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Taiwan Cooperative BankTaipei headquarters)

A bank is a financial institution that accepts deposits and channels those deposits into lending activities. Banks primarily provide financial services to customers while enriching investors. Government restrictions on financial activities by banks vary over time and location. Banks are important players in financial markets and offer services such as investment funds and loans. In some countries such as Germany, banks have historically owned major stakes in industrial corporations while in other countries such as the United States banks are prohibited from owning non-financial companies. In Japan, banks are usually the nexus of a cross-share holding entity known as the keiretsu. In France, bancassurance is prevalent, as most banks offer insurance services (and now real estate services) to their clients.

The level of government regulation of the banking industry varies widely, with countries such as Iceland, having relatively light regulation of the banking sector, and countries such as China having a wide variety of regulations but no systematic process that can be followed typical of a communist system.

The oldest bank still in existence is Monte dei Paschi di Siena, headquartered in Siena, Italy, which has been operating continuously since 1472.[1]

Financial market participants
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Contents

History

The very first state deposit bank, Banco di San Giorgio (Bank of St. George), was founded in 1407 at Genoa, Italy.[2]

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Origin of the word

Silver drachm coin from Trapezus, 4th century BC

The name bank derives from the Italian word banco "desk/bench", used during the Renaissance by Jewish Florentine bankers, who used to make their transactions above a desk covered by a green tablecloth.[3] However, there are traces of banking activity even in ancient times, which indicates that the word 'bank' might not necessarily come from the word 'banco'.

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.[4]

The earliest evidence of money-changing activity is depicted on a silver drachm coin from ancient Hellenic colony Trapezus on the Black Sea, modern Trabzon, c. 350–325 BC, presented in the British Museum in London. The coin shows a banker's table (trapeza) laden with coins, a pun on the name of the city.

In fact, even today in Modern Greek the word Trapeza (Τράπεζα) means both a table and a bank.

Traditional banking activities

Large door to an old bank vault.

Banks act as payment agents by conducting checking or current accounts for customers, paying cheques drawn by customers on the bank, and collecting cheques deposited to customers' current accounts. Banks also enable customer payments via other payment methods such as telegraphic transfer, EFTPOS, and ATM.

Banks borrow money by accepting funds deposited on current accounts, by accepting term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current accounts, by making installment loans, and by investing in marketable debt securities and other forms of money lending.

Banks provide almost all payment services, and a bank account is considered indispensable by most businesses, individuals and governments. Non-banks that provide payment services such as remittance companies are not normally considered an adequate substitute for having a bank account.

Banks borrow most funds from households and non-financial businesses, and lend most funds to households and non-financial businesses, but non-bank lenders provide a significant and in many cases adequate substitute for bank loans, and money market funds, cash management trusts and other non-bank financial institutions in many cases provide an adequate substitute to banks for lending savings to.

Entry regulation

Currently in most jurisdictions commercial banks are regulated by government entities and require a special bank licence to operate.

Usually the definition of the business of banking for the purposes of regulation is extended to include acceptance of deposits, even if they are not repayable to the customer's order—although money lending, by itself, is generally not included in the definition.

Unlike most other regulated industries, the regulator is typically also a participant in the market, i.e. a government-owned (central) bank. Central banks also typically have a monopoly on the business of issuing banknotes. However, in some countries this is not the case. In the UK, for example, the Financial Services Authority licences banks, and some commercial banks (such as the Bank of Scotland) issue their own banknotes in addition to those issued by the Bank of England, the UK government's central bank.

Definition

The definition of a bank varies from country to country.

Under English common law, a banker is defined as a person who carries on the business of banking, which is specified as:[5]

  • conducting current accounts for his customers
  • paying cheques drawn on him, and
  • collecting cheques for his customers.

In most English common law jurisdictions there is a Bills of Exchange Act that codifies the law in relation to negotiable instruments, including cheques, and this Act contains a statutory definition of the term banker: banker includes a body of persons, whether incorporated or not, who carry on the business of banking' (Section 2, Interpretation). Although this definition seems circular, it is actually functional, because it ensures that the legal basis for bank transactions such as cheques does not depend on how the bank is organised or regulated.

The business of banking is in many English common law countries not defined by statute but by common law, the definition above. In other English common law jurisdictions there are statutory definitions of the business of banking or banking business. When looking at these definitions it is important to keep in mind that they are defining the business of banking for the purposes of the legislation, and not necessarily in general. In particular, most of the definitions are from legislation that has the purposes of entry regulating and supervising banks rather than regulating the actual business of banking. However, in many cases the statutory definition closely mirrors the common law one. Examples of statutory definitions:

  • "banking business" means the business of receiving money on current or deposit account, paying and collecting cheques drawn by or paid in by customers, the making of advances to customers, and includes such other business as the Authority may prescribe for the purposes of this Act; (Banking Act (Singapore), Section 2, Interpretation).
  • "banking business" means the business of either or both of the following:
  1. receiving from the general public money on current, deposit, savings or other similar account repayable on demand or within less than [3 months] ... or with a period of call or notice of less than that period;
  2. paying or collecting cheques drawn by or paid in by customers[6]

Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale), direct credit, direct debit and internet banking, the cheque has lost its primacy in most banking systems as a payment instrument. This has led legal theorists to suggest that the cheque based definition should be broadened to include financial institutions that conduct current accounts for customers and enable customers to pay and be paid by third parties, even if they do not pay and collect cheques.[7]

Accounting for bank accounts

Suburban branch bank

Bank statements are accounting records produced by banks under the various accounting standards of the world. Under GAAP and IFRS there are two kinds of accounts: debit and credit. Credit accounts are Revenue, Equity and Liabilities. Debit Accounts are Assets and Expenses. This means you credit a credit account to increase its balance, and you debit a debit account to decrease its balance.[8]

This also means you debit your savings account every time you deposit money into it (and the account is normally in deficit), while you credit your credit card account every time you spend money from it (and the account is normally in credit).

However, if you read your bank statement, it will say the opposite—that you credit your account when you deposit money, and you debit it when you withdraw funds. If you have cash in your account, you have a positive (or credit) balance; if you are overdrawn, you have a negative (or deficit) balance.

The reason for this is that the bank, and not you, has produced the bank statement. Your savings might be your assets, but the bank's liability, so they are credit accounts (which should have a positive balance). Conversely, your loans are your liabilities but the bank's assets, so they are debit accounts (which should also have a positive balance).

Where bank transactions, balances, credits and debits are discussed below, they are done so from the viewpoint of the account holder—which is traditionally what most people are used to seeing.

Wider commercial role

The commercial role of banks is not limited to banking, and includes:

  • issue of banknotes (promissory notes issued by a banker and payable to bearer on demand)
  • processing of payments by way of telegraphic transfer, EFTPOS, internet banking or other means
  • issuing bank drafts and bank cheques
  • accepting money on term deposit
  • lending money by way of overdraft, installment loan or otherwise
  • providing documentary and standby letters of credit (trade finance), guarantees, performance bonds, securities underwriting commitments and other forms of off-balance sheet exposures
  • safekeeping of documents and other items in safe deposit boxes
  • currency exchange
  • acting as a 'financial supermarket' for the sale, distribution or brokerage, with or without advice, of insurance, unit trusts and similar financial products

Economic functions

The economic functions of banks include:

  1. issue of money, in the form of banknotes and current accounts subject to cheque or payment at the customer's order. These claims on banks can act as money because they are negotiable and/or repayable on demand, and hence valued at par. They are effectively transferable by mere delivery, in the case of banknotes, or by drawing a cheque that the payee may bank or cash.
  2. netting and settlement of payments – banks act as both collection and paying agents for customers, participating in interbank clearing and settlement systems to collect, present, be presented with, and pay payment instruments. This enables banks to economise on reserves held for settlement of payments, since inward and outward payments offset each other. It also enables the offsetting of payment flows between geographical areas, reducing the cost of settlement between them.
  3. credit intermediation – banks borrow and lend back-to-back on their own account as middle men.
  4. credit quality improvement – banks lend money to ordinary commercial and personal borrowers (ordinary credit quality), but are high quality borrowers. The improvement comes from diversification of the bank's assets and capital which provides a buffer to absorb losses without defaulting on its obligations. However, banknotes and deposits are generally unsecured; if the bank gets into difficulty and pledges assets as security, to raise the funding it needs to continue to operate, this puts the note holders and depositors in an economically subordinated position.
  5. maturity transformation – banks borrow more on demand debt and short term debt, but provide more long term loans. In other words, they borrow short and lend long. With a stronger credit quality than most other borrowers, banks can do this by aggregating issues (e.g. accepting deposits and issuing banknotes) and redemptions (e.g. withdrawals and redemptions of banknotes), maintaining reserves of cash, investing in marketable securities that can be readily converted to cash if needed, and raising replacement funding as needed from various sources (e.g. wholesale cash markets and securities markets).

Law of banking

Banking law is based on a contractual analysis of the relationship between the bank (defined above) and the customer—defined as any entity for which the bank agrees to conduct an account.

The law implies rights and obligations into this relationship as follows:

  1. The bank account balance is the financial position between the bank and the customer: when the account is in credit, the bank owes the balance to the customer; when the account is overdrawn, the customer owes the balance to the bank.
  2. The bank agrees to pay the customer's cheques up to the amount standing to the credit of the customer's account, plus any agreed overdraft limit.
  3. The bank may not pay from the customer's account without a mandate from the customer, e.g. a cheque drawn by the customer.
  4. The bank agrees to promptly collect the cheques deposited to the customer's account as the customer's agent, and to credit the proceeds to the customer's account.
  5. The bank has a right to combine the customer's accounts, since each account is just an aspect of the same credit relationship.
  6. The bank has a lien on cheques deposited to the customer's account, to the extent that the customer is indebted to the bank.
  7. The bank must not disclose details of transactions through the customer's account—unless the customer consents, there is a public duty to disclose, the bank's interests require it, or the law demands it.
  8. The bank must not close a customer's account without reasonable notice, since cheques are outstanding in the ordinary course of business for several days.

These implied contractual terms may be modified by express agreement between the customer and the bank. The statutes and regulations in force within a particular jurisdiction may also modify the above terms and/or create new rights, obligations or limitations relevant to the bank-customer relationship.


Some types of financial institution, such as building societies and credit unions, may be partly or wholly exempt from bank licence requirements, and therefore regulated under separate rules.

The requirements for the issue of a bank licence vary between jurisdictions but typically include:

  1. Minimum capital
  2. Minimum capital ratio
  3. 'Fit and Proper' requirements for the bank's controllers, owners, directors, and/or senior officers
  4. Approval of the bank's business plan as being sufficiently prudent and plausible.

Banking channels

Banks offer many different channels to access their banking and other services:

  • A branch, banking centre or financial centre is a retail location where a bank or financial institution offers a wide array of face-to-face service to its customers.
  • ATM is a computerised telecommunications device that provides a financial institution's customers a method of financial transactions in a public space without the need for a human clerk or bank teller. Most banks now have more ATMs than branches, and ATMs are providing a wider range of services to a wider range of users. For example in Hong Kong, most ATMs enable anyone to deposit cash to any customer of the bank's account by feeding in the notes and entering the account number to be credited. Also, most ATMs enable card holders from other banks to get their account balance and withdraw cash, even if the card is issued by a foreign bank.
  • Mail is part of the postal system which itself is a system wherein written documents typically enclosed in envelopes, and also small packages containing other matter, are delivered to destinations around the world. This can be used to deposit cheques and to send orders to the bank to pay money to third parties. Banks also normally use mail to deliver periodic account statements to customers.
  • Telephone banking is a service provided by a financial institution which allows its customers to perform transactions over the telephone. This normally includes bill payments for bills from major billers (e.g. for electricity).
  • 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.
  • Mobile banking is a method of using one's mobile phone to conduct simple banking transactions by remotely linking into a banking network.
  • Video banking is a term used for performing banking transactions or professional banking consultations via a remote video and audio connection. Video banking can be performed via purpose built banking transaction machines (similar to an Automated teller machine), or via a videoconference enabled bank branch.

Types of banks

Banks' activities can be divided into retail banking, dealing directly with individuals and small businesses; business banking, providing services to mid-market business; corporate banking, directed at large business entities; private banking, providing wealth management services to high net worth individuals and families; and investment banking, relating to activities on the financial markets. Most banks are profit-making, private enterprises. However, some are owned by government, or are non-profit organizations.

Central banks are normally government-owned and charged with quasi-regulatory responsibilities, such as supervising commercial banks, or controlling the cash interest rate. They generally provide liquidity to the banking system and act as the lender of last resort in event of a crisis.

Types of retail banks

National Bank of the Republic, Salt Lake City 1908
ATM AL RAJHI BANK
National Copper Bank, Salt Lake City 1911
  • Commercial bank: the term used for a normal bank to distinguish it from an investment bank. After the Great Depression, the U.S. Congress required that banks only engage in banking activities, whereas investment banks were limited to capital market activities. Since the two no longer have to be under separate ownership, some use the term "commercial bank" to refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses.
  • Community banks: locally operated financial institutions that empower employees to make local decisions to serve their customers and the partners.
  • Community development banks: regulated banks that provide financial services and credit to under-served markets or populations.
  • Postal savings banks: savings banks associated with national postal systems.
  • Private banks: banks that manage the assets of high net worth individuals.
  • Offshore banks: banks located in jurisdictions with low taxation and regulation. Many offshore banks are essentially private banks.
  • Savings bank: in Europe, savings banks take their roots in the 19th or sometimes even 18th century. Their original objective was to provide easily accessible savings products to all strata of the population. In some countries, savings banks were created on public initiative; in others, socially committed individuals created foundations to put in place the necessary infrastructure. Nowadays, European savings banks have kept their focus on retail banking: payments, savings products, credits and insurances for individuals or small and medium-sized enterprises. Apart from this retail focus, they also differ from commercial banks by their broadly decentralised distribution network, providing local and regional outreach—and by their socially responsible approach to business and society.
  • Building societies and Landesbanks: institutions that conduct retail banking.
  • Ethical banks: banks that prioritize the transparency of all operations and make only what they consider to be socially-responsible investments.
  • Islamic banks: Banks that transact according to Islamic principles.

Types of investment banks

  • Investment banks "underwrite" (guarantee the sale of) stock and bond issues, trade for their own accounts, make markets, and advise corporations on capital market activities such as mergers and acquisitions.
  • Merchant banks were traditionally banks which engaged in trade finance. The modern definition, however, refers to banks which provide capital to firms in the form of shares rather than loans. Unlike venture capital firms, they tend not to invest in new companies.

Both combined

  • Universal banks, more commonly known as financial services companies, engage in several of these activities. These big banks are very diversified groups that, among other services, also distribute insurance— hence the term bancassurance, a portmanteau word combining "banque or bank" and "assurance", signifying that both banking and insurance are provided by the same corporate entity.

Other types of banks

  • Islamic banks adhere to the concepts of Islamic law. This form of banking revolves around several well-established principles based on Islamic canons. All banking activities must avoid interest, a concept that is forbidden in Islam. Instead, the bank earns profit (markup) and fees on the financing facilities that it extends to customers.

Banks in the economy

Size of global banking industry

Assets of the largest 1,000 banks in the world grew by 6.8% in the 2008/2009 financial year to a record $96.4 trillion while profits declined by 85% to $115bn. Growth in assets in adverse market conditions was largely a result of recapitalisation. EU banks held the largest share of the total, 56% in 2008/2009, down from 61% in the previous year. Asian banks' share increased from 12% to 14% during the year, while the share of US banks increased from 11% to 13%. Fee revenue generated by global investment banking totalled $66.3bn in 2009, up 12% on the previous year. [9]

The United States has the most banks in the world in terms of institutions (7,085 at the end of 2008) and possibly branches (82,000).[citation needed] This is an indicator of the geography and regulatory structure of the USA, resulting in a large number of small to medium-sized institutions in its banking system. As of Nov 2009, China's top 4 banks have in excess of 67,000 branches (ICBC:18000+, BOC:12000+,CCB:13000+,ABC:24000+) with an additional 140 smaller banks with an undetermined number of branches. Japan had 129 banks and 12,000 branches. In 2004, Germany, France, and Italy each had more than 30,000 branches—more than double the 15,000 branches in the UK.[9]

Bank crisis

Banks are susceptible to many forms of risk which have triggered occasional systemic crises. These include liquidity risk (where many depositors may request withdrawals beyond available funds), credit risk (the chance that those who owe money to the bank will not repay it), and interest rate risk (the possibility that the bank will become unprofitable, if rising interest rates force it to pay relatively more on its deposits than it receives on its loans).

Banking crises have developed many times throughout history, when one or more risks have materialized for a banking sector as a whole. Prominent examples include the bank run that occurred during the Great Depression, the U.S. Savings and Loan crisis in the 1980s and early 1990s, the Japanese banking crisis during the 1990s, and the subprime mortgage crisis in the 2000s. Usually, the governments bail out the bank through rescue plan or individual public intervention.[10]

Challenges within the banking industry

United States

In the United States, the banking industry is a highly regulated industry with detailed and focused regulators. All banks with FDIC-insured deposits have the FDIC as a regulator; however, for examinations, the Federal Reserve is the primary federal regulator for Fed-member state banks; the Office of the Comptroller of the Currency (“OCC”) is the primary federal regulator for national banks; and the Office of Thrift Supervision, or OTS, is the primary federal regulator for thrifts. State non-member banks are examined by the state agencies as well as the FDIC. National banks have one primary regulator—the OCC.

Each regulatory agency has their own set of rules and regulations to which banks and thrifts must adhere.

The Federal Financial Institutions Examination Council (FFIEC) was established in 1979 as a formal interagency body empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions. Although the FFIEC has resulted in a greater degree of regulatory consistency between the agencies, the rules and regulations are constantly changing.

In addition to changing regulations, changes in the industry have led to consolidations within the Federal Reserve, FDIC, OTS and OCC. Offices have been closed, supervisory regions have been merged, staff levels have been reduced and budgets have been cut. The remaining regulators face an increased burden with increased workload and more banks per regulator. While banks struggle to keep up with the changes in the regulatory environment, regulators struggle to manage their workload and effectively regulate their banks. The impact of these changes is that banks are receiving less hands-on assessment by the regulators, less time spent with each institution, and the potential for more problems slipping through the cracks, potentially resulting in an overall increase in bank failures across the United States.

The changing economic environment has a significant impact on banks and thrifts as they struggle to effectively manage their interest rate spread in the face of low rates on loans, rate competition for deposits and the general market changes, industry trends and economic fluctuations. It has been a challenge for banks to effectively set their growth strategies with the recent economic market. A rising interest rate environment may seem to help financial institutions, but the effect of the changes on consumers and businesses is not predictable and the challenge remains for banks to grow and effectively manage the spread to generate a return to their shareholders.

The management of the banks’ asset portfolios also remains a challenge in today’s economic environment. Loans are a bank’s primary asset category and when loan quality becomes suspect, the foundation of a bank is shaken to the core. While always an issue for banks, declining asset quality has become a big problem for financial institutions. There are several reasons for this, one of which is the lax attitude some banks have adopted because of the years of “good times.” The potential for this is exacerbated by the reduction in the regulatory oversight of banks and in some cases depth of management. Problems are more likely to go undetected, resulting in a significant impact on the bank when they are recognized. In addition, banks, like any business, struggle to cut costs and have consequently eliminated certain expenses, such as adequate employee training programs.

Banks also face a host of other challenges such as aging ownership groups. Across the country, many banks’ management teams and board of directors are aging. Banks also face ongoing pressure by shareholders, both public and private, to achieve earnings and growth projections. Regulators place added pressure on banks to manage the various categories of risk. Banking is also an extremely competitive industry. Competing in the financial services industry has become tougher with the entrance of such players as insurance agencies, credit unions, check cashing services, credit card companies, etc.

As a reaction, banks have developed their activities in financial instruments, through financial market operations such as brokerage and trading and become big players in such activities.

Brokered deposits

One source of deposits for banks is brokers who deposit large sums of money on the behalf of investors. This money will generally go to the banks which offer the most favorable terms, often better than those offered local depositors. It is possible for a bank to be engaged in business with no local deposits at all, all funds being brokered deposits. Accepting a significant quantity of such deposits, or "hot money" as it is sometimes called, puts a bank in a difficult and sometimes risky position, as the funds must be lend or invested in a way that yields a return sufficient to pay the high interest being paid on the brokered deposits. This may result in risky decisions and even in eventual failure of the bank. Banks which failed during 2008 and 2009 in the United States during the global financial crisis had, on average, four times more brokered deposits as a percent of their deposits than the average bank. Such deposits, combined with risky real estate investments, factored into the Savings and loan crisis of the 1980s. Regulation of brokered deposits is opposed by banks on the grounds that the practice can be a source of external funding to growing communities with insufficient local deposits.[11]

Profitability

A bank generates a profit from the differential between the level of interest it pays for deposits and other sources of funds, and the level of interest it charges in its lending activities. This difference is referred to as the spread between the cost of funds and the loan interest rate. Historically, profitability from lending activities has been cyclical and dependent on the needs and strengths of loan customers. In recent history, investors have demanded a more stable revenue stream and banks have therefore placed more emphasis on transaction fees, primarily loan fees but also including service charges on an array of deposit activities and ancillary services (international banking, foreign exchange, insurance, investments, wire transfers, etc.). Lending activities, however, still provide the bulk of a commercial bank's income.

In the past 20 years American banks have taken many measures to ensure that they remain profitable while responding to increasingly changing market conditions. First, this includes the Gramm-Leach-Bliley Act, which allows banks again to merge with investment and insurance houses. Merging banking, investment, and insurance functions allows traditional banks to respond to increasing consumer demands for "one-stop shopping" by enabling cross-selling of products (which, the banks hope, will also increase profitability). Second, they have expanded the use of risk-based pricing from business lending to consumer lending, which means charging higher interest rates to those customers that are considered to be a higher credit risk and thus increased chance of default on loans. This helps to offset the losses from bad loans, lowers the price of loans to those who have better credit histories, and offers credit products to high risk customers who would otherwise been denied credit. Third, they have sought to increase the methods of payment processing available to the general public and business clients. These products include debit cards, prepaid cards, smart cards, and credit cards. They make it easier for consumers to conveniently make transactions and smooth their consumption over time (in some countries with underdeveloped financial systems, it is still common to deal strictly in cash, including carrying suitcases filled with cash to purchase a home). However, with convenience of easy credit, there is also increased risk that consumers will mismanage their financial resources and accumulate excessive debt. Banks make money from card products through interest payments and fees charged to consumers and transaction fees to companies that accept the cards. Helps in making profit and economic development as a whole.

See also

Country specific information

Types of institution

Terms and concepts

Related lists

References

  1. ^ Boland, Vincent (2009-06-12). "Modern dilemma for world’s oldest bank". Financial Times. http://www.ft.com/cms/s/0/a034542e-5771-11de-8c47-00144feabdc0.html?nclick_check=1. Retrieved 23 February 2010. 
  2. ^ Macesich, George (30 June 2000). "Central Banking: The Early Years: Other Early Banks". Issues in Money and Banking. Westport, Connecticut: Praeger Publishers (Greenwood Publishing Group). p. 42. doi:10.1336/0275967778. ISBN 978-0-275-96777-2. http://books.google.com/books?id=k1OYMZ8OzMUC&pg=PA42. Retrieved 2009-03-12. "The first state deposit bank was the Bank of St. George in Genoa, which was established in 1407." 
  3. ^ de Albuquerque, Martim (1855). Notes and Queries. London: George Bell. pp. 431. http://books.google.com/books?id=uIrWLegNZxUC&pg=PA431&lpg=PA431&dq=bank+italian+bench&source=web&ots=gp-um7BxxP&sig=r8eVJxS5-aLx3dmb_BmFxYuvW-U. 
  4. ^ Matyszak, Philip (2007). Ancient Rome on Five Denarii a Day. New York: Thames & Hudson. pp. 144. ISBN 050005147X. 
  5. ^ United Dominions Trust Ltd v Kirkwood, 1966, English Court of Appeal, 2 QB 431
  6. ^ (Banking Ordinance, Section 2, Interpretation, Hong Kong) Note that in this case the definition is extended to include accepting any deposits repayable in less than 3 months, companies that accept deposits of greater than HK$100 000 for periods of greater than 3 months are regulated as deposit taking companies rather than as banks in Hong Kong).
  7. ^ e.g. Tyree's Banking Law in New Zealand, A L Tyree, LexisNexis 2003, page 70.
  8. ^ Statistics Department (2001). "Source Data for Monetary and Financial Statistics". Monetary and Financial Statistics: Compilation Guide. Washington D.C.: International Monetary Fund. p. 24. ISBN 9781589065840. http://books.google.com/books?id=a03zkw-5fcEC&pg=PT36. Retrieved 2009-03-14. 
  9. ^ a b Banking 2010PDF (638 KB) charts 7–8, pages 3–4. International Financial Services, London (IFSL).
  10. ^ Fratianni, Michele; Francesco Marchionne (2009). "Rescuing Banks from the Effects of the Financial Crisis". SSRN Working Paper. http://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1476786_code942286.pdf?abstractid=1476786&mirid=1. 
  11. ^ "For Banks, Wads of Cash and Loads of Trouble" article by Eric Lipton and Andrew Martin in The New York Times July 3, 2009
  • "Genoa and the history of finance: a series of firsts ?" Giuseppe Felloni, Guido Laura. 9th November 2004, ISBN 88-87822-16-6 (the book can be downloaded at www.giuseppefelloni.it)

Further reading


Quotes

Up to date as of January 14, 2010
(Redirected to Banking article)

From Wikiquote

Quotes about the business of Banks: institutions where one can place and borrow money and take care of financial affairs.

Contents

Sourced

  • The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it.
  • The process by which banks create money is so simple that the mind is repelled.
  • The modern banking system manufactures “money” out of nothing; and the process is, perhaps, the most, astounding piece of “sleight of hand” that was ever invented. In fact, is was not invented. It merely “grew”. ... Banks in fact are able to create (and cancel) modern “deposit money”, just as much as they were originally able to create, or call in, their own original forms of private notes. They can, in fact, inflate and deflate, i.e., mint, and un-mint the modern “ledger-entry” currency.
    • Angas, Major L. L. B. (Lawrence Lee Bazley) (1937). Slump ahead in bonds. Somerset Pub. Co.. pp. 20-21. OCLC 3506072.  
  • The actual process of money creation takes place in commercial banks. As noted earlier, demand liabilities of commercial banks are money. ... Confidence in these forms of money also seems to be tied in some way to the fact that assets exist on the books of the government and the banks equal to the amount of money outstanding, even though most of the assets themselves are no more than pieces of paper...
    • Federal Reserve Bank of Chicago; Nichols, Dorothy M (1961). Modern Money Mechanics; a workbook on deposits, currency and bank reserves.. p. 3. OCLC 510802.   The 1992 revision of this booklet is available on wikisource
  • Commercial banks create checkbook money whenever they grant a loan, simply by adding new deposit dollars in accounts on their books in exchange for a borrower's IOU.
  • The 12 regional reserve banks aren't government institutions, but corporations nominally 'owned' by member commercial banks.
    • Federal Reserve Bank of New York, I Bet You Thought... (1977), p. 27
  • The use of money does not disestablish the normal process of creating credit. Money, it is true, is always being paid into the banks by the retailers and others who receive it in the course of business, and they of course receive bank credits in return for the money thus deposited. But for the manufacturers and others who have to pay money out, credits are still created by the exchange of obligations, the banker's immediate obligation being given to his customer in exchange for the customer's obligation to repay at a future date. We shall still describe this dual operation as the creation of credit. By its means the banker creates the means of payment out of nothing, whereas when he receives a bag of money from his customer, one means of payment, a bank credit, is merely substituted for another, an equal amount of cash.
  • And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.
  • So limited is our knowledge that we resort, not to science, but to shamans. We place control of the world's largest economy in the hands of a few elderly men, the central bankers.
  • With money every form of intercourse, and intercourse itself, is considered fortuitous for the individuals.
  • The banks do create money. They have been doing it for a long time, but they didn't quite realise it, and they did not admit it. Very few did. You will find it in all sorts of documents, financial textbooks, etc. But in the intervening years, and we must all be perfectly frank about these things, there has been a development of thought, until today I doubt very much whether you would get many prominent bankers to attempt to deny that banks create credit.
    • H. W. White, Chairman of the Associated Banks of New Zealand, to the New Zealand Monetary Commission, 1955.
  • But please do not think that I am not fond of banks,
    Because I think they deserve our appreciation and thanks.
    • Ogden Nash. ‘Bankers are Just Like Everybody Else, Except Richer’, The Face is Familiar (1954)
  • There is no group of people on the planet more stupid than bankers. They should be called bonkers. Look at the famous banks that are suddenly losing billions, because they handed out loans like lunatics.
    • Michael Winner, English film director and producer. From his interview in The Daily Mail (UK) newspaper, 17th June 2008

Unsourced

  • If you were a poor Indian with no weapons, and a bunch of conquistadors came up to you and asked where the gold was, I don't think it would be a good idea to say, 'I swallowed it. So sue me.'
  • If you want time to pass quickly, just give a banker your note for ninety days.
  • I went to the bank and went over my savings. I found out I have all the money that I'll ever need. If I die tomorrow.
  • My girlfriend's father died of throat trouble ... They hung him. He used to work in a bank. But no matter how much the boss likes you, if you work in a bank you can't bring home samples.
  • One rule which woe betides the banker who fails to heed it ... Never lend any money to anybody unless they don't need it.
  • Anytime four New Yorkers get into a cab together without arguing, a bank robbery has just taken place.
  • I think that not relying too heavily on one bank and one bank manager is a good rule to learn.

Disputed

  • The death of Lincoln was a disaster for Christendom. There was no man in the United States great enough to wear his boots and the bankers went anew to grab the riches. I fear that foreign bankers with their craftiness and tortuous tricks will entirely control the exuberant riches of America and use it to systematically corrupt modern civilization.
    • Sometimes attributed to Otto von Bismarck, German Chancellor (1815-1898). The apparent source of this is a German-American named Conrad Siem (d. 1931), who, in 1915, published recollections of conversations he allegedly had as a youth (about 12 years old) with Bismarck 37 years earlier. Should be treated skeptically. Siem, Conrad (1915). The C.S.L.T.: containing views on Abraham Lincoln as expressed by Bismarck in 1878, from the recollections of Conrad von Bauditz Siem. OCLC 52297724.  
  • The bank hath benefit of interest on all moneys which it creates out of nothing.
  • Banking was conceived in iniquity and was born in sin. The Bankers own the earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again. However, take this power away from them, and all the great fortunes disappear, and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of Bankers and pay the cost of your own slavery, let them continue to create money and control credit.
    • Attributed to Josiah Stamp, "President of the Bank of England and the second richest man in the British Empire". However, Stamp was never President of the Bank of England, though he was on the board of directors, nor does he appear to have ever been anywhere near the second richest man in the British Empire. No primary source for this is known. The earliest source is Silas W. Adams, The Legalized Crime of Banking (1958), who gives no earlier source, only saying "as said in an informal talk to 150 University of Texas history, economics and social science professors, in the 20's". (Stamp died in 1941.) The quote also seems to imply that Stamp made his fortune in banking, which is not true. It is inconsistent with everything Stamp said about banking on the record.

See also

External links

Wikipedia
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Look up banking in Wiktionary, the free dictionary

1911 encyclopedia

Up to date as of January 14, 2010

From LoveToKnow 1911

="">See Bank (disambiguation) for articles sharing the title Bank.


BANK,2 known also as "Polish Bank" and "Russian Bank" a card-game. An ordinary pack is used. Five or six players is a convenient number. Each contributes an arranged stake to the pool. The dealer gives three cards to each player and turns up another; if this is not lower than an eight (ace is lowest) he goes on till such a card is exposed. The player on the dealer's left, without touching or looking at his cards, can bet the amount of the pool, or any part of it, that among his cards is one that is higher (of the same suit) than the turn-up. If he wins, he takes the amount from the pool; if he loses, he pays it to the pool. Each player does the same in turn, the dealer last. Whenever the pool is exhausted, a fresh stake is put into the pool. After a round is over the deal passes. No player may touch his cards until he has made his bet; the penalty is a fine to the pool of twice the stake, and the loss of his right to bet during that round.

2 For the commercial "bank" see Banks and Banking.


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Wiktionary

Up to date as of January 14, 2010

Definition from Wiktionary, a free dictionary

See also bank

Contents

German

Etymology 1

Old High German bank, Old Saxon bank, from Germanic *banki-.

Noun

Bank f. (plural Bänke)

  1. bench
  2. workbench
  3. sandbank
  4. bank (of clouds, earth, etc.)
Derived terms
  • Fensterbank
  • Sandbank
  • auf die lange Bank schieben
  • Bänkelsänger

Etymology 2

Italian banco, bench, bank

Noun

Bank f. (plural: Banken)

  1. bank (financial institution)
Derived terms

Simple English

A bank is a place where money can be saved or loaned out from. Someone's money can be placed in the bank for safe keeping. Or the bank can give out loans to people for an agreement to pay the bank back at a later time, usually with interest. The people who run a bank are called bankers.

Banks also can use the money they have from deposits to invest in businesses in order to make more money.

In most of the modern world a bank settled by the government but independent of the state administrators controls how much money appears at a time. Such a kind of bank is called a national bank. A national bank ordinarily issues bills and/or coins. In some countries issuing money is the task of the government.

The word bank comes from an Italian word banco, meaning a bench, since Italian merchants in the medieval talked on borrowing and lending money between each others beside a bank and money was placed on that bank.

Traces of the Phoenician civilization showed a form of currency exchange among troc exchanges; it is believed that merchants from Alexandria deposited their "valuables" in Phoenicia.



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