Bank and
Banking
Perspective
PRESENT BY:
GILBERT E. BAROY
DENNILYN M. TANCHICO
TABLE OF
CONTENT
Nature of Banking Business 01
Principles of Banking Business 02-03
Types of Banks 04-05
Economic Significance of Banks 06
Why the State Supervises Banks 07
Nature of Banking
Business
"A Banks makes money
out of other people's
money"
Business banking is a
company's financial
dealings with an institution
that provides business
loans, credit, savings
accounts, and checking
accounts, specifically
designed for companies
rather than for individuals.
Principles of Banking
Business
Liquidity Safety Diversity
Liquidity is an The safety of funds lent In choosing its investment
portfolio, a commercial bank
important principle of is another principle of
should follow the principle of
bank lending. Bank lending. Safety means diversity. It should not invest
lend for short periods that the borrower its surplus funds in a
only because they lend should be able to repay particular type of security
public money which can the loan and interest in but in different types of
be withdrawn at any time at regular securities. It should choose
time by depositors. intervals without the shares and debentures of
different types of industries
They, therefore, default. The repayment
situated in different regions
advance loans on the of the loan depends
of the country. The same
security of such assets upon the nature of principle should be followed
which are easily security, the character in the case of state
marketable and of the borrower, his governments and local
convertible into cash at capacity to repay and bodies. Diversification aims
a short notice. his financial standing. at minimising risk of the
investment portfolio of a
Principles of Banking
Business
Stability Profitability
Another important principle of a This is the cardinal principle
bank’s investment policy should for making investment by a
be to invest in those stocks and bank. It must earn sufficient
securities which possess a high profits. It should, therefore,
degree of stability in their invest in such securities which
prices. The bank cannot afford was sure a fair and stable
any loss on the value of its return on the funds invested.
securities. It should, therefore, The earning capacity of
invest it funds in the shares of securities and shares depends
reputed companies where the upon the interest rate and the
possibility of decline in their dividend rate and the tax
prices is remote. benefits they carry.
TYPES OF BANK
Universal Banks
Universal banking is a system in which banks
provide a wide variety of comprehensive financial
services, including those tailored to retail,
commercial, and investment services. Universal
banking is common in some European countries,
including Switzerland.
Commercial Bank
The term commercial bank refers to a financial
institution that accepts deposits, offers checking
account sevices, makes various loans, and offers
basic financial products like certificates of deposit
(CDs) and savings accounts to individuals and
small businesses. A commercial bank is where
most people do their banking.
Thrift Bank
Is a type of financial institution that specializes in
offering savings accounts and originating home
mortgages for consumers. Thrift banks are also
sometimes referred to as Savings and Loan
Associations. (S&Ls). Thrift banks differ from larger
commercial banks, like Wells Fargo or Bank of America,
because they usually offer higher yields on savings
accounts and provide limited lending services to
businesses.
TYPES OF BANK
Rural Bank
Rural Bank are private, unit banking
institutions based in the rural areas
which mobilise financial resources and
control and extend credits to farmers,
cottage industrialists and other rural-
based economic operators in their
defined area of operation.
Offshore bank
Is a bank regulated under
international banking license (often
called offshore license), which
usually prohibits the bank from
establishing any business activities
in the jurisdiction of establishment
Economic
Significance of Banks
A bank facilitates dealings between
debtors and creditors because it
acts as anintermediary in the flow of
credit funds. It allows others the use
of idle funds of thecommunity in
productive activities
Creates money out
of proceeds of loans
Maintains
foreign trade
Why the State supervises Banks
-The state does not only supervise banks, but with the advent
of central banking, italso controls the bank’s operation.
Reasons
1. The banks are entrusted with other people’s money.
2. The state wants to assure that the banks will perform their functions
in the bestinterest of their clients through the honest and efficient
conduct of their functions
3. Banks are an essential component of any modern economy. They provide
an easy way for people to save and they provide payment services, primarily
in the form of checks, electronic funds transfers, and credit and debit cards.
Without payment services, the economy would quickly come to a halt.
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