Presentation on theme: "Financial Institutions and Banking Services"— Presentation transcript:
1 Financial Institutions and Banking Services Chapter 25Financial Institutions and Banking Services
2 Banks as a Business Banks offer services to its customers Checking AccountsSavings AccountsLoansBank chartersFederal charter = National BankState charter = State BankIn order to start a bank, owners must apply for a charter from either the state or federal government.
3 Two Types of Banks Deposit-Type Institutions Nondeposit Institutions Accept deposits for people and businesses to use in the future.Nondeposit InstitutionsDo not accept deposits.FDIC – Federal Deposit Insurance Corp.Federal Agency that helps to regulate banks and other financial institutions.
4 FDICProtects depositor’s money in case the bank or financial institution fails, as long as it is regulated by the FDICInsures all accounts under the same name at each bank up to an amount of $100,000Government Agency, but receives it’s money from the banks.Almost 99 percent of the banks are members of the FDIC
5 Deposit-Type Banks Commercial Banks – Full-Service Banks Offer checking accounts, provide savings accounts, make loans to individuals and businesses, and other servicesIn larger banks, these services may be broken into different departments.Savings departmentTrust departmentReal Estate departmentInvestment departmentShopping Centers to Supermarkets…..ATMs – Loans – Safe-Deposit Boxes
6 Deposit Type Banks Savings and Loan Association – Mutual Savings Bank Normally, specialize in savings accounts and making loans for home mortgagesPresently, they are leaning more toward offering a greater variety of services, so now they are becoming savings banks.Mutual Savings BankProvides a variety of servicesSavings accounts and to make loans to homebuyersOwned by its depositorsThe profits of a Mutual Savings Bank go to the depositor
7 Deposit-Type Banks Credit Unions User-Owned, Not-For-Profit, Cooperative InstitutionNormally its members have something in common with one another.Services offeredSavings depositsLoans for a variety of purposesSpecial Checking accountsCredit CardsMortgagesHome Equity loansSafe-Deposit BoxesInvestment servicesElectronic banking servicesLoans to small firmsAlliance – same company, government agency, labor union, profession, church, or community.Start here 11/15 5th
8 Nondeposit Financial Institutions Life Insurance Companiesprovide financial security for dependantsThrough careful investing in new and existing companies, life insurance companies can help to expand business in our economy.Investment CompaniesAllow people to choose investment opportunities for long-term growth of their money.Start 3rd hour here on 11/15
9 Nondeposit Financial Institutions Consumer Finance CompaniesSpecializes in making loans for long-lasting or durable goods, such as cars and refrigerators, and for financial emergencies.Mortgage CompaniesProvide loans for purchasing a new home or other real estateConsumer Finance companies make loans, and therefore are part of the financial services. Do not accept savings as do banks and other financial institutions.
10 Nondeposit Financial Institutions Check-Cashing OutletsMay cash paychecks or obtain other financial services.CCOs offer a wide variety of services such as electronic tax filing, money orders, private postal boxes, utility bill payment, and the sale of bus and subway tokens.
11 Types of Financial Services Accepting DepositsTransferring FundsLending MoneyStoring ValuablesProviding financial advice and investment servicesManaging trusts5th hour 11/16
12 Accepting DepositsSafe storage of funds for future use is an almost universal need.One of the main services offered by financial institutionsInterest –The amount that the bank pays its customers to use their money.
13 Transferring FundsMoney can easily be transferred from one account to another through simply writing a checkElectronic Funds TransferA system through which funds are moved electronically from one account to another and from one bank to another
14 Other EFT Services Point – of – Sale Transaction Debit Card – use at stores, gas stations, and or restaurants to pay for purchases.Direct Deposit – your paycheck is automatically deposited in your checking or savings account.Home Banking – payments are made and loans are obtained by customers using telephones and computers.
15 Lending MoneyMany people, businesses, and governments borrow money at some time.Individualspay for car or to pay for college tuitionBusinessBorrow money to build a new warehouse or to buy more merchandise for resaleBanks want to make loans like this….Majority of their revenue is from the interest they charge borrowers.Banks also issue Credit Cards (Visa and MasterCard)
16 Storing Valuables Safe-Deposit Boxes In the bank, an area where you can pay to store your valuables.JewelryBond and stock certificatesBirth recordsList of insurance policieswill
17 Providing Financial Advice and Investment Services Many banks can advise customers about such things as whether it is wise to buy a certain house, how to manage money better, or how to exchange U.S. currency for foreign currency.Period 3 11/16
18 Investments Are savings that are put to work to earn more money. Money in a savings account is a type of investment because the savings account earns interest.Bonds are another form of investment which customers can make from either the federal or state government, businesses, or school districts.
19 Managing Trusts Trust Companies Businesses that manage people’s money and property for them.Normally used by young people and by elders.Young people who inherit money may not have the skill and experience to invest wisely.Elder people who are ill may ask the trust department of a bank to manage their money.The bank or company then invests the money and keeps the customer informed with what is going on with their money.
20 The Federal Reserve System Federal Reserve Bank – is a bank where individuals cannot make deposits or open an account at. Only other banks can do that. This is a bank for banks, its relationship to other banks is similar to that or your bank to you.Federal Reserve System – supervise and regulate member banks in order to help the banks serve the public efficiently.
21 Financial Institutions and Economic Growth Bank Services are commonly used to:Build homesStart new businessesPlant cropsFinance educationsBuy goodsPave streetsBuild hospitalsBuy new business equipment
22 “Banking services are made possible through the savings you and others deposit. Deposits into banks to not sit idle in bank vaults. They are put to work. When you and others deposit money into a bank, you are create jobs and economic growth that benefit your community and society.”