Slide 1 THE BUSINESS OF BANKING 1.1 1.1 Introduction to Banking 1.2 1.2 Role of Banks in the Economy...
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Transcript of Slide 1 THE BUSINESS OF BANKING 1.1 1.1 Introduction to Banking 1.2 1.2 Role of Banks in the Economy...
Slide 11
THE BUSINESSOF BANKING
1.11.1 Introduction to Banking1.21.2 Role of Banks in the Economy1.31.3 How the Banking System Works1.41.4 Other Financial Institutions
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Slide 22
Lesson 1.1
INTRODUCTIONTO BANKING
Define the business of bankingIdentify trends in modern banking
GOALSGOALS
Slide 33
WHAT IS A BANK?WHAT IS A BANK?WHAT IS A BANK?WHAT IS A BANK?
A bank is a business.Banks sell their services to earn money.Banks must earn a profit to survive.
Slide 44
A UNIQUE BUSINESSA UNIQUE BUSINESSA UNIQUE BUSINESSA 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.
Slide 55
TYPES OF BANKSTYPES OF BANKSTYPES OF BANKSTYPES OF BANKS
Commercial banksRetail banksCentral banks
Slide 66
BANKING TODAYBANKING TODAYBANKING TODAYBANKING 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.
Slide 77
MERGERSMERGERSMERGERSMERGERS
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.
Slide 88
TOP TEN LARGEST TOP TEN LARGEST BANKS WORLDWIDE BANKS WORLDWIDE (Ranked by size of assets)
BankBank CountryCountryMizuho Financial Group JapanCitigroup United StatesDeutsche Bank GermanyJP Morgan Chase Co. United StatesBank of Tokyo-Mitsubishi JapanHSBC Holdings United KingdomHypo Vereinsbank GermanyUBS SwitzerlandBNP Paribas FranceBank of America Corp. United States
Slide 99
TECHNOLOGYTECHNOLOGYTECHNOLOGYTECHNOLOGY
Impact on bankersAccounting, 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” cardsOnline banking
Slide 1010
COMPETITIONCOMPETITIONCOMPETITIONCOMPETITION
As government regulations have changed, competition between banks has become fiercer.
Banks compete with each other and with other businesses that sell financial services.
Slide 1111
Lesson 1.2
ROLE OF BANKS IN THE ECONOMY
List banking activities that contribute to economic stabilityExplain how banking expands the economy
GOALSGOALS
Slide 1212
BANKS AND ECONOMICSBANKS AND ECONOMICSBANKS AND ECONOMICSBANKS 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.
Slide 1313
KEEPING YOUR MONEY SAFEKEEPING YOUR MONEY SAFEKEEPING YOUR MONEY SAFEKEEPING YOUR MONEY SAFE
Record keepingIdentificationEnforcementTransfer securitySound business practices
Slide 1414
SPREADING THE WEALTHSPREADING THE WEALTHSPREADING THE WEALTHSPREADING 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.
Slide 1515
TRANSFERRINGTRANSFERRINGTRANSFERRINGTRANSFERRING
Between banksBetween banks and individual customersBetween banks and industryBetween banks and governmentsBetween governments
Slide 1616
LENDINGLENDINGLENDINGLENDING
Loans to businessesLoans to governmentsLoans to individuals
Credit cardsHome loansAutomobile loans
Slide 1717
CREDITWORTHINESSCREDITWORTHINESSCREDITWORTHINESSCREDITWORTHINESS
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.
Slide 1818
GUARANTEEING THE MONEYGUARANTEEING THE MONEYGUARANTEEING THE MONEYGUARANTEEING 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.
Slide 1919
THE SUBSTANCE OF SOCIETYTHE SUBSTANCE OF SOCIETYTHE SUBSTANCE OF SOCIETYTHE 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.
Slide 2020
Lesson 1.3
HOW THE BANKING SYSTEM WORKS
Explain how banks acquire money to do businessIdentify new services that banks offer to stay competitive
GOALSGOALS
Slide 2121
MONEY AT WORKMONEY AT WORKMONEY AT WORKMONEY 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.
Slide 2222
THE SPREADTHE SPREADTHE SPREADTHE 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.
Slide 2323
OTHER FUNDSOTHER FUNDSOTHER FUNDSOTHER 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.
Slide 2424
ASSETS AND LIABILITIESASSETS AND LIABILITIESASSETS AND LIABILITIESASSETS 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.
Slide 2525
TWO PRINCIPLES OF BANKINGTWO PRINCIPLES OF BANKINGTWO PRINCIPLES OF BANKINGTWO PRINCIPLES OF BANKING
A bank’s liabilities exceed its reserves.A bank’s liabilities are more liquid than its
assets.
Slide 2626
BANKS WORKING FOR YOUBANKS WORKING FOR YOUBANKS WORKING FOR YOUBANKS 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.
Slide 2727
CHANGES IN TRADITIONAL SERVICESCHANGES IN TRADITIONAL SERVICESCHANGES IN TRADITIONAL SERVICESCHANGES IN TRADITIONAL SERVICES
Branch locationsExtended hoursDrive-up windowsVariety of checking accountsSavings optionsPersonal service
Slide 2828
NEW SERVICESNEW SERVICESNEW SERVICESNEW SERVICES
Credit cardsInnovative lendingAutomated teller machines (ATMs)Smart cardsOnline banking
Slide 2929
Lesson 1.4
OTHER FINANCIAL INSTITUTIONS
Explain depository financial institutionsExplain nondepository financial institutions
GOALSGOALS
Slide 3030
TYPES OF FINANCIAL INSTITUTIONSTYPES OF FINANCIAL INSTITUTIONSTYPES OF FINANCIAL INSTITUTIONSTYPES OF FINANCIAL INSTITUTIONS
Depository intermediaries Obtain funds from the publicUse the funds to finance their business
Nondepository intermediariesDo not take or hold depositsEarn their money by selling specific services or
policies
Slide 3131
DEPOSITORY INTERMEDIARIESDEPOSITORY INTERMEDIARIESDEPOSITORY INTERMEDIARIESDEPOSITORY INTERMEDIARIES
Commercial banksSavings and loan associationsMutual savings banksCredit unions