7/23/2019 Chapter 1 Banks

http://slidepdf.com/reader/full/chapter-1-banks 1/9

BANKINGSummer Term (I), 2015Instructor: Sumaira Hamid

Chapter 1:An Overview of Banks & their Services

7/23/2019 Chapter 1 Banks

http://slidepdf.com/reader/full/chapter-1-banks 2/9

What is a bank?i!erence Between Bank "epositor# Instit$tion & NonBankin% Instit$tion "Nonepositor# Instit$tion'

• Bankepositor# Instit$tion:

 – A (nancia) inter*e+iar# accepting deposits and granting loans;ofers te !idest menu o" ser#ices o" an$ %nancial institution

• &an's ,-NC.IONA/ .ASK is to IN.020IA.0  et!een s$rp)$s $nitsan+ +e(cit units $ ofering %nancial ser#ices to indulge in trans"erring o""unds "rom one group to anoter

• Inter*e+iation activit# !ill e pro%tale as long as sprea+ is positive

 – A epositor# Instit$tion : Autorised to collect deposits and sinceit deals !it pulic "unds, a depositor$ institution is directl$ans!erale to te entral &an' (e*g S&+)

 – 2a3or so$rce o" "unds eposit Borrowin%s

7/23/2019 Chapter 1 Banks

http://slidepdf.com/reader/full/chapter-1-banks 3/9

• Nonepositor# Instit$tion or NonBankin% Instit$tion "NB,I'

 – A (nancia) inter*e+iar# other than

+epositor# instit$tion ofering cec'ingaccounts or loans b$t not both  e-ample .easingcompan$, securit$ %rms etc

 –

A Nonepositor# Instit$tion is  NO.Autorised to collect deposits li'e an's

 – 2a3or so$rce o" "unds: NonepositBorrowin%s or 04$it#

7/23/2019 Chapter 1 Banks

http://slidepdf.com/reader/full/chapter-1-banks 4/9

Ke# NonBank Co*petitors Bankers ,ace .o+a#

7/23/2019 Chapter 1 Banks

http://slidepdf.com/reader/full/chapter-1-banks 5/9

Wh# banks e5ist? What essentia) services +o banksprovi+e that other b$sinesses an+ in+ivi+$a)s cannotprovi+e for the*se)ves?

• ivision of )ar%e instr$*ents: an's pro#ide a #aluale ser#icein di#iding up tose instruments !ic e#er$one cannot aford intosmaller securities tat are readil$ a#ailale "or millions o" people

• isk Arbitra%e: Anoter contriution an's ma'e is teir!illingness to accept ris'$ loans "rom orro!ers, !ile issuing lo!/ris' securities to teir depositors

• /i4$i+it#: an's also satis"$ te strong need o" man$ customers"or liuidit$

• Infor*ation as#**etr#: &an's a#e prospered in teir superiorailit$ to e#aluate in"ormation

• e)e%ate  2onitors:  Te ailit$ o" an's to gater anal$e%nancial in"ormation as gi#en rise to anoter #ie! o" !$ an's

e-ist in modern societ$

7/23/2019 Chapter 1 Banks

http://slidepdf.com/reader/full/chapter-1-banks 6/9

Services Banks have o!ere+ thro$%ho$t histor#

• Carr#in% o$t c$rrenc# e5chan%e : trade currencies

• isco$ntin% co**ercia) notes & *akin% b$siness )oans: – on#erting I34s recei#ed $ mercants "rom teir customers into cas

• O!erin% savin% +eposits:  Tri"t accounts tat pa$ interest

encourage to sa#e

• Safekeepin% of va)$ab)es

• S$pportin% %overn*ent activities with cre+it:

• O!erin% checkin% acco$nts "e*an+ eposits' 6NonInterest

• O!erin% .r$st Services: anaging customers6 propert$ and

in#esting teir "unds "or a "ees

7/23/2019 Chapter 1 Banks

http://slidepdf.com/reader/full/chapter-1-banks 7/9

Services Banks have +eve)ope+ *ore recent)#

• Grantin% Cons$*er )oans

• ,inancia) A+visin% 6 7inancial +lanning

• Cash 2ana%e*ent 6 anage liuidit$ 8 cas accounts

• O!erin% 04$ip*ent /easin% 6 7inance 3perating .ease

• 2akin% 7ent$re Capita) /oans 6 7inance ne! companies

• Se))in% Ins$rance Services

• Se))in% etire*ent 8)ans

• O!erin% Sec$rit# Brokera%e Invest*ent Services 6 Trading o" securities

• O!erin% 2$t$a) ,$n+s an+ Ann$ities

• O!erin% Invest*ent Bankin%: elp Issuance o" securities, ad#isor$

ser#ices

7/23/2019 Chapter 1 Banks

http://slidepdf.com/reader/full/chapter-1-banks 8/9

.he 2an# i!erent o)es Banks 8)a# in the 0cono*#

7/23/2019 Chapter 1 Banks

http://slidepdf.com/reader/full/chapter-1-banks 9/9

.ren+s A!ectin% A)) Banks

• Service 8ro)iferation: +roduct Inno#ation, !ide menu o" ser#ices

• isin% Co*petition

• ere%$)ation 6 loosening o" go#ernment control

•

isin% ,$n+in% Costs 6 related to sources o" "unds 8 %nancing

• An Increasin%)# Interest Sensitive 2i5 of ,$n+s

• A .echno)o%ica) evo)$tion: automation electronic net!or's"or ease o" transaction, pa$ments etc

• Conso)i+ation & Geo%raphic 05pansion

• G)oba)i9ation of Bankin% &an's competing around te !orld

• Increase+ isk of ,ai)$re