Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Chapter 1
Book Chapter 1 - An Overview of Bank and their service
Q: What is a bank? How does a bank differ from most other financial-service providers?
A bank is a financial institution and a financial intermediary that accepts deposits and channels those
deposits into lending activities, either directly or through capital markets. A bank connects customers
that have capital deficits to customers with capital surpluses.
Other financial service providers offer some of the financial services offered by a bank, but not all of
them within one institution.
Q: Why are some banks reaching out to become one-stop financial-service conglomerates? Is this a
good idea, in your opinion?
There are two reasons that banks are increasingly becoming one-stop financial service conglomerates.
1. the increased competition from other types of financial institutions and the erosion of banks’
traditional service areas.
2. 2.the Financial Services Modernization Act which has allowed banks to expand their role to be
full-service providers.
Q: What is a merchant banking service?
Merchant banking is a professional service provided by the merchant banks to their customers
considering their financial needs, for adequate consideration in the form of fee. Merchant banks are
banks that conduct fundraising, financial advising and loan services to large corporations.
Q: What different kinds of services do banks offer the public today? What services do their closest
competitors offer?
Different kinds of services do banks offer the public today:
1. Taking deposits
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
All of these services are also offered by their closest competitors. Banks and their closest competitors
are converging and becoming the financial department stores of the modern.
Q: Why do banks exist in modern society. according to the theory of finance?
There are multiple approaches to answering this question. The traditional view of banks as financial
intermediaries sees them as simultaneously fulfilling the financial-service needs of savers (surplus-
spending units) and borrowers (deficit-spending units), providing both a supply of credit and a supply of
liquid assets.
A newer view sees banks as delegated monitors who assess and evaluate borrowers on behalf of their
depositors and earn fees for supplying monitoring services.
Banks also have been viewed in recent theory as suppliers of liquidity and transactions services that
reduce costs for their customers and, through diversification, reduce risk. Banks are also critical in the
