Banking
Banking refers to the industry and practice of accepting deposits, lending money, and providing financial services. Banks play a crucial role in the economy by facilitating the flow of funds between savers and borrowers, and by offering various financial products such as loans, mortgages, and investment services. The banking sector is regulated to ensure stability and protect consumers.
8 Key excerpts on "Banking"
eBook - ePubA Practical Guide to Financial Services
Knowledge, Opportunities and Inclusion
- Lien Luu, Jonquil Lowe, Patrick Ring, Amandeep Sahota, Lien Luu, Jonquil Lowe, Patrick Ring, Amandeep Sahota(Authors)
- 2021(Publication Date)
- Routledge(Publisher)
...3 Banking Tinashe C. Bvirindi DOI: 10.4324/9781003227663-3 Key points summary Banks play a key role in the economy through financial intermediation, enabling the efficient allocation of resources between savers and borrowers. Banking institutions provide a wide variety of financial products and services and take different forms depending on the markets in which they specialise. The Banking sector in the UK has traditionally suffered from a lack of competition, although changes in technology are beginning to have an impact on the market. Banks play a key role in most economies as vehicles both for mobilising savings and for financing investment to support economic growth and development. In most economies, banks are the primary providers of savings products and the suppliers of external finance (capital) to both individuals and firms. In developing economies, where capital markets are relatively underdeveloped, banks dominate in the supply of both short-term and long-term capital. In developed economies, where capital markets play a dominant role in the financing of business enterprises, banks are the dominant suppliers of capital to individuals and to a large subset of SMEs that have no access to capital markets. In this chapter, we define a bank, explore the role of banks and discuss the different types of banks, as well as the different products and services they offer. In addition, we discuss some of the recent developments in Banking such as open Banking and digital Banking (although see Chapter 7 for more detailed discussion in digital and fintech developments)...
eBook - ePubMoney and Banking
An International Text
- Robert Eyler(Author)
- 2009(Publication Date)
- Routledge(Publisher)
...7 The microeconomics of Banking Introduction Like any other business, financial intermediaries have sales, administration, building costs, electricity bills, accounts payable, and office supplies expenses. What makes these businesses different from most others is that the product sold is money. This is true for commercial banks, insurance companies, and investment banks alike. These firms sell services also, but these services are tied to the storing and investing of money in order to make revenue. Financial intermediaries take profits from financial leverage, or in the form of commission as a percent of investor revenue made on a transaction, or both. It is important to view the financial intermediary, especially banks, like any other firm. This chapter’s focus is on the microeconomics of Banking decisions, which entails some review of basic price theory from microeconomics. Maximizing profit is assumed to be behind all decisions made by the bank to either approve or reject loan applications, choosing to hire a customer service representative, buying government debt securities, or taking in new deposits. Regulations concerning Banking and financial markets are discussed briefly, especially international differences between regulatory environments. We assume here that the profit maximization decisions made by banks are done with the appropriate regulatory environment in mind and acting as constraints on activities. Demand and supply functions are discussed as in any other business. The interaction of the marginal utility and marginal cost for the consumer takes place alongside the interaction of marginal revenue and marginal cost for the financial intermediary. The pursuit of net interest margin lies at the heart of the bank’s profit function. This chapter begins with an overview of demand and supply for deposits to fund the loanable funds market described in Chapter 2. The profit functions and optimality for a bank are also shown...
eBook - ePubThe Bank Credit Analysis Handbook
A Guide for Analysts, Bankers and Investors
- Jonathan Golin, Philippe Delhaise(Authors)
- 2013(Publication Date)
- Wiley(Publisher)
...In contrast, nonfinancial firms, with a few exceptions, are lightly regulated in most jurisdictions, and governments generally take a hands-off policy toward their activities. In most contemporary market-driven economies, if an ordinary company fails, it is of no great concern. This is not so in the case of banks. Because they depend on depositor confidence for their survival, and since governments neither want to confront irate depositors, nor more critically, contend with a significant number of banks unable to function as payment and credit conduits, deposit-taking institutions are rarely left to fend for themselves and go bust without a passing thought. Even where deposit insurance exists and depositors remain pacified, the failure of a single critical financial institution may be plausibly viewed by policymakers as likely to have a detrimental impact on the health of the regional or national financial system. Moreover, the costs of repairing a Banking crisis typically far outweigh the costs of taking prudent measures to prevent one. Governments therefore actively monitor, regulate, and—in light of the importance of banks to their respective economies—ultimately function as lenders of last resort through the national central bank, or an equivalent agency. Owing to the privileged position that banks commonly enjoy, their credit analysis must give due consideration to an institution’s role within the relevant financial system. Its position will affect the analyst’s assessment concerning the probability, and degree, of support that may be offered by the state—whether explicitly or more commonly implicitly—in the case the bank experiences financial distress. Making such assessments not only calls for consideration of applicable laws and regulations, but also relevant institutional structures and policies, both historic and prospective...
eBook - ePubThe Digital Banking Revolution
How Fintech Companies are Transforming the Retail Banking Industry Through Disruptive Financial Innovation
- Luigi Wewege, Michael C. Thomsett(Authors)
- 2019(Publication Date)
- De Gruyter(Publisher)
...Chapter 2 Overview of Banking Before we set forth the reasons why traditional retail banks are facing extinction, readers must understand the historical underpinnings influencing the evolution of the Banking system, and the extent to which these factors give insight into the current structure and organization of banks. The past provides lessons for the present and guidance for the future. Although it is not possible to predict the future, it is possible, with a perspicacious eye, to discern the complex interaction of historical forces and factors producing favorable conditions. These have enabled a select few people to identify niches for their banks and to set the finance industry on a new and previously unimagined trajectory. Brief History of Banking Today’s Banking system is the latest in a long evolution of financial services. The earliest known practices of Banking as attested to by written standards originated in Babylonia around the second millennium BC. These standards were in part formal laws, enshrined in the Code of Hammurabi, and transactions were apparently similar to the practices of modern-day Banking. However, in that ancient agrarian society deposits were not of capital but of grain or other crops, cattle, and precious metals. The fundamental concepts underlying the modern-day Banking system were evident in these primitive arrangements. Loans were advanced, deposits were received, and borrowers paid interest. Similar rudimentary Banking arrangements were prevalent in ancient Egypt, having originated in the need for grain to be stocked in warehouses of the centralized state. Depositors used written orders for taking out specific quantities of deposited grains. This system proved so effective that it became self-sustaining, spawning parallel Banking practices with respect to precious metals and coinage. The well-documented history of Banking in Italy traces back to the medieval cities of Venice, Florence, and Genoa...
eBook - ePubCulture, Conduct and Ethics in Banking
Principles and Practice
- Fred Bell(Author)
- 2019(Publication Date)
- Kogan Page(Publisher)
...04 A short history of Banking Introduction This chapter summarizes the history of Banking and the role it plays in society. The creation and changing nature of money itself are considered, as is the evolution of banks and Banking as we know it today. Finally, we will look at the 2007–08 global financial crisis and what it’s meant for banks and the Banking sector. LEARNING OBJECTIVES By the end of this chapter you will be able to: describe the evolution of money and explain its primary functions; explain how banks have evolved over time and differentiate between the types of banks that now operate in the marketplace; apply ethics to Banking and evaluate the attributes of an ethical bank; evaluate how the Banking industry has responded to crises in the industry, and in particular, the changes that have been triggered in response to the 2007–08 global financial crisis. What is money? Money is the raw material with which all banks must work. Money existed long before banks emerged, but without money it is hard to imagine what services would be required of a bank. This opening section considers the functions that money serves in society. Money has generally been viewed to have four main functions: As a means of exchange or payment Prior to the introduction of an agreed currency or money, barter was the only means of exchange. It was difficult to agree or calculate an accepted value of products unless there happened to be a ‘co-incidence of wants’, and it’s easy for us to see how difficult this could have been in terms of working out a ‘fair’ rate of exchange between two very different goods or services. Once the price of products has been established, money itself can be used as the form of payment. For money to fulfil this function there has to be trust in its use; first, that it has the underlying value it is marked as representing, and second, that it can be generally used to purchase other items in that community, region or country...
eBook - ePubContemporary Economics
An Applications Approach
- Robert Carbaugh(Author)
- 2016(Publication Date)
- Routledge(Publisher)
...The other half was in “circulation.” However, many of these coins were apparently being hoarded, as few of them were observed in day-to-day transactions. According to the adage, money makes the world go around. As far back as 300 B.C.E., Aristotle maintained that everything must be assessed in money because this allows people to exchange their services and so makes society possible. Indeed, money is an integral part of our everyday life. In this chapter, we will examine money and the role that it plays in the economy. We will focus on the nature of money, the operation of our Banking system, and the process by which money is created. Throughout this chapter, we will refer to the Federal Reserve System, which is the central Banking system of the United States. The Federal Reserve supplies banks 1 with currency, operates a nationwide clearing mechanism for checks, serves as a lender of last resort for troubled banks, supervises and examines member banks for safety and soundness, provides checking accounts for the U.S. Treasury, issues and redeems government securities, and conducts monetary policy for the nation. We will discuss the nature and operations of the Federal Reserve System more fully in the next chapter. 1 The U.S. economy has an array of banks, including commercial banks, savings and loan associations, mutual savings banks, and credit unions. We call these depository institutions : They accept deposits from people and provide checking accounts that are part of the money supply. The Meaning of Money When you go to Pizza Hut to purchase a dinner, you obtain something of value—a pizza and a soft drink. To pay for these items, you might hand the waiter some cash or a personal check. The restaurant is happy to accept either of these pieces of paper, which, in themselves are worthless...
eBook - ePubTreasury Finance and Development Banking
A Guide to Credit, Debt, and Risk
- Biagio Mazzi(Author)
- 2013(Publication Date)
- Wiley(Publisher)
...A bank exists and profits from making money available to others. To make money available is an intentionally vague expression because the ways banks inject liquidity (a favorite journalese expression meaning helping to increase the circulation of money) into the world are multiple and some are more direct than others. The simplest, and the one we shall focus on, is through lending money to whoever needs it (and, of course, qualifies for it). A loan is the main instrument of lending and the one we shall discuss at length throughout the book. In Section 3.1.1 we give a rigorous definition of it, in Section 3.3.1 we discuss its valuation, and in Chapter 7 we discuss its relationship to debt. Here we are simply going to introduce a loan in the context of a description of the activity of a bank. If we allow for the statement that, irrespective of the sophistication of a Banking activity, the business of a bank is lending, we can simply focus on loans, and for that matter the activity of a development bank is sufficient for our discussion. Any additional activity a traditional financial institution, such as an investment bank, carries out can be seen as built on this. Who are the clients facing a development bank, the entities needing a loan? A typical client of a development institution is a sovereign or private entity most often associated with the developing world; such client would seek the help of a development bank because to do the same in the capital markets would be too expensive or downright impossible. The need for a loan can be associated with a more or less specific development project that the sovereign or corporate entity envisages to carry out. The term development project is vague but we can imagine it including building schools and hospitals, developing infrastructure and power sources, even developing a basic capital market...
eBook - ePubFinance and Society in 21st Century China
Chinese Culture versus Western Markets
- Junie T. Tong(Author)
- 2016(Publication Date)
- Routledge(Publisher)
...The second part of this chapter creates an understanding, from a critical perspective, of the reality of close to four centuries of recurrent financial crises and more significantly, the resulting disastrous social and economic damage that, in turn, has proved to be hazardous to the stability and sustainability of humankind itself. The final part of this chapter, derived from the identified reality gap, aims to raise critical consciousness of the importance of promulgating an interdisciplinary-oriented rather than a purely mathematically driven financial system in the hope of bringing about better social and economic stability. Hughes and MacDonald state that since the introduction of the first world bourse (stock market) in 1460 in Antwerp ‘where capital and credit were made available to royal borrowers on an ongoing basis in return for guaranteed tax revenue or other promises of repayment’, 1 the core activity of banks was no longer just acting as intermediary between depositors and borrowers or facilitating trade in goods. Since then, Banking and money have become instruments for financial trading and speculation. Unfortunately, the free movement of capital has been controlling the fortunes and manipulating the lives of many individuals over the globe. Shelagh Heffernan, in her book entitled Modern Banking states: Kindleberger (1978) employs the Minsky (1977, 1982, 1986) model as his framework for explaining financial crisis. Kindleberger's interpretation of Minsky is as follows. Any financial crisis is an endogenous part of the business cycle...
