Banking today

Nowadays the role of bank in the social life could be hardly overestimated. Banks have become a key institute entitled to play a leading role as a sort of blood-vascular system of Economy, or, in industrial terms, a lubricant that oils its wheels thus facilitating to execute the widest range of financial transactions.

According to The World Top 10 net, the top 10 banks in the world in terms of assets are:

1. CITIBANK

2. JP MORGAN CHASE

3. HSBS

4. BANK OF AMERICA

5. CREDIT AGRICOLE GROUP

6. ROYAL BANK OF SCOTLAND

7. MITSUBISH TOKYO FINANCIAL GROUP

8. MIZUHO FINANCIAL GROUP

9. HBOS

10. BNP PARIBAS

The list of Top 10 Russian banks goes as follows:

1. SBERBANK

2. VTB

3. GAZPROMBANK

4. VTB24

5. ROSSELHOZBANK

6. BANK OF MOSCOW

7. ALFA-BANK

8. FK OTKRYTIE

9. UNICREDIT BANK

10. PROMSVIAZBANK

Banking is an activity based on well-defined laws and by-laws that strictly regulate this sphere of economic and financial activity. Because money can affect many economic variables that are important to the well-being of any economy, politicians and policymakers throughout the world care about the conduct of monetary policy, the management of money and interest rates. The organization responsible for the conduct of a nation’s monetary policy and inter alia for supervision of banks in most countries, save the U.S., is the Central bank. The Central bank does not conduct commercial banking activities. Its goal is to attain stable economic growth in the nation, and through its actions, influence the flow of money and credit in the economy.

In the U.S. The Federal Reserve System is entrusted to perform those functions. The Federal Reserve System (or simply The Fed) is a quasi-governmental entity which. consists of the Board of Governors, The Federal Open Market Committee, 12 Federal Reserve banks, 25 branches, member financial institutions, and advisory committees.

Are banks allowed to trade cars or Invest in car manufacturing and trading? The answer to the questions stems from national banking legislation that views a bank as a financial intermediary. A financial intermediary is an institution that specializes in bringing lenders and borrowers together.

In what sense are banks financial intermediaries? A bank is a business and its owners or managers aim to maximize profits. A bank makes profits by lending and borrowing. To get money in, the bank offers favorable terms to potential depositors. British clearing banks offer interest on sight deposits only to important customers, but they usually offer free checking facilities to people whose sight deposits or current accounts do not fall below a certain level. They do not charge directly for the expenses of clearing and processing checks. And they offer interest on time deposits.

Let us see how the London clearing banks lend out their money. Most is lent out as advances of overdrafts to households and firms, usually at interest rates well in excess of the rate simultaneously being paid to the bank customers with time deposits. Some is used to purchase securities such as long-term government bonds. Some is more prudently invested in liquid assets. Although these do not pay such a high rate of interest, the bank knows that it can get its money back quickly if people start withdrawing a lot of money from their sight deposits. And some money is held as cash, the most liquid asset of all.

What economic services does the bank provide?

It is transforming household loans to the bank into bank loans to a wide range of people – governments wishing to finance a budget deficit, firms borrowing to build a new factory, and individuals borrowing to start a new business or to buy a new home. The bank is using its specialist expertise to acquire a diversified portfolio of investments though depositors merely observe that they get an interest rate on their time deposits or free chequing facilities. Without the existence of the intermediary, depositors would have neither the time nor the expertise to decide which of these loans or investments to make. That is the economic service that the bank as an intermediary provides.

Banks are not the only financial intermediaries. Insurance companies, pension funds, and building societies also take in money in order to re-lend it. It means that banks and other intermediaries are not allowed to manufacture cars but can legally share profits of car manufacture by investing in car industry.

Дата добавления: 2015-11-14