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Banking & Fin - Ch 1

Banking & Finance - Banking Basics

A type of financial institution; any organization that provides services related to money Banks
Protecting money Lending money Issuing money (like the Federal Reserve Bank Does) Sending money from one place to another Keeping track of money Helping customers get more money Helping businesses find money Functions of a Bank
Individuals Groups Stockholders Owners of a Bank
Some countries banks are owned by the government nationalization
Lending money at a higher interest rate than they pay depositors Providing services such as safe deposit boxes Charging fees of various kinds How do Banks Make Money?
Details how the bank is to be operated and how it will be regulated. Issued by the federal and state governments Charter
Customers can give their money to it (make a deposit) and then come back for their money later (make a withdrawal) Depository Institution
a percentage of a bank’s funds that must be held separately to ensure that the money will be available when customers want to get their money from their accounts Reserves
Provide services for consumers, such as deposit accounts, mortgage, auto and personal loans as well as credit cards Retail Banks
No physical location or building, Customers do their business with the bank from anywhere they have an internet connection Internet Bank
Focuses on business customers, providing bank accounts along with specialized services such as foreign exchange, investment services, and capital loans Commercial Bank
Very Large, often international banks whose primary customers are businesses, other banks, and governments Money Center Banks
provides investment services and banking services Investment Bank
Oversees a country’s banking system, Government Established, Stabilizes a country’s money system, The US established the Federal Reserve System Central Banks
one location, Usually found in small towns or rural areas, Serve the local customer Unit Bank
Across a state or a few states in the same region, Usually specialize in retail banking and do not operate internationally, May be a member of the Federal reserve System, Typically classified as midsized based on bank activity Regional banks or interstate banks
offices across the country, Charted by the Federal Office of the Comptroller of the Currency (OCC, Do not have to follow state interest rate caps, All members of the Federal Reserve System National Banks
A Computerize d Machine that provides a means of self-service banking Automated Teller Machine
Also known as, home banking, allows customers to conduct financial transactions on a secure website operated by their bank Online Banking
Allow for immediate money transfer from one person to another Person-to-Person or Peer-to-Peer (P2P)
a computer software program loaded onto SmartPhones or tablets that let the user perform specific tasks Apps
How banking is essential to economic growth Expands the economy and provides jobs, income, investment returns, and tax revenues
Debit Card also known as check card, allows bank customers to withdraw cash or pay for goods and services in stores or online
Federal Deposit Insurance Corporation (FDIC) Protects depositors money up to $250,000 per account in the event of bank failure
Banker's Blanket Bond Insurance to protect banks from robberies or employee theft
Loan Cycle 1. Bank uses deposit to make loan 2. Loan is used to purchase a car from dealership 3. Car dealership pays employee after sale of car 4. Car salesman purchases TV with paycheck 5. TV Store deposits their money into their bank
Financial Intermediary An institution that acts as a go-between in financial transactions (facilitates money between savers and borrowers)
Electronic Funds Transfer (EFT) Electronic exchange of money from one account to another through computer-based systems (Debit card or ATM)
Automated Clearinghouses (SCH) Electronic networks for financial transaction (60% handled by federal reserve)
Created by: mryan396