Chapter 7 Types of Banks - Ibrahim Sameer...Types of Banks Ibrahim Sameer (MBA - Specialized in...
Transcript of Chapter 7 Types of Banks - Ibrahim Sameer...Types of Banks Ibrahim Sameer (MBA - Specialized in...
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Chapter 7
Types of BanksIbrahim Sameer (MBA - Specialized in Finance,
B.Com – Specialized in Accounting & Marketing)
www.ibrahimsameer.wordpress.com
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What Is a Banking System?
• When you sit back and think about it, banks are
often a huge part of our lives.
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What Is a Banking System?
• We deposit our paychecks, take out loans, and set
up savings accounts, all at a bank.
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What Is a Banking System?
• But what do banks do? What are the different
types of banks?
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What Is a Banking System?
• Let's start finding some answers to these
questions by looking at the different types of banks
that make up a banking system.
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What Is a Banking System?
• A banking system is a group or network of
institutions that provide financial services for us.
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What Is a Banking System?
• These institutions are responsible for operating a
payment system, providing loans, taking deposits,
and helping with investments.
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Functions of Banking System
• Banking systems perform several different
functions, depending on the network of institutions.
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Functions of Banking System
• For example, payment and loan functions at
commercial banks allow us to deposit funds and
use our checking accounts and debit cards to pay
our bills or make purchases.
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Functions of Banking System
• They can also help us finance our cars and homes.
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Functions of Banking System
• By comparison, central banks or systems
distribute currency and establish money-
related policies.
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Functions of Banking System
• Investment banks or systems conduct trades or
deal with capital markets.
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Functions of Banking System
• Many banks are profit-seeking entities with
stockholders. They obtain profits by charging
more interest for loans and paying less interest
on deposits.
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Functions of Banking System
• For example, a bank may charge a 6% interest
rate on a 30-year, fixed rate mortgage, but offer an
interest rate of only 1% on a savings account of
$100,000.
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Different Types of Banks
Retail Bank
Commercial Bank
Corporative Bank
Investment Bank
Exim Bank
Central Bank
Merchant Bank
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Retail Bank
• Retail Banks provide basic banking services to
individual consumers.
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Retail Bank
• Retail banking, also known as consumer banking.
These are the local branch of the commercial bank
you see in your neighborhood everyday. For
example BML branch in Ungoofaaru
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Retail Bank
• Products and services include safe deposit boxes,
checking and saving account, CDs, mortgages and
car loan.
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Commercial Bank
• A commercial bank is a financial institution that is
authorized by law to receive money from
businesses and individuals and lend money to
them. Commercial banks are open to the public
and serve individuals, institutions, and businesses.
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Commercial Bank
• A commercial bank is almost certainly the type of
bank you think of when you think about a bank
because it is the type of bank that most people
regularly use.
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Commercial Bank
• Banks are regulated by federal and state laws
depending on how they are organized and the
services they provide. Commercial banks are also
monitored through the MMA in Maldives.
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Commercial Bank
• A commercial bank is authorized to serve the
following functions:
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Commercial Bank
• Receive deposits - take money in from individuals
and businesses (called depositors).
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Commercial Bank
• Disburse payments - make payments upon the
direction of its depositors, such as honoring a
check.
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Commercial Bank
• Collections - a bank will act as your agent to collect
funds from another bank payable to you, such as
when someone pays you by check drawn on an
account from a different bank.
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Commercial Bank
• Safeguard money - banks are considered a safe
place to store your wealth.
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Commercial Bank
• Maintain and service savings and checking
accounts of its depositors.
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Commercial Bank
• Lend money
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Cooperative Bank
• Co-operative banks are registered normally under
the deferral law. They generally give credit
facilities to small farmers, salaried employees,
small-scale industries, etc. Co-operative Banks are
available in rural as well as in urban areas. The
functions of these banks are just similar to
commercial banks.
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Cooperative Bank
• In Maldives we don’t have cooperative bank so far
but in some other countries they do have.
• Lets look into some examples now:
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Cooperative Bank
• Metro South Coop Bank (Philippines)
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Cooperative Bank
• Apna Sahakari Co-Op Bank Ltd. (India)
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Cooperative Bank
• The Surat People’s Co-op Bank Ltd. (India)
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Cooperative Bank
• The Kalupur Commercial Co-op Bank Ltd. (India)
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Investment Bank
• Investment banks are special type of bank involved
in a variety of large and complex financial services
for major institution.
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Investment Bank
• Unlike commercial and retail banks investment
bank do not take deposits.
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Investment Bank
• Top 5 major investment bank in the globe are as
follows:
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Investment Bank
• JP Morgan Chase
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Investment Bank
• Goldman Sachs
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Investment Bank
• Bank of America Merill Lynch
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Investment Bank
• Morgan Stanley
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Investment Bank
• Citi Group
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Investment Bank
• Some of the main functions of investment bank
include the following:
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Investment Bank
• Investment bank help companies to raise capital.
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Investment Bank
• Do you know that in 2016 JP Morgan & Goldman
Sachs received (in the form of revenue) more than
$96.60 & $39.20 Billion respectively.
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Investment Bank
• In 2016 Assets under management (AUM) (Assets
under management (AUM) is the total market
value of assets that an investment company or
financial institution manages on behalf of
investors) of JP Morgan is around $2.4 Trillion.
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Investment Bank
• They advice companies on issuing new debt and
securities.
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Investment Bank
• IPO Deals: When the company decided to be
listed in stock market for the first time so that
common people can buy shares is called IPO. In
such case investment bank helps to get such
offering. They help of price and to market for
wealthy clients and earns commission on money
raised.
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Investment Bank
• Mergers and acquisition.
• In 2011 Microsoft offers to buy Skype, Skype
approach JP Morgan to help them to get right deal;
paying $30 million fees to them.
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Exim Bank
• It is popularly known as ‘Export Import Bank’. Such
banks provide long term financial assistance to
the exporters and importers.
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Central Bank
• Every country of the world has a central bank. In
Maldives central bank is Maldives Monetary
Authority (MMA).
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Central Bank
• In India, Reserve Bank of India, in U.S.A, Federal
Reserve and in U.K, Bank of England.
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Central Bank
• These central banks are the bankers of the other
banks. They provide specialized functions i.e.
issue of paper currency, working as bankers of
government, supervising and controlling foreign
exchange. A central bank is a non-profit making
institution. It does not deal with the public but it
deals with other banks. The principal responsibility
of Central Bank is thorough control on currency of
a country.
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Merchant Bank
• A merchant bank is a financial institution that
perform underwriting, loan services, financial
advising and fund raising services to large
corporation and high net worth individuals.
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Merchant Bank
• A merchant bank do not provide regular banking
services such as offering checking the accounts to
general public and in fact merchant bank don’t
take deposit from public.
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Merchant Bank
• A vast majority of merchant banking activity
involves international transections. For example
ABC Company want to buy a company in another
country they will higher a merchant bank to advice
them to the best way to structure the transection.
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Merchant Bank
• The merchant bank might also help ABC by
financing the transection through underwriting or
some type of syndicated loan arrangement.
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Merchant Bank
• Merchant bank are very much like investment
bank.
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Merchant Bank
• But because of their specialty in international
transection their emphasis is on providing services
to multinational corporation and high net worth
individuals that do business in more than one
nation.
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Questions & Answers
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