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Banking01.ppt
- 1. © South-Western Publishing
Slide 1
THE BUSINESS
OF BANKING
1.1 Introduction to Banking
1.2 Role of Banks in the Economy
1.3 How the Banking System Works
1.4 Other Financial Institutions
1
- 4. © South-Western Publishing
Slide 4
A UNIQUE BUSINESS
The services banks offer to customers have to do
almost entirely with handling money for other people.
Money is a medium of exchange—an agreed upon system
for measuring values of goods and services.
Money shows how much something is worth.
A bank is a financial intermediary for the safeguarding,
transferring, exchanging, or lending of money.
An intermediary is a facilitator acting between parties.
Banks facilitate the flow of money throughout our economy.
- 6. © South-Western Publishing
Slide 6
BANKING TODAY
Traditionally, banking was viewed as a solid and
slow-moving industry.
Banking today is an exciting, fast-moving,
around-the-clock, around-the-world activity.
- 7. © South-Western Publishing
Slide 7
MERGERS
A merger occurs when one or more banks join or
acquire another bank or banks.
Mergers increase the size of banks, giving them
more resources.
Mergers decrease the number of banks.
Mergers have created an opening for a new
wave of small local banks.
- 8. © South-Western Publishing
Slide 8
TOP TEN LARGEST
BANKS WORLDWIDE (Ranked by size of assets)
Bank Country
Mizuho Financial Group Japan
Citigroup United States
Deutsche Bank Germany
JP Morgan Chase Co. United States
Bank of Tokyo-Mitsubishi Japan
HSBC Holdings United Kingdom
Hypo Vereinsbank Germany
UBS Switzerland
BNP Paribas France
Bank of America Corp. United States
- 9. © South-Western Publishing
Slide 9
TECHNOLOGY
Impact on bankers
Accounting, auditing, and examining functions have
been taken over by fast and efficient technology.
Funds transfer, record keeping, and financial
analyses have become instantaneous.
Impact on consumers
Automated teller machines (ATMs)
“Smart” cards
Online banking
- 10. © South-Western Publishing
Slide 10
COMPETITION
As government regulations have changed,
competition between banks has become fiercer.
Banks compete with each other and with other
businesses that sell financial services.
- 11. © South-Western Publishing
Slide 11
Lesson 1.2
ROLE OF BANKS IN
THE ECONOMY
List banking activities that contribute to
economic stability
Explain how banking expands the
economy
GOALS
- 12. © South-Western Publishing
Slide 12
BANKS AND ECONOMICS
Money is a medium of exchange and the basis
of the modern economy.
Banks and other institutions play a critical role in
performing services that are essential to the
functioning of an economy.
- 14. © South-Western Publishing
Slide 14
SPREADING THE WEALTH
Banks play a key role in transferring money to
provide growth and stabilizing the monetary
supply.
Bank lending makes money available to
consumers and businesses to make purchases
they might not otherwise be able to make.
- 15. © South-Western Publishing
Slide 15
TRANSFERRING
Between banks
Between banks and individual customers
Between banks and industry
Between banks and governments
Between governments
- 17. © South-Western Publishing
Slide 17
CREDITWORTHINESS
Evaluating the creditworthiness of customers
is a banking function that affects the economy
at large.
Banking policies and regulations regarding
creditworthiness and the ratio of loans to
deposits help guarantee a secure financial
environment.
- 18. © South-Western Publishing
Slide 18
GUARANTEEING THE MONEY
In the United States, banks and the government work together
to form the banking system and to make sure the money
supply is adequate, appropriate, and trustworthy.
Much of this guarantee is backed through the central banking
function of the Federal Reserve.
Individual banks work with the government to implement
monetary policy, perform exchange functions, and defeat
counterfeiters of currency.
Banks guarantee their own policies.
- 19. © South-Western Publishing
Slide 19
THE SUBSTANCE OF SOCIETY
A great part of the economic system is
psychological.
Banks are at the heart of our financial system,
and their effect on your life cannot be calculated.
- 20. © South-Western Publishing
Slide 20
Lesson 1.3
HOW THE BANKING
SYSTEM WORKS
Explain how banks acquire money to do
business
Identify new services that banks offer to
stay competitive
GOALS
- 21. © South-Western Publishing
Slide 21
MONEY AT WORK
Banks earn money in various ways.
Most of their income comes from the interest that
people or businesses pay as they repay a loan.
When banks lend money, they put it to work.
- 22. © South-Western Publishing
Slide 22
THE SPREAD
The difference between what a bank pays in
interest and what it receives in interest is called
the spread, or net interest income.
The spread is not pure profit. The spread is
income, or revenue.
Profit is what is left of revenue after costs are
deducted.
- 23. © South-Western Publishing
Slide 23
OTHER FUNDS
In addition to interest income, banks have other
sources of income.
They charge for various services such as rental
of safe-deposit boxes, account maintenance
fees for checking accounts, fees for online bill
payments, and ATM transaction fees.
Banks make money on investments.
Banks may have funds at their disposal from
stockholder investments.
- 24. © South-Western Publishing
Slide 24
ASSETS AND LIABILITIES
An asset is anything of value. In financial terms,
that usually means money.
A liquid asset is anything that can readily be
exchanged, like cash.
A liability, in financial terms, is a cash obligation.
- 25. © South-Western Publishing
Slide 25
TWO PRINCIPLES OF BANKING
A bank’s liabilities exceed its reserves.
A bank’s liabilities are more liquid than its assets.
- 26. © South-Western Publishing
Slide 26
BANKS WORKING FOR YOU
Banking has changed radically in the last 20 years.
Large regional banks have huge resources.
Smaller banks use the flexibility that sometimes
comes with smaller size to their advantage.
- 27. © South-Western Publishing
Slide 27
CHANGES IN TRADITIONAL SERVICES
Branch locations
Extended hours
Drive-up windows
Variety of checking accounts
Savings options
Personal service
- 29. © South-Western Publishing
Slide 29
Lesson 1.4
OTHER FINANCIAL
INSTITUTIONS
Explain depository financial institutions
Explain nondepository financial institutions
GOALS
- 30. © South-Western Publishing
Slide 30
TYPES OF FINANCIAL INSTITUTIONS
Depository intermediaries
Obtain funds from the public
Use the funds to finance their business
Nondepository intermediaries
Do not take or hold deposits
Earn their money by selling specific services or
policies
- 32. © South-Western Publishing
Slide 32
NONDEPOSITORY INTERMEDIARIES
Insurance companies
Trusts companies/pension funds
Brokerage houses
Loan companies
Currency exchanges
Editor's Notes
- 12/19/2022
- 12/19/2022