Mar
2023

The Extraordinary Materials in the Seemingly Ordinary Bank Check

When it comes to the technology involved in printing checks, the finance industry has come up with so many innovations that have paved the way for more secure transactions. In the past, banks were the only sources for printing checks. Nowadays, check printing services are practically everywhere-from companies that print out checks; some charitable institutions; and, of course, the Internet.

Check printing companies offer cheaper services as compared to their bank counterparts. High rates could be easily avoided with the employment of these companies. Also, the number of days in ordering checks have been dramatically reduced which makes them a popular choice among users. More and more companies now personalize their checks and the numbers just keep growing.

Most of the companies who offer their services to print checks use special software. For individuals who want to do the printing themselves, these software programs can be easily downloaded at a certain price (others come for free but only come with basic features).

In order to come up with special printed out checks, a special paper is used by these companies. A bank check now normally utilizes the MICR or Magnetic Ink Character Recognition technology and they can only be printed on these special, safety papers. A check paper is a bonded paper that has been treated with chemicals and is primarily used in printing deposit slips, coupons, bonds, merchandise certificates, warranties, and checks.

This special type of paper is highly durable and can even be used with high-speed equipment due to its resilience to stress. Also, it has a unique security feature as it can help detect alterations on the check or even forgery. Other security features include watermarks and original document security screen; microline; warning band; and void pantographs. And for the artistic users out there, they can even choose from a variety of designs and colors.

The papers used in printing checks have to meet certain requirements before they pass the quality checks. The moisture content of these papers has to be on the range of 4-6%. In order to remain at such a range, they have to be stored in an area that is free from extreme hot or cold temperatures. Also, humidity must be avoided. Formatted checks are then printed out on blank secure safety check stock with the aid of laser printers and MICR toners.

All checks that have been printed and have conformed to these standards that were set by the Federal Reserve Board of Governors CC could then be released to their users. Such are the rigorous practices that are involved in printing checks if only to ensure security-and they’re really worth it.

Jul
2022

Investing in China – The Banking Sector

China’s banking sector has traditionally served as a party-controlled feeding trough for its inefficient, unprofitable state-owned enterprises (SOEs), most of which were technically insolvent. The process was simple – extend a loan to an unqualified SOE applicant, then write off the loan as a bad debt when it failed to repay. This situation is beginning to change, and Chinese banks are attracting the attention of foreign banks that are beginning to view them as investment opportunities rather than potential competitors. Nevertheless, China’s banking industry is beset by several problems.

1. SOE Lending: The importance of the Chinese banking sector as a source of domestic capital is hard to overstate. Mainland China’s stock markets are anemic compared to the behemoths of Hong Kong, Tokyo and New York, and China’s bond market is virtually nonexistent. That leaves banks as the only major source of over-the-table domestic funding for private enterprises. Yet SOE lending continues to siphon off a good part of banking capital, notwithstanding that China’s stock markets were largely designed to provide SOEs with an alternative source of funding. Many domestic companies have resorted to the underground institutional loan sharks with their high interest rates, or relying solely on retained earnings for funding. Even though SOE loan defaults have declined dramatically at some banks for recent loans, the industry as a whole is still experiencing a hangover from imprudent lending under earlier, more politicized lending policies.

2. Corruption: There is a crackdown underway, but corruption is rampant in many sectors of the Chinese economy, and the government is always cracking down on corruption in this or that industry. Meanwhile, the cycle continues. It is tempting to predict that only the threat of bankruptcy due to foreign competition will ever be enough to create the political will necessary for consistent enforcement of the law.

3. Decentralization: China’s banking sector looks fairly centralized on paper, but the hidden problem is the de facto independence of far-flung branches from headquarters. China’s branch banks have been used to operating with a much greater independence than is the rule in the West (thus contributing greatly to the corruption problem), and any attempt to assert control from HQ is bound to be met with spirited local resistance.

The moment of truth is coming up fast, however, as China’s WTO commitments require it to fully open its banking and insurance markets to foreign competition next year. The government is responding introducing a host of new regulations to rationalize lending practices and by cracking down on internal corruption (whether the new regulations will actually be followed by the branch banks is a question that only time can answer). Banks are responding by listing with IPOs on overseas markets and with American-style “downsizing”, closing branches and laying off staff.

Foreign banks are responding by investing billions of dollars into Chinese banks, surprising in light of the above problems. Furthermore, they are acquiring minority stakes that are unlikely to ever offer them operational control, in some cases mainly for the purpose of securing access to distribution networks for insurance, credit cards, and investment products after 2007.

Nobody wants to see China’s banks wither in the wake of foreign competition – not even their foreign “competitors”, because a Chinese banking crisis would have a significant negative effect on the entire world economy.