An Overview of Banks & Their Services

An Overview of Banks & Their Services

What is a Bank?
Expert’s Opinions

n    “A dealer in debts – his own & of other people”.                                                             Geoffrey Crowther

n    “A bank as an institution whose debts (bank deposits) are widely accepted in settlement of other people’s debts to each other”.

R.S. Sayers

n    “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

Definition of Bank (continued)

Definition in terms of –

ü   Services

ü   Economic Function

ü   Legal Existence

Definition in terms of Services

n   A financial intermediary accepting deposits & granting loans; offers the widest menu of services of any financial institutions.

n   Depository institutions offerings checking accounts or commercial loans but not both are called Nonbank banks or “Thrift Institutions”.

Economic Function –
Flow Of Funds

Receives Interest

Legal Existence

n   “A bank as any institution that could qualify for deposit insurance administered by the FDIC” ]

The Services Banks Offer Public

n           Services Banks Have Offered Throughout History:

n        Carrying out currency exchange.

n        Discounting commercial notes & making business loans.

n        Offering savings deposits.

n        Safekeeping of valuables & certification of value.

n        Supporting government activities with credit.

n        Offering checking accounts (Demand deposits).

n        Offering trust services (managing financial affairs/property, trustee for wills)

The Services Banks Offer Public—-Contd

n           Services Banks have Developed More Recently:

n        Granting Consumer Loans.

n        Financial Advising.

n        Cash Management.

n        Offering Equipment Leasing.

n        Making Venture Capital Loans.

n        Selling Insurance.

n        Selling Retirement Plans

n        Security Brokerage.

n        Offering Mutual Funds & Annuities.

n        Offering Merchant Banking Services.

The Services Banks Offer Public—-Contd

n           Recent Trends Affecting All Banks:

n        Service Proliferation.

n        Rising Competition.

n        Deregulation.

n        Rising Funding Costs.

n        An Increasingly Interest-Sensitive mix of Funds.

n        A Technological revolution.

n        Consolidation & geographical Expansion.

n        Globalization of banking.

n        Increased risk of failure.

Considerations While Choosing a Bank

n          Features

n          Services

n          Fees

n          ATMs

Considerations While Choosing a Bank…Contd.

n           Features

•         Interest Rate (Annual percentage yield)

•         Convenience

•         FDIC membership

•         Size

•         Minimum deposit

•         Limitations

•         Availability of Funds

Considerations While Choosing a Bank…Contd.

n          Services

Considerations While Choosing a Bank…Contd.

n           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

Considerations While Choosing a Bank…Contd.

n         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.

Are Banks Dying?

n    Weaken the central bank’s ability to control the growth of the money supply & achieve the nation’s economic goals.

n    Damage those customers, mainly small businesses & families, who rely most heavily on banks for loans & other financial services.

n    Make banking services less conveniently available to customers as bank offices are consolidated & closed.