What is meant by the 3-6-3 Rule?
The 3-6-3 rule is slang for the informal practice of the banking sector in the 1950s, 1960s, and 1970s.
The 3-6-3 rule describes how a
banker deposit 3% interest in a depositor's account, lends money to the
depositor at 6% interest, and then plays golf at 3pm. In the 1950s, 1960s and
1970s, a large part of banking business was lending money at higher interest
rates than paying depositors (due to strict regulations at the time).
Look at a
glance
--- The 3-6-3 rule is slang for
informal banking practice, particularly in the 1950s, 1960s, and 1970s. This
was the result of the uncompetitive, simple terms of the industry.
--- The 3-6-3 rule describes how a
banker puts 3% interest in a depositor's account, lends money to a depositor at
6% interest, and then plays golf at 3pm.
--- After the Great Depression,
the government introduced stricter banking regulations that made it difficult
for banks to compete with each other and limited the range of services they
could provide to their customers. The banking sector was generally stagnant.
Realizing
the 3-6-3 Rule
After the Great Depression, the
government introduced stricter banking regulations. This was in part due to the
problems facing the banking industry that caused the recession that triggered
the Great Depression, particularly corruption and lack of regulation. One of
the consequences of this regulation is that banks have controlled the interest
rates at which they can lend and borrow money. This made competition between
banks more difficult and limited the range of services they could provide to
their customers. Overall, the banking sector was stagnant.
With the deregulation of banking
and the widespread adoption of information technology in the decades since the
1970s, banking has now become much more competitive and complex. For example,
banks can now offer a wide range of services including personal and commercial
banking services, investment management and asset management.
In banks that provide retail
banking services, individual customers often use local branches of much larger
commercial banks. Retail banks typically offer their customers savings and
checking accounts, mortgages, personal loans, debit/credit cards, and proof of
deposit (CDs). In a private customer business, the focus is on the individual
consumer (as opposed to large customers like foundations).
A bank that provides asset
management to its clients typically manages collective investment plans (e.g. pension
funds) and oversees the assets of individual clients. Banks that deal with
collective assets may also offer a wide range of traditional and alternative
products that the average individual investor may not have, such as IPO
opportunities and hedge funds.
A bank that
offers wealth management services can serve both people with high net worth and
those with very high net worth. The financial advisors of these banks typically
work with their clients to develop tailored financial solutions to their needs.
Financial advisors can also provide professional services such as investment
management, income tax preparation, and estate planning. Most financial
advisors seek the Certified Financial Analyst (CFA) certification, which
measures their competence and integrity in the field of investment management.
