offered by the institution. Distinguish among depository services, credit services, fiduciary services, etc.
- Assumptions. List major assumptions upon which projections are based. Include, at a minimum: market growth rates, competition, interest rates, cost of funds, overhead, asset-liability mix, returns on assets and equity, dividends, and capital ratios (both leverage and risk based ratios).
- Pro forma statements. Provide pro forma balance sheets and income (profit and loss) statements for three years. Show expected asset-liability mixes, volume of each type of service to be offered, fixed asset investment, and compensation to be given to management and staff.
- External audits. Indicate the provisions made for an annual external audit as is required by the Banking Act.
IV. Leadership and Management.
- Officers and compensation. Provide a list of officers showing the fees, salaries, and other forms of compensation or benefits to be given each individual.
- Insider agreements. Describe any agreements for leases or services the institution intends to enter into with any of its directors, executive officers, or principal shareholders, or with any organization or affiliate controlled by a director, executive officer, or principal shareholder. Provide copies of any such agreements including specific details of rates and terms and comparative market data upon which the rates and terms are based.
V. Capitalization and Additional Sources.
- Capital plan. Describe plans for financing growth, internally or externally, over the first three years of operation.
- Additional capital sources. Describe what sources of additional capital are available should the need arise.