BANKING INFO

Islamic Economics

2009-07-04T03:44:00.000-07:00

Islamic banking is based on the principles of Islamic economics — an economic framework in accordance with Islamic law (Sharia'h).

There are two types of Islamic economics:

Caliphate , the Islamic form of government representing the political unity and leadership of the Muslim world (Islamic political framework).
Assuming the political framework is non-Islamic, therefore, seeking to integrate some prominent Islamic tenets into a secular economic framework.

Caliphate is the absolute Islamic rule, thus the economy focuses on distribution of resources in order to meet the basic and luxurious needs of individuals in society, and the state has a clear role in policing, taxation, managing public assets, and ensuring the circulation of wealth. Such a political framework in its true form does not exist in today's world.

Assuming non-Islamic political framework simply proposes two main tenets: no interest can be earned on loans and socially responsible investing. This is the way conventional banking is Islamized—the first step towards an Islamic economic framework.

Modern day Islamic scholars and academics have developed various modes of Sharia'h complaint financing that are designed to work within the prevailing capitalist economic framework. In order to achieve this balance numerous concessions have been afforded to financial institutions that would not apply if a viable interest free economic system existed. The intention behind making these concessions is to encourage the evolution of this type of alternative system

ISLAMIC BANKING - What is Islamic Banking?

2009-07-04T03:35:00.000-07:00

Islamic banks appeared on the world scene as active players over two decades ago. But "many of the principles upon which Islamic banking is based have been commonly accepted all over the world, for centuries rather than decades".

The basic principle of Islamic banking is the prohibition of Riba- (Usury - or interest):

"While a basic tenant of Islamic banking - the outlawing of riba, a term that encompasses not only the concept of usury, but also that of interest - has seldom been recognised as applicable beyond the Islamic world, many of its guiding principles have. The majority of these principles are based on simple morality and common sense, which form the bases of many religions, including Islam.

"The universal nature of these principles is immediately apparent even at a cursory glance of non-Muslim literature. Usury was prohibited in both the Old and New Testaments of the Bible, while Shakespeare and many other writers, particularly those writing in the 19th century, have attacked the barbarity of the practice. Much of the morality championed by Victorian writers such as Dickens - ranging from the equitable distribution of wealth through to man's fundamental right to work - is clearly present in modern Islamic society.

"Although the western media frequently suggest that Islamic banking in its present form is a recent phenomenon, in fact, the basic practices and principles date back to the early part of the seventh century." (Islamic Finance: A Euromoney Publication, 1997).
t is evident that Islamic finance was practiced predominantly in the Muslim world throughout the Middle Ages, fostering trade and business activities. In Spain and the Mediterranean and Baltic States, Islamic merchants became indispensable middlemen for trading activities. It is claimed that many concepts, techniques, and instruments of Islamic finance were later adopted by European financiers and businessmen.
The revival of Islamic banking coincided with the world-wide celebration of the advent of the 15th Century of Islamic calendar (Hijra) in 1976. At the same time financial resources of Muslims particularly those of the oil producing countries, received a boost due to rationalization of the oil prices, which had hitherto been under the control of foreign oil Corporations. These events led Muslims' to strive to model their lives in accordance with the ethics and philosophy of Islam.

Disenchantment with the value neutral capitalist and socialist financial systems led not only Muslims but also others to look for ethical values in their financial dealings and in the West some financial organisations have opted for ethical operations.
Islam not only prohibits dealing in interest but also in liquor, pork, gambling, pornography and anything else, which the Shariah (Islamic Law) deems Haram (unlawful). Islamic banking is an instrument for the development of an Islamic economic order. Some of the salient features of this order may be summed up as:

While permitting the individual the right to seek his economic well-being, Islam makes a clear distinction between what is Halal (lawful) and what is haram (forbidden) in pursuit of such economic activity. In broad terms, Islam forbids all forms of economic activity, which are morally or socially injurious.
While acknowledging the individual's right to ownership of wealth legitimately acquired, Islam makes it obligatory on the individual to spend his wealth judiciously and not to hoard it, keep it idle or to squander it.
While allowing an individual to retain any surplus wealth, Islam seeks to reduce the margin of the surplus for the well-being of the community as a whole, in particular the destitute and deprived sections of society by participation in the process of Zakat.
While making allowance for the ways of human nature and yet not yielding to the consequences of its worst propensities, Islam seeks to prevent the accumulation of wealth in a few hands to the detriment of society as a whole, by its laws of inheritance.
Viewed as a whole, the economic system envisaged by Islam aims at social justice without inhibiting individual enterprise beyond the point where it becomes not only collectively injurious but also individually self-destructive.

The Islamic financial system employs the concept of participation in the enterprise, utilizing the funds at risk on a profit-and- loss-sharing basis. This by no means implies that investments with financial institutions are necessarily speculative. This can be excluded by careful investment policy, diversification of risk and prudent management by Islamic financial institutions.

It is possible, that investment in Islamic financial institutions can provide potential profit in proportion to the risk assumed to satisfy the differing demands of participants in the contemporary environment and within the guidelines of the Shariah.

The concept of profit-and-loss sharing, as a basis of financial transactions is a progressive one as it distinguishes good performance from the bad and the mediocre. This concept therefore encourages better resource management.

Islamic banks are structured to retain a clearly differentiated status between shareholders' capital and clients' deposits in order to ensure correct profit-sharing according to Islamic Law.

The pressure on the investment bank

2009-07-04T03:34:00.001-07:00

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Investment banks ‘show green shoots’

2009-07-04T03:31:00.000-07:00

THE retail banking sector’s prospects remained weak for the second quarter of this year, while investment banks saw an upsurge in sentiment, largely driven by business fundamentals.

Retail banking confidence fell from 32 points in the first quarter this year to a slightly weaker 28 points in the second quarter, while investment banking rose sharply, from 32 to 50.

These are the findings of the 30th quarterly Ernst & Young financial services index, released yesterday. It was carried out by the Bureau for Economic Research in Stellenbosch to measure confidence in the banking industry.

Emilio Pera, the lead financial services director at Ernst & Young, said: “We have been hearing a lot about the appearance of early signs of a recovery (green shoots) in the last four to six weeks. In the case of investment banks, this appears to be more pronounced.”

Pera said it was interesting that business fundamentals were not entirely different between retail and investment banks.

Both segments were experiencing continuing and protracted profit contractions, caused by flat or reduced income growth, and continued high growth in non-performing loans. Investments banks were benefiting from a client base more resilient to interest rate increases over the last two years, although corporate entities were starting to feel the effect toward the end of the rate tightening cycle.

Pera said a more fundamental reason for the return of confidence in investment banking was a turnaround in resource companies. All the major producers had gained from rebounding commodity prices, which had led to a resumption in corporate mergers and acquisitions (M&A) activity and a re-look at moth-balled projects.

While demand for credit remained weak, banks themselves were maintaining stringent credit standards, particularly in the retail sector. On the other hand, investment banks saw a noticeable relaxation of credit standards in the second quarter.

“Retail banks remain wary of granting credit in an environment where the ability of over-extended households to repay secured and unsecured debts continued to be a concern,” Pera said.

“Credit cards, mortgages and instalment finance are all either reflecting negative or flat growth in the year to April,” he said.

It was understandable that banks were more cautious in their credit granting processes. .

What is Investment Banking?

2009-07-04T03:29:00.000-07:00

Investment banking is a field of banking that aids companies in acquiring funds. In addition to the acquisition of new funds, investment banking also offers advice for a wide range of transactions a company might engage in.

Traditionally, banks either engaged in commercial banking or investment banking. In commercial banking, the institution collects deposits from clients and gives direct loans to businesses and individuals. In the United States, it was illegal for a bank to have both commercial and investment banking until 1999, when the Gramm-Leach-Bliley Act legalized it.

Through investment banking, an institution generates funds in two different ways. They may draw on public funds through the capital market by selling stock in their company, and they may also seek out venture capital or private equity in exchange for a stake in their company.

An investment banking firm also does a large amount of consulting. Investment bankers give companies advice on mergers and acquisitions, for example. They also track the market in order to give advice on when to make public offerings and how best to manage the business' public assets. Some of the consultative activities investment banking firms engage in overlap with those of a private brokerage, as they will often give buy-and-sell advice to the companies they represent.

The line between investment banking and other forms of banking has blurred in recent years, as deregulation allows banking institutions to take on more and more sectors. With the advent of mega-banks which operate at a number of levels, many of the services often associated with investment banking are being made available to clients who would otherwise be too small to make their business profitable.

Careers in investment banking are lucrative and one of the most sought after positions in the money-market world. A career in investment banking involves extensive traveling, grueling hours and an often cut-throat lifestyle. While highly competitive and time intensive, investmentbanking also offers an exciting lifestyle with huge financial incentives that are a draw to many people.

What investment bankers do in their free time

2009-07-04T03:26:00.000-07:00

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Financial Analyst / Investment Banker

2009-07-04T03:25:00.001-07:00

Secret to Finding an Investment Banking Internship

2009-07-04T03:22:00.000-07:00

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unofficial guide to investment banking

2009-07-04T03:17:00.000-07:00

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RBS Islamic Banking

2009-07-04T03:13:00.000-07:00

The emergence of our RBS Islamic banking has made banking easier for customers interested in financial products and services which are in harmony with their religious beliefs. RBS understands the needs of our local communities and our Islamic brand is able to meet customers' desire for Shariah Compliant Solutions.

RBS Islamic Banking is a client driven institution which provides innovative solutions to cater to genuine customer needs. Central to our customers is our commitment towards adherence to Shariah which is evident through all our practices and Delivery of the best service standards through its presence across the country. For detailed information or queries on Islamic Banking and Finance please feel free to schedule a meeting with our Islamic Banking team by calling your Relationship Manager at 111-11-71-72 or call our Customer Interaction Centre at 111-06-06-06.

Money, Banking and The Federal Reserve 2

2009-07-04T03:12:00.000-07:00

Money, Banking and the Federal Reserve

2009-07-04T03:09:00.000-07:00

Fox News Blames Black People for Financial Meltdown

2009-07-03T07:58:00.000-07:00

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Fox News Special Report on The Banking Crisis

2009-07-03T07:56:00.001-07:00

A mobile banking conceptual model

2009-03-29T05:25:00.000-07:00

In one academic model mobile banking is defined as:

"Mobile Banking refers to provision and availment of banking- and financial services with the help of mobile telecommunication devices.The scope of offered services may include facilities to conduct bank and stock market transactions, to administer accounts and to access customised information."

According to this model Mobile Banking can be said to consist of three inter-related concepts:

Most services in the categories designated Accounting and Brokerage are transaction-based. The non-transaction-based services of an informational nature are however essential for conducting transactions - for instance, balance enquiries might be needed before committing a money remittance. The accounting and brokerage services are therefore offered invariably in combination with information services. Information services, on the other hand, may be offered as an independent module.

Mobile banking

2009-03-29T05:23:00.000-07:00

Mobile banking (also known as M-Banking, mbanking, SMS Banking etc.) is a term used for performing balance checks, account transactions, payments etc. via a mobile device such as a mobile phone. Mobile banking today (2007) is most often performed via SMS or the Mobile Internet but can also use special programs called clients downloaded to the mobile device.

Bankers' bank

2009-03-29T05:12:00.000-07:00

A bankers' bank is a financial institution that provides financial services to community banks in the United States of America. Bankers' banks are owned by investor banks and may provide services only to community banks.

By leveraging positive economies of scale, bankers' banks are able to provide many services to community banks that typically would be economically available only to large national or multinational banks. The advantage here is that community banks which use these services can in turn offer them to their customers, allowing these smaller independent banks to effectively compete with larger banks.

The first bankers' bank was formed in Minnesota in 1975. Currently there are 22 bankers' banks across the US serving more than 6,000 banks in 48 states. The largest bankers' bank is at present TIB-The Independent BankersBank, located in Irving, TX, and serving over 1,300 banks across 46 states - plus Guam and Bermuda.

Profitability

2009-03-29T05:11:00.000-07:00

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 10 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.

Bank crisis

2009-03-29T05:10:00.000-07:00

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

Other types of banks

2009-03-29T05:09:00.001-07:00

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.

Other types of banks

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Types of investment banks

2009-03-29T05:08:00.000-07:00

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. For example, Citigroup is a large American bank involved in commercial and retail lending, with subsidiaries in tax havens offering offshore banking services to customers in other countries. Other large financial institutions are similarly diversified and engage in multiple activities. In Europe and Asia, 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.

Types of banks

2009-03-29T05:04:00.000-07:00

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

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.

Banking channels

2009-03-29T05:02:00.000-07:00

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.

Entry regulation

2009-03-29T05:00:00.000-07:00

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.

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:

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

Law of banking

2009-03-29T04:58:00.000-07:00

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:

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.
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.
The bank may not pay from the customer's account without a mandate from the customer, e.g. a cheque drawn by the customer.
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.
The bank has a right to combine the customer's accounts, since each account is just an aspect of the same credit relationship.
The bank has a lien on cheques deposited to the customer's account, to the extent that the customer is indebted to the bank.

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.

Economic functions of A bank

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The economic functions of banks include:

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.
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.
credit intermediation – banks borrow and lend back-to-back on their own account as middle men .
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.
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).

Wider commercial role

2009-03-29T04:51:00.000-07:00

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 .

Accounting for bank accounts

2009-03-29T04:50:00.000-07:00

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 increase its balance

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 have a negative 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.

Origin of the word

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The name bank derives from the Italian word banco "desk/bench", used during the Renaissance by 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.
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]

Traditional banking activities

2009-03-29T04:41:00.000-07:00

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.

History

2009-03-29T04:40:00.000-07:00

Banks have influenced economies and politics for centuries. Historically, the primary purpose of a bank was to provide loans to trading companies. Banks provided funds to allow businesses to purchase inventory, and collected those funds back with interest when the goods were sold. For centuries, the banking industry only dealt with businesses, not consumers. Banking services have expanded to include services directed at individuals, and risk in these much smaller transactions are pooled.

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

A Glance at the History of Banking Systems

2009-03-29T04:18:00.000-07:00

Banking has become a very significant aspect of financial management for an individual, a business, or the government. IT may be interesting to find out how it all started by discussing the history of banking systems.

Barter trading and the first forms of money

Long time ago, there wasn't any currency to exchange with other people if there is to be an exchange of goods. What the primitive people did was to do barter trading.

Individuals can own properties out of any ornaments like stones or shells that are shaped to qualify as very good dcor. Those who have these nice objects can exchange them for other items they can make use of. This is the root of trading and wealth acquisition.

The individual barter extended between tribes in the event of surplus of utilities. If one tribe has so much of an article that is useful to another tribe, there can be an arrangement to exchange the surplus with some very good pieces of ornaments.

But physical exchanges of things eventually became too much of a burden so a system was developed to assign or transfer certain perceived values to a token which can represent a certain amount of wealth. That was how people conceived the usage of money.

Wealth refers to things that have inherent use. Land is very useful, so it is considered as a wealth. The deed that covers ownership of a land is in itself, not the wealth, it is just an evidence or proof of wealth.

A metal that has certain value or use for many people, like the gold, can be considered wealth.

During those times, a man is very wealthy though he doesn't really have so much money. If he owns a lot of land, useful tools, or goods that are in demand, then he is wealthy.

The need to exchange wealth from one tribe to another gave birth to banking. The process was slow and the growth was inevitable. The history of banking systems has indeed gone through the needle's eye but it has really grown through time.

First banking system

The very first system related to banking can be traced twelve thousand years ago in the era prior to the Assyrian empire. There were evidence of records and accounts believed to be built around a system that controls trade in that empire. This evidence was discovered in 1890 by a professor of Archaeology in the University of Pennsylvania whose name was Doctor Heilprecht.

Most civilizations and empires rose and fell according to how the wealth was successfully traded. Wealth is in the form of useful metals that were exchanged through channels and which also got affected by supply and demand.

As civilizations developed, people devised ways to grow as groups and it was during the eighteenth and nineteenth centuries that people have engaged in producing things apart form those that are intended for personal use. People started producing against competition or in cooperation with others.

Each group would produce utilities for use of the other group. The purpose then shifted and production was intended for exchange of commerce. Civilization, commerce or trade, and tokens of wealth or money have all come to mean banking.