Abstract

Component Control versus Profit Control in Banking — Aspects of the Control of Decentral Units

The paper discusses the issue of whether the rating and control of bank branches should be carried out with the help of their profit per period or - to avoid the disadvantage of “external assessment” by way of inter-branch accounting prices - preferably on the basis of earnings components such as business volume, business terms and operating expenses. Interest centres therefore around the problem of how the various earnings components can be consolidated into a uniform rating and control criterion. From this standpoint, a component control system found in banking practice is examined as to its suitability for guiding a branch manager’s activities in the direction of the bank’s overall objective. The arguments presented here lead to the conclusion that the rating criteria applied in the investigated control system are unsuitable, because they do not give an adequate picture of the branch’s contribution to the results of the bank as a whole.