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Category: Business and Industry
Date Submitted: 10/26/2012 03:59 PM
Banking: Principles, Practice and Regulation (FINA1094)
•Commercial and Investment Banking
What do banks do?
A simplified bank balance sheet:
Assets Liabilities
Cash Customer deposits
Liquid assets Market borrowing
Loans Equity
Other investments
Fixed assets
Total Total
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Defining a bank
•Easy to define banks in era of rigid demarcations of financial services industry – i.e. deposit-taking financial institutions (as distinct from non-deposit-taking financial institutions, discussed last week).
•Definition has become problematic due to regulatory change, overlapping activities, growth of financial conglomerates, etc.
•Some writers still draw distinctions based on the deposit-taking and/or the intermediary role of financial institutions.
Banks’ activities I
•UK’s Financial Services and Markets Act (2000) defines activities banks may engage in as including:
- accepting deposits;
- issuing e-money (i.e electronic money used on the internet);
- implementing or carrying out contracts of insurance as principal;
- dealing in investments (as principal or agent);
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Banks’ activities II
Banks’ activities cont’d:
- managing investments;
- advising on investments;
- safeguarding and administering investments;
- arranging deals in investments and arranging regulated mortgage activities;
Banks’ activities III
Banks’ activities cont’d:
- advising on regulated mortgage activities;
- entering into and administering regulated mortgage contracts;
- establishing and managing collective investment schemes (e.g. investment funds and mutual funds);
- establishing and managing pension schemes.
Banking services I
1.Payment services (organised arrangements for transferring value between its participants):
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