1. Instructor: Rushdy MD Bakth
Fin Chapter 1: An Overview of the Changing Financial - Services Sector
Instructor: Rushdy MD Bakth

2. 1-2
Introduction
A bank is a financial intermediary whose core activity is to channel funds from savers to borrowers increasing the economic efficiency by productive allocation of resources.
Make payments
Financial advice
Finance public facilities by purchasing government notes and bonds
Source of Working capital
Banks are the principal source of credit (loanable funds) for millions of individuals and families and for many units of government.
The credit crisis of dramatically altered the banking landscape.
Worldwide banks grant more installment loans to consumers (individuals and families) than any other financial-service provider.
Bank and non-bank financial firms are declining in numbers, consolidating into fewer but also much larger companies.

3. What Is a Bank? A commercial bank can be defined in terms of:
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What Is a Bank?
A commercial bank can be defined in terms of:
The economic functions it performs: They transfer funds from savers to borrowers and in paying for goods & service
The services it offers its customers: Bank services have expanded from traditional services (checking & debit accounts, credit cards, savings plans, loans) and including investment banking, insurance protection, financial planning, advice for merging companies, the sale of risk-management services, and so on.
The legal basis for its existence: A bank is any business offering deposits subject to withdrawal on demand and making commercial or business nature loans.

4. What Is a Bank? (continued)
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What Is a Bank? (continued)
As organizations bearing the label of banks (investment banks, mortgage banks, merchant banks, universal banks) and several industrial companies invaded to control bank or offer bank like services, regulators decided to add another factor so that they can’t claim exemption from being regulated as a bank.
Congress then defined a bank as any institution that could qualify for deposit insurance administered by the Federal Deposit Insurance Corporation (FDIC)
In the U.S., a bank had come to be defined, not so much by its array of service offerings, but by the government agency insuring its deposits.
In Bangladesh, Bank Deposit Insurance Scheme (BDIS) run under Central Bank of Bangladesh

5. Economic Function – Flow Of Funds
Receives Interest
Borrows
Deposits
Deficit Units/
Borrowers/
Users
Surplus Units/
Depositors/
Savers
Bank
Receives Interest
Pays Interest
Bank’s Margin = Interest received from borrower – Interest paid to the depositors

6. The Services Banks Offer Public
Services Banks Have Offered Throughout History:
Carrying out currency exchange.
Discounting commercial notes & making business loans.
Offering savings deposits.
Safekeeping of valuables & certification of value.
Supporting government activities with credit.
Offering checking accounts (Demand deposits).
Offering trust services (managing financial affairs/property, trustee for wills)

7. The Services Banks Offer Public----Contd
Services Banks have Developed More Recently:
Granting Consumer Loans.
Financial Advising.
Cash Management.
Offering Equipment Leasing.
Making Venture Capital Loans.
Selling Insurance.
Selling Retirement Plans
Security Brokerage.
Offering Mutual Funds & Annuities.
Offering Merchant Banking Services.

8. The Services Banks Offer Public----Contd
Recent Trends Affecting All Banks:
Service Proliferation.
Rising Competition.
Deregulation.
Rising Funding Costs.
An Increasingly Interest-Sensitive mix of Funds.
A Technological revolution.
Consolidation & geographical Expansion.
Globalization of banking.
Increased risk of failure.

9. Considerations While Choosing a Bank
Features
Services
Fees
ATMs

10. Considerations While Choosing a Bank…Contd.
Features
Interest Rate (Annual percentage yield)
Convenience
FDIC membership
Size
Minimum deposit
Limitations
Availability of Funds

11. Considerations While Choosing a Bank…Contd.
Services
direct deposit
ATMs
banking by telephone (what can you do over the phone, and when?)
online banking
credit cards
debit cards
overdraft protection
canceled checks (included with monthly statements?)
loans and mortgages
stock and mutual fund trading
retirement planning services
small business services
access to international money markets
copies of previous monthly statements
deposit slips and other slips
phone support
talking to a teller in person
debit card fees
traveler's checks
loan application processing
safe deposit box rental
stop payment
wire transfer
money order

12. Considerations While Choosing a Bank…Contd.
Fees
Maintenance fees
Low-balance penalty
ATM surcharges, "Foreign" ATM fees
Returned check
Bounced check
Overdraft Protection
Check printing
Per-check charges
Cancelled check return fees
Closed account

13. Considerations While Choosing a Bank…Contd.
ATMs
Once you have an account, balance your checkbook on a regular basis, to make sure that the bank hasn't made any errors and so that you know how much you have in your account. Also understand every fee you are charged, and complain about any that you don't agree with. Take a look at any inserts that accompany your monthly statement, because banks are required to disclose any fee changes, and that's where you'll find out about them.

14. Leading Competitors with Banks
Saving Associations
Credit Unions
Fringe Banks
Money Market Funds
Mutual Funds
Hedge Funds
Security Brokers and dealers
Investment Banks
Finance Companies
Financial Holding Companies
Life and Property/casualty insurance companies

15. Types of Banks Commercial Banks Money Center Banks Community Banks
Saving Banks
Cooperative Banks
Mortgage Banks
Investment Banks
Merchant Banks

16. Types of Banks International Banks Wholesale Banks Retail Banks
Affiliated Banks
Virtual Banks
Fringe Banks