Chapter 25 Financial Institutions and Banking Services.
Post on 26-Dec-2015
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Banks as a BusinessBanks as a Business
Banks offer services to its customers– Checking Accounts– Savings Accounts– Loans
Bank charters– Federal charter = National Bank– State charter = State Bank
Two Types of BanksTwo Types of Banks
Deposit-Type Institutions– Accept deposits for people and businesses to
use in the future.Nondeposit Institutions
– Do not accept deposits.
FDIC – Federal Deposit Insurance Corp.– Federal Agency that helps to regulate banks and
other financial institutions.
FDICFDIC
Protects depositor’s money in case the bank or financial institution fails, as long as it is regulated by the FDIC– Insures all accounts under the same name at
each bank up to an amount of $100,000– Government Agency, but receives it’s money
from the banks.– Almost 99 percent of the banks are members of
the FDIC
Deposit-Type BanksDeposit-Type BanksCommercial Banks –
– Full-Service Banks– Offer checking accounts, provide savings
accounts, make loans to individuals and businesses, and other services
– In larger banks, these services may be broken into different departments.
Savings department Trust department Real Estate department Investment department
Deposit Type BanksDeposit Type BanksSavings and Loan Association –
– Normally, specialize in savings accounts and making loans for home mortgages
– Presently, they are leaning more toward offering a greater variety of services, so now they are becoming savings banks.
Mutual Savings Bank– Provides a variety of services
Savings accounts and to make loans to homebuyers
– Owned by its depositors The profits of a Mutual Savings Bank go to the depositor
Deposit-Type BanksDeposit-Type Banks Credit Unions
– User-Owned, Not-For-Profit, Cooperative Institution– Normally its members have something in common with
one another.– Services offered
Savings deposits Loans for a variety of purposes Special Checking accounts Credit Cards Mortgages Home Equity loans Safe-Deposit Boxes Investment services Electronic banking services Loans to small firms
Nondeposit Financial Nondeposit Financial InstitutionsInstitutions
Life Insurance Companies – provide financial security for dependants– Through careful investing in new and existing
companies, life insurance companies can help to expand business in our economy.
Investment Companies– Allow people to choose investment
opportunities for long-term growth of their money.
Nondeposit Financial Nondeposit Financial InstitutionsInstitutions
Consumer Finance Companies– Specializes in making loans for long-lasting or
durable goods, such as cars and refrigerators, and for financial emergencies.
Mortgage Companies– Provide loans for purchasing a new home or
other real estate
Nondeposit Financial Nondeposit Financial InstitutionsInstitutions
Check-Cashing Outlets
– May 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.
Types of Financial ServicesTypes of Financial Services
Accepting DepositsTransferring FundsLending MoneyStoring ValuablesProviding financial advice and investment
servicesManaging trusts
Accepting DepositsAccepting Deposits
Safe storage of funds for future use is an almost universal need.
One of the main services offered by financial institutions
Interest – – The amount that the bank pays its customers to
use their money.
Transferring FundsTransferring Funds
Money can easily be transferred from one account to another through simply writing a check
Electronic Funds Transfer– A system through which funds are moved
electronically from one account to another and from one bank to another
Other EFT ServicesOther 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.
Lending MoneyLending Money Many people, businesses, and governments
borrow money at some time.– Individuals
pay for car or to pay for college tuition
– Business Borrow money to build a new warehouse or to buy more
merchandise for resale
Banks 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)
Storing ValuablesStoring Valuables
Safe-Deposit Boxes– In the bank, an area where you can pay to store
your valuables. Jewelry Bond and stock certificates Birth records List of insurance policies will
Providing Financial Advice Providing Financial Advice and Investment Servicesand 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.
InvestmentsInvestments
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.
Managing TrustsManaging 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.
The Federal Reserve SystemThe 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.
Financial Institutions and Financial Institutions and Economic GrowthEconomic Growth
Bank Services are commonly used to:– Build homes– Start new businesses– Plant crops– Finance educations– Buy goods– Pave streets– Build hospitals– Buy new business equipment
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