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Financial intermediary
Financial intermediation consists of “channeling funds between surplus and deficit agents”. Afinancial intermediary is a financial institution that connects surplus and deficit agents. The
classic example of a financial intermediary is a bank that transforms bank deposits into bank loans.
Through the process of financial intermediation, certain assets or liabilities are transformed intodifferent assets or liabilities. As such, financial intermediaries channel funds from people whohave extra money (savers to those who do not have enough money to carry out a desired activity( borrowers.
!n the ".#., a financial intermediary is typically an institution that facilitates the channeling of funds between lenders and borrowers indirectly. That is, savers (lenders give funds to anintermediary institution (such as a bank , and that institution gives those funds to spenders
(borrowers. This may be in the form of loans or mortgages. Alternatively, they may lend themoney directly via the financial markets, which is known as financial disintermediation.
Functions performed by financial intermediaries
$inancial intermediaries provide % ma&or functions'
. )aturity transformation' *onverting short+term liabilities to long term assets (banks dealwith large number of lenders and borrowers, and reconcile their conflicting needs
. -isk transformation' *onverting risky investments into relatively risk+free ones. (lending
to multiple borrowers to spread the risk
%. *onvenience denomination' )atching small deposits with large loans and large depositswith small loans
Advantages of financial intermediaries
There are essential advantages from using financial intermediaries'
. *ost advantage over direct lendingborrowing
. )arket failure protection the conflicting needs of lenders and borrowers are reconciled, preventing market failure
The cost advantages of using financial intermediaries include'
. -econciling conflicting preferences of lenders and borrowers
. -isk aversion intermediaries help spread out and decrease the risks
1
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%. /conomies of scale using financial intermediaries reduces the costs of lending and borrowing
0. /conomies of scope intermediaries concentrate on the demands of the lenders and borrowers and are able to enhance their products and services (use same inputs to
produce different outputs
What Are The Functions of A Financial Manager?
• Financial Management
The main function of a $inance )anager ($) is to provide materially accurate information to
the general public, shareholders, stakeholders and the management of an enterprise, be this a
&oint stock (limited liability *ompany, social enterprisecharity or community association, such
as a sports club or a parentteacher organisation. This information will be of two types The first
will be management accounts that provides information from which decisions can be made,
showing the success + or otherwise + of the organisation in achieving it1s goals and targets. The
second is financial accounts that is more formal and fulfils legal and moral obligations of
organisations. This will include profit and loss accounts at the end of a trading period, together
with a balance sheet showing the assets and liabilities of the organisation. The $), working
with auditors and accountants, will complete and file tax returns and other information that is
re2uired by the Authorities that oversee the operation of the organisation. This type of
information is usually produced annually, but for very large organisations, such as *orporations
with operations all over the world, and whose shares are 2uoted on #tock /xchanges, data is
often produced at the end of each 2uarter+year to ensure information is shared, and from which
investors can make reasoned &udgements. The format of the various reports can be 2uite simple +
useful in small organisations, such as social clubs, but get more complex the larger the
organisation. A second key function of an $) is to maintain control over the organisation. This
is achieved in a number of ways. Target setting is the usual process, with ob&ectives, defined as a
budget set for each part of the organisation, showing how much revenue is re2uired to supportthe cost structure, so that a trading profit is made at the end of the period. The $) has to work
with all the other )anagers in the organisation to make sure the ob&ectives are reasonable, are
understood and the whole team agrees with them. This process is very complicated and difficult,
but once achieved helps the whole organisation. 3nce a budget is agreed, the $) can monitor
progress by measuring what is actually happening against the plan, showing other )anagers if
2
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they are on track, or some action needs to be taken to increase sales to generate more revenue, or
stop spending to cut costs. The $) maintains control by determining processes and ways of
doing things. $or example, to spend money on something, it is unusual to have a process that
establishes whether good value is being achieved by re2uiring the purchaser to look at different
ways of buying what they want, getting different 2uotes from different suppliers. 4rocesses like
these help maintain control by having an audit trail that supports the purchase decision. 3ther
functions will include those needed to be a manager, responsible for the people in the finance
team, so good interpersonal skills are re2uired, together with the ability to prioritise and organise.
$inance )anagers do lots of thinks and look all the financial parts of the company. They are
responsible for allocating financial resources of the company. They also activity take part is
budgeting, risk management and financial reporting. 3ther important finance manager tasks are
have an eye on profits and loss, make financial reports, making certain plans to lessen the
financial risk and so on.
Financial Management
#ome of the main functions of a $inance )anager includes setting up financial goals, planning
strategies to reach these goals, keeping a high check on profits and loss, preparing financial
reports, investing funds, monitoring cash flows, advising the rest of on mergers and ac2uisitions,
accounting and auditing, developing certain kind of procedures in order to minimi5e financial
risk and establishing lending criteria. !n short, financial managers handle all the financial
dealings and accounts of the company.
The whole lingo is to add value to the company by setting the right financial goals. They handle
all the financial accounts with rigorous auditing. They decide on how much of the company1s
profits should be returned into investment and also how much should be reinvested into the
organisation. $inancial managers are pillars to your new organisation or a step to the growth of
your organisation.
3
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The main task of a financial manager is to supply investment advice along with financial
planning services. 6asically the financial manager helps the consumer to maximi5e their net
worth via appropriate asset allocation.
$inancial managers usually use stocks, bonds, mutual funds and insurance products to fulfil the
re2uirements of a client. 7uite a few financial managers accept a commission imbursement for
the different types of financial products which they negotiate for, even though 8fee+based8
development is gaining popularity in the market.
3ne of the vital services which financial managers supply is the retirement planning. The
financial managers have high scale knowledge in the field of budgeting, forecasting, taxation,
asset allocation, etc. $inancial managers may even help their client in investing for both long
term as well as short term basis. )uddassar )emon
The five basic corporate finance functions are described as those functions related to9
raising capital to support company operations and investments (aka, financing functions9
selecting those pro&ects based on risk and expected return that are the best use of a company1s
resources (aka, capital budgeting functions9
% management of company cash flow and balancing the ratio of debt and e2uity financing to
maximi5e company value (aka, financial management function9
0 developing a company governance structure to encourage ethical behavior and actions that
serve the best interests of its stockholders (aka, corporate governance function9 and
: management of risk exposure to maintain optimum risk+return trade+off that maximi5es
shareholder value (aka, risk management function. Anonymous
The role of financial managers are as follows'
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+ ;evelopment and !mplementation of financial policies and systems
+ /stablishment of performance standards
+ 4reparation of various financial reports for senior managers
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• *ollective investment schemes
• 4ension funds
Banks
Definition:
The definition of a bank varies from country to country.
"nder /nglish common law, a banker is defined as a person who carries on the business of
banking, which is specified as'
• conducting current accounts for his customers,
• paying che2ues drawn on himher, and
• collecting che2ues for hisher customers.
!n most common law &urisdictions there is a 6ills of /xchange Act that codifies the law in
relation to negotiable instruments, including che2ues, and this Act contains a statutory definition
of the term banker ' banker includes a body of persons, whether incorporated or not, who carry
on the business of banking1 (#ection , !nterpretation. Although this definition seems circular, it
is actually functional, because it ensures that the legal basis for bank transactions such as
che2ues does not depend on how the bank is structured or regulated.
The business of banking is in many /nglish common law countries not defined by statute but by
common law, the definition above. !n other /nglish common law &urisdictions there are statutory
definitions of the business of banking or banking business. hen looking at these definitions it is
important to keep in mind that they are defining the business of banking for the purposes of the
legislation, and not necessarily in general. !n particular, most of the definitions are from
legislation that has the purposes of entry regulating and supervising banks rather than regulating
6
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the actual business of banking.
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6anking in its modern sense evolved in the 0th century in the rich cities of -enaissance !taly
but in many ways was a continuation of ideas and concepts of credit and lending that had its
roots in the ancient world. !n the history of banking, a number of banking dynasties have played
a central role over many centuries. The oldest existing bank was founded in 0>.
6anks act as payment agents by conducting checking or current accounts for customers, paying
che2ues drawn by customers on the bank, and collecting che2ues deposited to customers1 current
accounts. 6anks also enable customer payments via other payment methods such as Automated
*learing :F billion to
G>FF billion between @@> and FF>, much of the increase caused by bank lending. !f all the
banks increase their lending together, then they can expect new deposits to return to them and the
amount of money in the economy will increase. /xcessive or risky lending can cause borrowers
to default, the banks then become more cautious, so there is less lending and therefore less
money so that the economy can go from boom to bust as happened in the "E and many other
estern economies after FF>.
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hannels
6anks offer many different channels to access their banking and other services'
•Automated Teller )achines
• A branch is a retail location
• *all center
• )ail' most banks accept che2ue deposits via mail and use mail to communicate to their
customers, e.g. by sending out statements
• )obile banking is a method of using one1s mobile phone to conduct banking transactions
• 3nline banking is a term used for performing multiple transactions, payments etc. over
the !nternet
• -elationship )anagers, mostly for private banking or business banking, often visiting
customers at their homes or businesses
• Telephone banking is a service which allows its customers to conduct transactions over
the telephone with automated attendant or when re2uested with telephone operator
• Hideo banking is a term used for performing banking transactions or professional banking
consultations via a remote video and audio connection. Hideo banking can be performed
via purpose built banking transaction machines (similar to an Automated teller machine,
or via a video conference enabled bank branch clarification
• ;#A is a ;irect #elling Agent, who works for the bank based on a contract. !ts main &ob
is to increase the customer base for the bank.
Business model
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A bank can generate revenue in a variety of different ways including interest, transaction fees
and financial advice. The main method is via charging interest on the capital it lends out to
customers. The bank profits from the difference between the level of interest it pays for deposits
and other sources of funds, and the level of interest it charges in its lending activities.
This difference is referred to as the spread between the cost of funds and the loan interest rate.
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card products through interest payments and fees charged to consumers and transaction fees to
companies that accept its credit andor debit cards. This helps in making profit and facilitates
economic development as a whole.
• !roducts
"etail banking
• *hecking account
• #avings account
•)oney market account
• *ertificate of deposit (*;
• !ndividual retirement account (!-A
• *redit card
•
;ebit card
• )ortgage
•
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• *urrent Accounts
• *he2ue books
Business #or commercial$investment% banking
• 6usiness loan
• *apital raising (/2uity ;ebt
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• Ji2uidity risk ' risk that a given security or asset cannot be traded 2uickly enough in the
market to prevent a loss (or make the re2uired profit.
• )arket risk ' risk that the value of a portfolio, either an investment portfolio or a trading
portfolio, will decrease due to the change in value of the market risk factors.
• 3perational risk ' risk arising from execution of a company1s business functions.
• -eputational risk ' a type of risk related to the trustworthiness of business.
• )acroeconomic risk ' risks related to the aggregate economy the bank is operating in.
The capital re2uirement is a bank regulation, which sets a framework on how banks and
depository institutions must handle their capital. The categori5ation of assets and capital is highly
standardi5ed so that it can be risk weighted.
Functions of Banks in the &conomy
6anks perform various functions in the economy. These economic functions of banks include'
. 'ssue of money, in the form of banknotes and current accounts sub&ect to check or payment at the customer1s order. These claims on banks can act as money because they
are negotiable or repayable on demand, and hence valued at par. They are effectively
transferable by mere delivery, in the case of banknotes, or by drawing a check that the
payee may bank or cash.
. (etting and settlement of payments L banks act as both collection and paying agents
for customers, participating in interbank clearing and settlement systems to collect,
present, be presented with, and pay payment instruments. This enables banks to
economi5e on reserves held for settlement of payments, since inward and outward
payments offset each other. !t also enables the offsetting of payment flows between
geographical areas, reducing the cost of settlement between them.
13
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%. redit intermediation L banks borrow and lend back+to+back on their own account as
middle men.
0. redit )uality improvement L banks lend money to ordinary commercial and personal
borrowers (ordinary credit 2uality, but are high 2uality borrowers. The improvement
comes from diversification of the bank1s assets and capital which provides a buffer to
absorb losses without defaulting on its obligations.
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6anking crises have developed many times throughout history, when one or more risks have
emerged for a banking sector as a whole. 4rominent examples include the bank run that occurred
during the Ireat ;epression, the ".#. #avings and Joan crisis in the @?Fs and early @@Fs, the
Mapanese banking crisis during the @@Fs, and the sub+prime mortgage crisis in the FFFs.
*i+e of global banking industry
Assets of the largest ,FFF banks in the world grew by =.?N in the FF?FF@ financial year to a
record "#O@=.0 trillion while profits declined by ?:N to "#O: billion. Irowth in assets in
adverse market conditions was largely a result of recapitali5ation. /" banks held the largest
share of the total, :=N in FF?FF@, down from =N in the previous year. Asian banks1 share
increased from N to 0N during the year, while the share of "# banks increased from N to
%N. $ee revenue generated by global investment banking totaled "#O==.% billion in FF@, up
N on the previous year.
The "nited #tates has the most banks in the world in terms of institutions (>,F?: at the end of
FF? and possibly branches (?,FFF. This is an indicator of the geography and regulatory
structure of the "#A, resulting in a large number of small to medium+si5ed institutions in its
banking system. As of Dov FF@, *hina1s top 0 banks have in excess of =>,FFF branches
(!*6*'?FFFP, 63*'FFFP, **6'%FFFP, A6*'0FFFP with an additional 0F smaller bankswith an undetermined number of branches. Mapan had @ banks and ,FFF branches. !n FF0,
Iermany, $rance, and !taly each had more than %F,FFF branchesQmore than double the :,FFF
branches in the "E.
Banking "egulation
*urrently commercial banks are regulated in most &urisdictions by government entities and
re2uire a special bank license to operate.
"sually the definition of the business of banking for the purposes of regulation is extended to
include acceptance of deposits, even if they are not repayable to the customer1s orderQalthough
money lending, by itself, is generally not included in the definition.
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"nlike most other regulated industries, the regulator is typically also a participant in the market,
being either a publicly or privately governed central bank . *entral banks also typically have a
monopoly on the business of issuing banknotes. . The bank must not disclose details of transactions through the customer1s accountQ
unless the customer consents, there is a public duty to disclose, the bank1s interests
re2uire it, or the law demands it.
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?. The bank must not close a customer1s account without reasonable notice, since checks are
outstanding in the ordinary course of business for several days.
These implied contractual terms may be modified by express agreement between the customer
and the bank. The statutes and regulations in force within a particular &urisdiction may also
modify the above terms andor create new rights, obligations or limitations relevant to the bank+
customer relationship.
#ome types of financial institution, such as building societies and credit unions, may be partly or
wholly exempt from bank license re2uirements, and therefore regulated under separate rules.
The re2uirements for the issue of a bank license vary between &urisdictions but typically include'
. )inimum capital
. )inimum capital ratio
%. 1$it and 4roper1 re2uirements for the bank1s controllers, owners, directors, or senior
officers
0. Approval of the bank1s business plan as being sufficiently prudent and plausible.
Types of Banks
6anks1 activities can be divided into retail banking, dealing directly with individuals and small
businesses9 business banking, providing services to mid+market business9 corporate banking,
directed at large business entities9 private banking, providing wealth management services to
high net worth individuals and families9 and investment banking, relating to activities on the
financial markets. )ost banks are profit+making, private enterprises.
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• *ommercial bank ' the term used for a normal bank to distinguish it from an investment
bank. After the Ireat ;epression, the ".#. *ongress re2uired that banks only engage in
banking activities, whereas investment banks were limited to capital market activities.
#ince the two no longer have to be under separate ownership, some use the term
8commercial bank8 to refer to a bank or a division of a bank that mostly deals with
deposits and loans from corporations or large businesses.
• *ommunity banks' locally operated financial institutions that empower employees to
make local decisions to serve their customers and the partners.
• *ommunity development banks' regulated banks that provide financial services and
credit to under+served markets or populations.
• *redit unions' not+for+profit cooperatives owned by the depositors and often offering
rates more favorable than for+profit banks. Typically, membership is restricted to
employees of a particular company, residents of a defined area, members of a certain
union or religious organi5ations, and their immediate families.
• 4ostal savings banks' savings banks associated with national postal systems.
• 4rivate banks' banks that manage the assets of high net worth individuals.
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focus on retail banking' payments, savings products, credits and insurances for
individuals or small and medium+si5ed enterprises. Apart from this retail focus, they also
differ from commercial banks by their broadly decentrali5ed distribution network,
providing local and regional outreachQand by their socially responsible approach to
business and society.
• 6uilding societies and Jandesbanks' institutions that conduct retail banking.
• /thical banks' banks that prioriti5e the transparency of all operations and make only what
they consider to be socially+responsible investments.
• A ;irect or !nternet+3nly bank is a banking operation without any physical bank
branches, conceived and implemented wholly with networked computers.
Types of investment banks
•
!nvestment banks 8underwrite8 (guarantee the sale of stock and bond issues, trade for their own accounts, make markets, provide investment management, and advise
corporations on capital market activities such as mergers and ac2uisitions.
• )erchant banks were traditionally banks which engaged in trade finance. The modern
definition, however, refers to banks which provide capital to firms in the form of shares
rather than loans. "nlike venture capital firms, they tend not to invest in new companies.
Both combined,
• "niversal banks, more commonly known as financial services companies, engage in
several of these activities. These big banks are very diversified groups that, among other
services, also distribute insuranceQ hence the term bancassurance, a portmanteau word
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combining 8ban2ue or bank8 and 8assurance8, signifying that both banking and insurance
are provided by the same corporate entity.
-ther types of banks
• *entral banks are normally government+owned and charged with 2uasi+regulatory
responsibilities, such as supervising commercial banks, or controlling the cash interest
rate. They generally provide li2uidity to the banking system and act as the lender of last
resort in event of a crisis.
• !slamic banks adhere to the concepts of !slamic law. This form of banking revolves
around several well+established principles based on !slamic canons. All banking activities
must avoid interest, a concept that is forbidden in !slam. !nstead, the bank earns profit
(markup and fees on the financing facilities that it extends to customers.
Banking in the .nited *tates
The "nited #tates banking industry is one of the most heavily regulated in the world, with
multiple speciali5ed and focused regulators. All banks with $;!*+insured deposits have the
$ederal ;eposit !nsurance *orporation ($;!* as a regulator. @ as a
formal inter+agency body empowered to prescribe uniform principles, standards, and report
forms for the federal examination of financial institutions. Although the $$!/* has resulted in a
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greater degree of regulatory consistency between the agencies, the rules and regulations are
constantly changing.
!n addition to changing regulations, changes in the industry have led to consolidations within the
$ederal -eserve, $;!*, 3T#, )A!* and 3**. 3ffices have been closed, supervisory regions
have been merged, staff levels have been reduced and budgets have been cut. The remaining
regulators face an increased burden with increased workload and more banks per regulator.
hile banks struggle to keep up with the changes in the regulatory environment, regulators
struggle to manage their workload and effectively regulate their banks. The impact of these
changes is that banks are receiving less hands+on assessment by the regulators, less time spent
with each institution, and the potential for more problems slipping through the cracks, potentially
resulting in an overall increase in bank failures across the "nited #tates.
The changing economic environment has a significant impact on banks and thrifts as they
struggle to effectively manage their interest rate spread in the face of low rates on loans, rate
competition for deposits and the general market changes, industry trends and economic
fluctuations. !t has been a challenge for banks to effectively set their growth strategies with the
recent economic market. A rising interest rate environment may seem to help financial
institutions, but the effect of the changes on consumers and businesses is not predictable and the
challenge remains for banks to grow and effectively manage the spread to generate a return to
their shareholders.
The management of the banksS asset portfolios also remains a challenge in todaySs economic
environment. Joans are a bankSs primary asset category and when loan 2uality becomes suspect,
the foundation of a bank is shaken to the core. hile always an issue for banks, declining asset
2uality has become a big problem for financial institutions. There are several reasons for this,
one of which is the lax attitude some banks have adopted because of the years of “good times.”
The potential for this is exacerbated by the reduction in the regulatory oversight of banks and in
some cases depth of management. 4roblems are more likely to go undetected, resulting in a
significant impact on the bank when they are discovered. !n addition, banks, like any business,
struggle to cut costs and have conse2uently eliminated certain expenses, such as ade2uate
employee training programs.
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6anks also face a host of other challenges such as aging ownership groups. Across the country,
many banksS management teams and board of directors are aging. 6anks also face ongoing
pressure by shareholders, both public and private, to achieve earnings and growth pro&ections.
-egulators place added pressure on banks to manage the various categories of risk. 6anking is
also an extremely competitive industry. *ompeting in the financial services industry has become
tougher with the entrance of such players as insurance agencies, credit unions, check cashing
services, credit card companies, etc.
As a reaction, banks have developed their activities in financial instruments, through financial
market operations such as brokerage and )A!* trust R #ecurities *learing services trading and
become big players in such activities.
ompetition for /oanable Funds
To be able to provide borrowers with the funds needed, banks must compete for deposits. The
phenomenon of disintermediation had to dollars moving from savings accounts and into direct
market instruments such as ".#. ;epartment of Treasury obligations, agency securities, and
corporate debt. 3ne of the greatest factors in recent years in the movement of deposits was the
tremendous growth of money market funds whose higher interest rates attracted consumer
deposits.
To compete for deposits, "# savings institutions offer many different types of plans'
• 4assbook or ordinary deposit accounts Q permit any amount to be added to or withdrawn
from the account at any time.
• D3 and #uper D3 accounts Q function like checking accounts but earn interest. A
minimum balance may be re2uired on #uper D3 accounts.
• )oney market accounts Q carry a monthly limit of preauthori5ed transfers to other
accounts or persons and may re2uire a minimum or average balance.
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• *ertificate accounts Q sub&ect to loss of some or all interest on withdrawals before
maturity.
• Dotice accounts Q the e2uivalent of certificate accounts with an indefinite term. #avers
agree to notify the institution a specified time before withdrawal.
• !ndividual retirement accounts (!-As and Eeogh plans Q a form of retirement savings
in which the funds deposited and interest earned are exempt from income tax until after
withdrawal.
• *hecking accounts Q offered by some institutions under definite restrictions.
• All withdrawals and deposits are completely the sole decision and responsibility of the
account owner unless the parent or guardian is re2uired to do otherwise for legal reasons.
• *lub accounts and other savings accounts Q designed to help people save regularly to
meet certain goals.
Compare this to what obtains in Sierra Leone.
Accounting for Bank Accounts
6ank statements are accounting records produced by banks under the various accounting
standards of the world. "nder IAA4 and )A!* there are two kinds of accounts' debit and
credit. *redit accounts are -evenue, /2uity and Jiabilities. ;ebit Accounts are Assets and
/xpenses. This means you credit a credit account to increase its balance, and you debit a credit
account to decrease its balance.
This also means you credit your savings account every time you deposit money into it (and the
account is normally in credit, while you debit your credit card account every time you spend
money from it (and the account is normally in debit.
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it will say the oppositeQthat you credit your account when you deposit money and you debit it
when you withdraw funds. !f you have cash in your account, you have a positive (or credit
balance9 if you are overdrawn, you have a negative (or deficit balance.
here bank transactions, balances, credits and debits are discussed below, they are done so from
the viewpoint of the account holderQwhich is traditionally what most people are used to seeing.
Brokered deposits
3ne source of deposits for banks is brokers who deposit large sums of money on the behalf of
investors through )A!* or other trust corporations. This money will generally go to the bankswhich offer the most favorable terms, often better than those offered local depositors. !t is
possible for a bank to engage in business with no local deposits at all, all funds being brokered
deposits. Accepting a significant 2uantity of such deposits, or 8 hot money8 as it is sometimes
called, puts a bank in a difficult and sometimes risky position, as the funds must be lent or
invested in a way that yields a return sufficient to pay the high interest being paid on the
brokered deposits. This may result in risky decisions and even in eventual failure of the bank.
6anks which failed during FF? and FF@ in the "nited #tates during the global financial crisis
had, on average, four times more brokered deposits as a percent of their deposits than the average
bank. #uch deposits, combined with risky real estate investments, factored into the savings and
loan crisis of the @?Fs. )A!* -egulation of brokered deposits is opposed by banks on the
grounds that the practice can be a source of external funding to growing communities with
insufficient local deposits.
0lobali+ation in the Banking 'ndustry
!n modern time there have been huge reductions to the barriers of global competition in the
banking industry. !ncreases in telecommunications and other financial technologies, such as
6loomberg, have allowed banks to extend their reach all over the world, since they no longer
have to be near customers to manage both their finances and their risk. The growth in cross+
border activities has also increased the demand for banks that can provide various services across
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borders to different nationalities.
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of $inance asserted, “Do independent country can regard itself as truly independent until it has
its own national currency. The time is not too distant when #ierra Jeone too will have its own
central bank”.
4reliminary arrangements for the establishment of a central bank including the drafting of the
legislation then commenced. 3n >th )arch, @=%, the 6ank of #ierra Jeone Act became law
and the 6ank began operation on 0th August, @=0, the day #ierra Jeone changed to the decimal
system of currency.
What does the Bank do?
The ob&ectives of 6ank of #ierra Jeone as spelt out in the 6ank of #ierra Jeone Act FFF are'
• The promotion of monetary stability and a sound nancial structure
• The maintenance of the internal and e!ternal "alues of the #eone
• The promotion of credit and e!chan$e conditions conduci"e to the balanced$ro%th of the economy
• The issuin$ and distribution of notes and currency in the country
• The formulation and implementation of monetary policy
• &an'er and ad"iser to the (o"ernment in nancial and economic matters
• The mana$in$ of domestic as %ell as forei$n debt
• )ctin$ as custodian of the country*s reser"e of appro"ed forei$n e!chan$e
• )ctin$ as ban'er to the +ommercial &an's
• The super"ision and re$ulation of the acti"ities of commercial ban's andother ,inancial -nstitutions to ensure the health of the nancial system
•
The administration of the operations of .tructural )d/ustment ro$rams%here the ban' has specic responsibilities
(on Traditional "ole
• -ural 6anking9 and
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• ;iamond *ertification
-1nership
The 6ank of #ierra Jeone is a body corporate and is FFN state+owned.
Administration$Who "uns the Bank
The 6ankSs affairs (i.e. policies and general administration are administered by the 6oard of
;irectors which comprise the Iovernor, the ;eputy Iovernor and formerly % now : Don+
executive ;irectors, all of whom are appointed by the
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10.'ye &an'
11nited &an' for )frica
12;enith &an'
+ommunity ban's
1
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Step 0o. 1escription cti%it'
&Submit a letter of application for a license to either BSL or SLI*#M, including all rele%ant documents
(BSL or SLI*#M carries out appraisal of the application, and issues a response notif'ing applicant of decision
If appro%al is granted to issue license, the notification 2ill include instructions on the applicable license fees
and description of the license area. The license becomes effecti%e on making pa'ments of applicable fees a meeting other conditions listed in the notification.
Industry Minimum Capital License Fees
(Le) (US$) (Mn Le) (Mn US$)
Banking effecti%e &/3&/(3& (4 Bn 5. Mn 67 Mn &k
#ther $inancial Ser%ices (33 Mn -6k 5 Mn &.-k
Insurance
Insurance !elated Ser%ices
Book "evie1
The -evised Prudential Guidelines of Sierra Leone for Commercial Banks 2012
Or
he Guidelines Go!erin" Bank of Sierra Leone #orei"n $%chan"e &uction 2012
Or
he Bankin" &ct 2011.
Or
he Bank of Sierra Leone &ct 2011