Bank and Other Financial Institution

8/6/2019 Bank and Other Financial Institution

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Bank and Other Financial

Institution

Bank and Other Financial

Institution

Week 1


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DefinitionDefinition

A banker or bank is a financial institution

whose primary activity is to act as a

payment agent for customers and to

borrow and lend money.

The first modern bank was founded in Italy

in Genoa in 1406, its name was Banco diSan Giorgio (Bank of St. George).


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Under English common law, a banker is

defined as a person who carries on the

business of banking, which is specified as:

1. conducting current accounts for his customers2. paying cheques drawn on him, and

3. collecting cheques for his customers.


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According Act No. 10 Year 1998, definition

of bank: bank adalah badan usaha yang

menghimpun dana dari masyarakat dalam

bentuk simpanan dan menyalurkannyakepada masyarakat dalam bentuk kredit

dan atau bentuk-bentuk lainnya dalam

rangka meningkatkan taraf hidup rakyat

banyak.


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Origin of Word Bank'Origin of Word Bank'

The name bank derives from the Italian word banco

"desk/bench", used during the Renaissance by

Florentines bankers, who used to make their

transactions above a desk covered by a green

tablecloth. In fact, the word traces its origins back to the Ancient

Roman Empire, where moneylenders would set up their

stalls in the middle of enclosed courtyards called macella

on a long bench called a bancu, from which the words

banco and bank are derived.

As a moneychanger, the merchant at the bancu did not

so much invest money as merely convert the foreign

currency into the only legal tender in Rome- that of the

Imperial Mint.


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Function of Financial InstitutionFunction of Financial Institution

Lender-Savers

Households

Firms Government

Foreigners

Financial

Markets

Borrowers-Spenders

Business-Firms

Government Households

Foreigners

Direct Finance

Indirect Finance

Financial

Intermediaries


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Traditional Bank ActivitiesTraditional Bank Activities

Banks act as payment agents by

conducting checking or current accounts

for customers, paying cheques drawn by

customers on the bank, and collectingcheques deposited to customers' current

accounts. Banks also enable customer

payments via other payment methods

such as telegraphic transfer, EFTPOS,

and ATM.


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Traditional Bank ActivitiesTraditional Bank Activities

Banks borrow money by accepting fundsdeposited on current account, accepting termdeposits and by issuing debt securities suchas banknotes and bonds.

Banks lend money by making advances tocustomers on current account, by making

installment loans, and by investing inmarketable debt securities and other forms ofmoney lending.


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Wider Commercial Bank RoleWider Commercial Bank Role

However the commercial role of banks is wider than banking, andincludes:

1. issue of banknotes (promissory notes issued by a banker andpayable to bearer on demand)

2. processing of payments by way of telegraphic transfer, EFTPOS,internet banking or other means

3. issuing bank drafts and bank cheques4. accepting money on term deposit

5. lending money by way of overdraft, installment loan or otherwise

6. providing documentary and standby letters of credit, guarantees,performance bonds, securities underwriting commitments andother forms of off balance sheet exposures

7. safekeeping of documents and other items in safe deposit boxes8. currency exchange

9. sale, distribution or brokerage, with or without advice, of insurance,unit trusts and similar financial products as a 'financialsupermarket'


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Type of BanksType of Banks

Based on Act No. 10 Year 1998, types of

banks are Commercial Bank (Bank

Umum) dan Rural Bank (Bank Perkreditan

Rakyat) Types of Bank based on ownership:

1. National Bank Owned by Government

2. Private National Bank3. Foreign Bank

4. Mixed Bank


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Type of BanksType of Banks

Type of Bank Based on Operation of

Banks (according to API):

1. International Bank (equity > Rp 50 billion)

2. National Bank (equity Rp10 trillion Rp 50trillion)

3. Local Bank (Rp 100 billion Rp 10 trillion)


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Banking ChannelsBanking Channels

Banks offer many different channels to access theirbanking and other services:

A branch, banking centre or financial centre is a retaillocation where a bank or financial institution offers awide array of face-to-face service to its customers

ATM is a computerised telecommunications devicethat provides a financial institution's customers amethod of financial transactions in a public spacewithout the need for a human clerk or bank teller. Most

banks now have more ATMs than branches, andATMs are providing a wider range of services to awider range of users.


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Mail is part of the postal system which are

delivered to destinations around the world.

This can be used to deposit cheques and

to send orders to the bank to pay moneyto third parties.


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Telephone banking is a service provided

by a financial institution which allows its

customers to perform transactions over

the telephone. This normally includes billpayments for bills from major billers (e.g.

for electricity, credit card bill, transfer, etc.)


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Online banking is a term used for

performing transactions, payments etc.

over the Internet through a bank, credit

union or building society's secure website


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Bank and Other Financial Institution

Documents

Transcript of Bank and Other Financial Institution