Banking Industry
The banking industry refers to the network of financial institutions that provide various services, including accepting deposits, lending money, and facilitating financial transactions. It plays a crucial role in the economy by channeling funds from savers to borrowers and providing essential financial services to individuals, businesses, and governments. The industry is regulated to ensure stability and protect consumers.
8 Key excerpts on "Banking Industry"
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 - ePub- Jin Cao(Author)
- 2021(Publication Date)
- Routledge(Publisher)
...PART I Introduction CHAPTER 1 Introduction DOI: 10.4324/9780429356773-2 1.1 What Are Banks and Why Are They Special? B anks are among some of the most important yet sometimes the most controversial institutions in an economy. Banks provide socially desirable services for households, firms, and other financial institutions, but bank failure often costs enormously for taxpayers and economic growth. In this chapter, we will take a brief look inside the Banking Industry, explain terms and jargon that we will use frequently in the rest of this book, and focus on the features in banking that make banks and the economics of banking special. According to Encyclopædia Britannica, a bank is “an institution that deals in money and its substitutes and provides other money-related services. In its role as a financial intermediary, a bank accepts deposits and makes loans”. That is, a bank provides financial intermediation services between lenders and borrowers, collecting funds from lenders and lending the funds to borrowers; of course, nowadays, we shall also interpret “deposits”, “loans”, “depositors”, and “borrowers” more broadly. In addition, the boundary between banks and other types of financial institutions is becoming more and more blurred, for example, certain financial institutions such as mutual funds also provide financial intermediation services. In the narrow sense, only a financial institution that carries a banking license that is issued by banking authority is legally classified as a bank...
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 - ePubEmerging FinTech
Understanding and Maximizing Their Benefits
- Paul Taylor(Author)
- 2022(Publication Date)
- Business Expert Press(Publisher)
...These services are also distributed via Branches, Websites, and Call Centers. Some Banks will offer both Retail and Business Banking through the same Branch (although Business Banking does tend to be performed from larger branches situated in towns and cities). They offer similar services as Retail Banking (see above) but they are tailored more towards corporations. The list of typical services is listed below again for completeness • Current accounts—An account at a bank where money can be deposited and withdrawn without notice. • Savings accounts—An account at a bank where a small amount of interest is paid on the amount deposited. Typically, there is no notice for adding or removing monies. • Mortgages—A legal agreement where a bank will loan money (with interest) to allow an individual to purchase a property. The mortgage loan is guaranteed by the property so if the borrower defaults then the bank can take legal title of the property. However, once the mortgage is fully paid then the bank has no claim over the property. • Personal loans—A loan from a bank to an individual for a personal need (such as buying a car). • Debit cards—A debit card is a payment card that deducts money from the customer’s current account when it is used. It can be used to purchase goods or withdraw cash from an ATM. • Credit cards—A card that allows a customer (or the cardholder) to borrow money to pay for goods and services. The customer will be charged interest on the borrowed money and sometimes they will also be charged a flat fee as well. The customer will be expected to refund the borrowed money back to the bank regularly. Investment Banking This area is often misunderstood but effectively it is a bank that performs complex, risky, and large transactions on behalf of large customers such as companies, institutions, and governments...
eBook - ePub- Ahmed Al Rajhi, Abdullah Al Salamah, Monica Malik, Rodney Wilson(Authors)
- 2012(Publication Date)
- Routledge(Publisher)
...5 The banking sector and financial markets Since the early years of economic development theory in the 1950s, there has been a good deal of debate about whether finance simply responds to the needs of enterprise or if the emergence of financial institutions is actually able to promote business and entrepreneurial activity. 1 In the former view, the role of finance is essentially a passive one, with banks and other financial institutions growing as the economy expands. In contrast to the demand-following view, the supply leading approach holds that the availability of substantial funding, perhaps at low cost, may stimulate entrepreneurial effort and encourage business ambitions. The top managers of financial institutions may themselves play an entrepreneurial role, perhaps because they are also company directors. 2 This was certainly experience in East and South-East Asia, one that proved successful in promoting high rates of economic growth, at least until the Asia crisis of 1997, which resulted in accusations of ‘crony capitalism’. Which approach is relevant to the banking experience of Saudi Arabia and the development of the kingdom’s financial markets? It would be tempting to subscribe to the demand-following approach, with banks simply responding to the growth of the potential market for their services. However, the position is more complex: the market for banking services has always been subject to state controls, with the state determining the basic structural parameters leaving the banks and other financial institutions free for the most part to compete and expand within those parameters. State involvement has not been a matter of ideology, as there was no desire to nationalise the banking system as in neighbouring Iraq, Egypt or Syria...
eBook - ePubTreasury Finance and Development Banking
A Guide to Credit, Debt, and Risk
- Biagio Mazzi(Author)
- 2013(Publication Date)
- Wiley(Publisher)
...CHAPTER 1 An Introductory View to Banking, Development Banking, and Treasury We have mentioned that our focus is going to be any treasury activity carried out by a traditional financial institution, a development bank, a corporation, or a government. When discussing the issuance of debt we will indeed draw examples from all four types of entities listed; however, when the objective will be a deeper understanding of several concatenated activities, we shall focus on the former two types of institution: investment banks and development banks. Furthermore, our view will narrow toward development banking not only because it is a special concern of ours but also because, in its simpler type of financial activity, it offers an opportunity to isolate clearly the different functions of a bank. A development institution that uses the tools of investment banking (we shall see in Section 1.6.1 that some do not) offers the simplest type of banking activity, a type made up of instruments upon which traditional investment banks have built increasingly more sophisticated ones; the higher level of sophistication, in our situation, does not translate necessarily to a better understanding. In this chapter we shall introduce the fundamental activities of a financial institution as lending, borrowing, investing, and asset liability management (ALM); we shall try to present them in this order so as to follow the business line that goes from the client’s need for a loan, through the bank’s need to fund the loan, and then invest the income generated and hedge the potential risks. We shall then conclude with a sketch of the structure of a typical financial institution and a definition of the type of development bank we shall be dealing with. 1.1 A REPRESENTATION OF THE CAPITAL FLOW IN A FINANCIAL INSTITUTION Before offering an introduction to fundamental banking activities, let us focus on a schematic representation of the flow of capital within a financial institution...
- Maureen Burton, Reynold F. Nesiba, Bruce Brown(Authors)
- 2015(Publication Date)
- Routledge(Publisher)
...Chapter Seventeen 17 Regulation of the Banking System and the Financial Services Industry DOI: 10.4324/9781315706405-22 The difficulty lies not so much in developing new ideas as in escaping from old ones. —John Maynard Keynes The people’s right to change what does not work is one of the greatest principles of our system of government. —Richard Nixon Learning Objectives After reading this chapter, you should know : Why regulation is needed in the financial services industry Who regulates whom in the banking system Some of the major pieces of legislation important to the Banking Industry today Regulatory challenges facing Congress and the regulators The Role of Regulation The ability of certain industries within a market economy to regulate themselves has been the subject of controversy for a long time. Some analysts believe that virtually no regulation is needed and that the market can handle practically every situation far better than a government regulatory agency. For example, they believe that airlines can regulate themselves better than a government regulatory agency can. 1 If an airline is unsafe, so the argument goes, it will experience more accidents than other airlines. As passengers become aware of this accident record, they will avoid flying on the unsafe airline, and it will be driven out of business. Likewise, the market can better regulate the financial services industry than any regulatory agency such as the Fed or the Office of Thrift Supervision can. According to this argument, a bank that takes too many risks will be driven out of business when cautious depositors become aware of the risks and withdraw their deposits or when the bank sustains losses and is unable to pay back depositors. At the other extreme are those who believe that the economy needs a lot of regulation because the quest for profits is so strong that, without regulation, consumer welfare will likely be jeopardized...
