A bank is a commercial or state institution that provides financial services, including issuing money in various forms, receiving deposits of money, lending money and processing transactions and the creating of credit. A commercial bank accepts deposits from customers and in turn makes loans, even in excess of the deposits; a process known as fractional-reserve banking. Some banks (called Banks of issue) issue banknotes as legal tender. A commercial bank is usually defined as an institution that both accepts deposits and makes loans; there are also financial institutions that provide selected banking services without meeting the legal definition of a bank. Many banks offer ancillary financial services to make additional profit; for example, most banks also rent safe deposit boxes in their branches. Currently in most jurisdictions commercial banks are regulated & require permission to operate. Operational authority is granted by bank regulatory authorities who provide rights to conduct the most fundamental banking services such as accepting deposits and making loans.
Purpose of a bank:
Banks have influenced economies & 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.
Commercial Lending:
For centuries, the banking industry only dealt with businesses, not consumers. Commercial lending today is a very intense activity, with banks carefully analyzing the financial condition of their business clients to determine the level of risk in each loan transaction.
Banking Services:
Banking services have expanded to include services directed at individuals, and risks in these much smaller transactions are pooled.
- A Bank’s Profit
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 cyclic 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 array of deposit activities and ancillary services (international banking, foreign exchange, insurance, investments, wire transfers, etc.). However, lending activities still provide the bulk of a commercial bank's income.The name bank derives from the Italian word banco "desk/bench", used during the Renaissance by Florentines bankers, who used to make their transactions above a desk covered by a green tablecloth. However, there are traces of banking activity even in the Babylonian times, and indeed a book about the history of banking is named: Banking, from Babylon to Wall Street.
- Services Typically Offered by Banks
Although the basic type of services offered by a bank depends upon the type of bank and the country, services provided usually include:
1. Taking deposits from their customers and issuing current (Pak) or checking (US) accounts and savings accounts to individuals and businesses.
2. Extending loans to individuals and businesses.
3. Cashing cheque
4. Facilitating money transactions such as wire transfers and cashier's checks
5. Issuing credit cards, ATM cards, and debit cards
6. Storing valuables, particularly in a safe deposit box
7. Consumer & commercial financial advisory services
8. Pension & retirement planning
Financial transactions can be performed through many different channels:
1. 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.
2. ATM is a computerized 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
3. 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
4. Telephone banking is a service provided by a financial institution which allows its customers to perform transactions over the telephone.
5. 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.
Purpose of a bank:
Banks have influenced economies & 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.
Commercial Lending:
For centuries, the banking industry only dealt with businesses, not consumers. Commercial lending today is a very intense activity, with banks carefully analyzing the financial condition of their business clients to determine the level of risk in each loan transaction.
Banking Services:
Banking services have expanded to include services directed at individuals, and risks in these much smaller transactions are pooled.
- A Bank’s Profit
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 cyclic 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 array of deposit activities and ancillary services (international banking, foreign exchange, insurance, investments, wire transfers, etc.). However, lending activities still provide the bulk of a commercial bank's income.The name bank derives from the Italian word banco "desk/bench", used during the Renaissance by Florentines bankers, who used to make their transactions above a desk covered by a green tablecloth. However, there are traces of banking activity even in the Babylonian times, and indeed a book about the history of banking is named: Banking, from Babylon to Wall Street.
- Services Typically Offered by Banks
Although the basic type of services offered by a bank depends upon the type of bank and the country, services provided usually include:
1. Taking deposits from their customers and issuing current (Pak) or checking (US) accounts and savings accounts to individuals and businesses.
2. Extending loans to individuals and businesses.
3. Cashing cheque
4. Facilitating money transactions such as wire transfers and cashier's checks
5. Issuing credit cards, ATM cards, and debit cards
6. Storing valuables, particularly in a safe deposit box
7. Consumer & commercial financial advisory services
8. Pension & retirement planning
Financial transactions can be performed through many different channels:
1. 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.
2. ATM is a computerized 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
3. 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
4. Telephone banking is a service provided by a financial institution which allows its customers to perform transactions over the telephone.
5. 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.
