Topic 1: Commercial Banks and Their Services: An Overview

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Topic 1 Commercial Banks and Their Services An
Overview

• The Financial System and Competing Financial
  Institutions
• The financial system is an integral part of the
  financial sector of an economy
• Financial system refers to the structure,
  organisation, institutions, and activities
  within the financial market.
• Financial institutions can be in the form of
  depository and non-depository institutions
  that compete with one another.
• The structure of financial system in any
  economy can be characterised as

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Structure of A Typical Financial System
Regulatory Institutions
Capital market
Money market
Financial Institutions
Non-deposit institutions
Depository institutions
Security brokers Real estate investment Investment
institutions (Mutual funds) Finance
companies Insurance companies Mortgage companies
Commercial banks
Savings institutions Credit unions
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What Is A Bank?

• A bank can be defined in terms of three
  criteria
• - its economic functions financial
  intermediation, that is, transferring of funds
  and provision of payment for goods and services
• - the type of services it offers this does not
  give a clear definition of bank, as many of the
  services rendered by banks are equally rendered
  by non-bank financial institutions
• - the legal basis for its existence that is,
  the regulatory framework that governs the
  licensing and operations of such bank.
• In summary, a bank can be defined as any
  business organisation that offers acceptance
  of deposits, which is subject to withdrawal on
  demand (either through check or electronic
  transfer, or both) and grants loans and credits
  to private individuals and business firms on
  commercial basis.

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• Commercial Banks Roles and Services
• - It is important to note that the roles listed
  below are not Strictly unique to banks, as many
  of their closest competitors also perform some of
  these roles.
• Banks major roles/functions
• - Intermediation function
• - Payment function
• - Guarantor role
• - Risk management function
• - Savings/investment advisor role
• - Safekeeping/certification of value
• - Agency role (usually through a trust
  department)
• - Policy role

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• Other services
• - Savings deposit
• - Foreign exchange transaction
• - Provision of credits
• - Portfolio management
• - Equipment leasing
• - Venture capital loans
• Commercial Bank and Their Closest Competitors
• - Savings institutions
• - Credit unions
• - Security brokers
• - Real estate investment
• - Investment institutions (Mutual funds)
• - Finance holding companies and conglomerates
• - Insurance companies
• - Mortgage companies
• - Others such as, Cambios, Money market funds,