What is a Bank?
A bank is a business. But unlike some businesses, banks do not manufacture products or extract natural resources from the earth. Banks are financial institutions which sell services - financial services such as car loans, home mortgage loans, business loans, checking accounts, and credit card services.
Some people go to the bank in search of a safe place to keep their money. Others go to the bank seeking money for loans to buy houses and cars, start business, expand farms, or do any of the other things that require borrowing money.
Where do banks get the money to lend? They get it from the people who open saving and other types of accounts. Banks act as go-betweens for people who save and people who need to borrow. If savers did not put their money in banks, the banks would have little or no money to lend.
Modern banks offer many services to businesses as well as to individual customers. The service menu of banks does not remain unchanged as new services are constantly introduced.
Here are some of the most widely used banking facilities:
A credit card enables the holder to buy goods and repay the credit card issuer at a later date.
Granting loans an amount of money borrowed from the bank which must be repaid at a fixed rate of interest.
Direct debit is a system of paying bills, by having money automatically transferred from a bank account.
An overdraft is a loan made by a bank to a customer so he may take out more money than is actually in a bank account.
A standing order is an arrangement with a bank to pay a certain amount to another person or organization at a regular intervals.
In recent years banks have diversified, and now offer such services as insurance, investment advice, private pension plans, and home-banking (telephone, SMS and Internet) facilities.
Current account services; Discounting bills of exchange ( )
Deposit account services; Investments management services;
Savings account services; Cash dispensers/ automated teller machines;
Foreign exchange transactions ( )
Safe custody ( 볺)
Types of Banks.
There exist different types of banks. There are commercial banks, saving banks, saving and loan associations, cooperative banks, and credit unions. Central banks such as the National Bank of Ukraine, the Bank of England or the Federal Reserve System (US) look after the governments finance and monetary policy, act as bankers for the state and for commercial banks, manage a countrys reserves of gold and foreign currencies, and are responsible for issuing banknotes.
Commercial banks deals directly with the public. They offer a wide range of services such as accepting deposits, making loans and managing customers accounts. The aim of commercial banks is to earn profit.
Merchant banks dont deal with the public. They provide services for companies. They specialize in raising capital for industry, arranging flotation, takeovers and mergers, and investment portfolios.
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Investment banks are firms that control the issue of new securities (shares and bonds).
Savings banks are financial institutions that specialize in providing services such as savings accounts as opposed to general banking services.
What Types of Accounts Do Banks Offer?
Saving accounts are for people who want to keep their money in a safe place and earn interest at the same time. You do not need a lot of money to open a saving account, and you can withdraw your money at any time.
Checking accounts or current accounts offer safety and convenience. You keep your money in a checking account and write a check when you want to pay a bill or transfer some of your money to someone else. If your checkbook is lost or stolen, all you need to do is close your account and open a new one so that nobody can use your old checks.
Certificates of deposits are savings deposits that require customers to keep a certain amount of money in the bank for a fixed period of time. As a rule, the rate of interest your money earns is higher if you agree to keep your money for a longer period of time.
Finally, banks do not always call their accounts by the same names. Often, they choose distinctive names in hope of attracting customers. But sometimes there can be a real difference between one bank's accounts and another's, so shop around.
Who Owns a Bank?
The owners are the shareholders. At the outset they provide the necessary capital. All banks are organized on the joint stock principle and are registered public companies.
The Chairman and the Board of Directors are elected by the ordinary shareholders at the Annual General Meeting and are responsible for the efficient management of the bank. The Board is concerned with the overall policy of the bank and the major decisions, which put that policy into effect.
The Board will appoint a Managing Director who is directly responsible to them and a member of the Board. They will also appoint the most senior executives who in turn appoint the rest of the staff who will be responsible in different capacities for the day to day running of the bank.
At the end of each business year the Directors recommend and the Annual General Meeting decides how much of the profit should be distributed to the shareholders as dividend, and how much should be retained for the business. A bank publishes its Report and Accounts and sends it to every shareholder, from which they can easily determine the total profits the bank has earned and how much is available for distribution.
