Chapter: 01

An Over view of Banks & T heir Ser vices

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What is a Bank? Experts Opinions

A dealer in debts his own & of other people. Geoffrey Crowther A bank as an institution whose debts (bank deposits) are widely accepted in settlement of other peoples debts to each other. R.S. Sayers No person or body, corporate or otherwise, can be a banker who does not (i) take deposit accounts, (ii) take current accounts, (iii) issue & pay cheques, & (iv) collect cheques, crossed & uncrossed, for his customers. Sir John Paget
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Definition of Bank (continued)

Definition in terms of
Services Economic

Function Legal Existence

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Definition in terms of Services

A

financial intermediary accepting deposits & granting loans; offers the widest menu of services of any financial institutions. Depository institutions offerings checking accounts or commercial loans but not both are called Nonbank banks or Thrift Institutions.

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Economic Function Flow Of Funds

Receives Interest

Deposits Surplus Units/ Depositors/ Savers

Pays Interest

Borrows Deficit Units/ Borrowers/ Users

Receives Interest

Bank

Banks Margin = Interest received from borrower Interest paid to the depositors

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Legal Existence
A

bank as any institution that could qualify for deposit insurance administered by the FDIC

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The Services Banks Offer Public

A.

Services Banks Have Offered Throughout History:

1. Carrying out currency exchange. 2. Discounting commercial notes & making business loans. 3. Offering savings deposits. 4. Safekeeping of valuables & certification of value. 5. Supporting government activities with credit. 6. Offering checking accounts (Demand deposits). 7. Offering trust services (managing financial affairs/property, trustee for wills)
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The Services Banks Offer Public----Contd

B.

Services Banks have Developed More Recently:

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Granting Consumer Loans. Financial Advising. Cash Management. Offering Equipment Leasing. Making Venture Capital Loans. Selling Insurance. Selling Retirement Plans Security Brokerage. Offering Mutual Funds & Annuities. Offering Merchant Banking Services.
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The Services Banks Offer Public----Contd

C.

Recent Trends Affecting All Banks:

1. 2. 3. 4. 5. 6. 7. 8. 9. Service Proliferation. Rising Competition. Deregulation. Rising Funding Costs. An Increasingly Interest-Sensitive mix of Funds. A Technological revolution. Consolidation & geographical Expansion. Globalization of banking. Increased risk of failure.
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Considerations While Choosing a Bank Features 2. Services 3. Fees 4. ATMs

1.

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Considerations While Choosing a BankContd.

1.

Features
Interest Rate (Annual percentage yield) Convenience FDIC membership Size Minimum deposit Limitations Availability of Funds

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Considerations While Choosing a BankContd.

2.

Services
deposit
access

direct ATMs

to international money

markets banking by telephone (what can you copies of previous monthly statements do over the phone, and when?) deposit slips and other slips online banking phone support credit cards talking to a teller in person debit cards debit card fees overdraft protection traveler's checks canceled checks (included with loan application processing monthly statements?) loans and mortgages safe deposit box rental stock and mutual fund trading stop payment retirement planning services wire transfer small business services money order
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Considerations While Choosing a BankContd.

3.

Fees
Maintenance fees Low-balance penalty ATM surcharges, "Foreign" ATM fees Returned check Bounced check Overdraft Protection Check printing Per-check charges Cancelled check return fees Closed account
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Considerations While Choosing a BankContd.

4.

ATMs
Once you have an account, balance your checkbook on a regular basis, to make sure that the bank hasn't made any errors and so that you know how much you have in your account. Also understand every fee you are charged, and complain about any that you don't agree with. Take a look at any inserts that accompany your monthly statement, because banks are required to disclose any fee changes, and that's where you'll find out about them.

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Are Banks Dying?

Weaken the central banks ability to control the growth of the money supply & achieve the nations economic goals. Damage those customers, mainly small businesses & families, who rely most heavily on banks for loans & other financial services. Make banking services less conveniently available to customers as bank offices are consolidated & closed.
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