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L1. An Overview of Banking & the Changes in Financial – Service Sector…
L1. An Overview of Banking & the Changes in Financial – Service Sector
What is a bank?
qualifies to be regulated by FDIC – The Federal Deposit Insurance Corporation!
The Different Kinds of Financial Service
Firms Calling Themselves Banks
1. Commercial Banks
: accept deposits and make loans C&I
2. Money Center Banks
: largest commercial banks based in
leading financial centers
3. Saving Banks
: attract saving deposits, loans to I & Family
4. Investment Banks
: underwrite issues of new securities
5. Merchant Banks
: supply both debt and equity capital to
businesses
6. Universal Banks
: offer virtually all financial services available
7. International Banks
: commercial banks international
8. Wholesale Banks
: larger commercial banks serving C&G
9. Retail Banks
: smaller banks serving small business & I
10.Virtual Banks
: offer services only over Internet
11.Cooperative Banks
: help farmer, ranchers, consumers
12.Community Banks
: smaller, locally focused commercial
and saving banks
13.Mortgage Banks
: provide mortgage loans on new homes
14.Bankers’ Banks
: supply services (check clearing, security
trading)
15
.Limited Purpose Banks
: narrow menu of the services:
credit card, subprime lenders
16.Minority Banks
: customers belonging to minority groups
17.National Banks
: function under a federal charter through
controller of the currency of US
18.State Bank
: function under charter issues by state
banking commission
19.Insured Banks
: maintain deposits backed by FEDIC plans
20.Member Banks
: belong to the Fed (Federal Reserve
System)
21.Affiliated Banks
: wholly or partially owned by a holding
company
The Financial Service Competitors of Banks
1. Savings Associations
: selling deposits, mortgage loans+
household credits-Atlas Savings
2. Savings Banks
: attract saving deposits, loans to I &
Family
3. Credit Unions
: collect deposits, make loans to members as non-profit to individual sharing a common bond American Union of Milwaukee
4. Money Market Funds
: collect S-T funds, invest in quality
S-T
5. Mutual Funds (Investment Companies)
: pool of stocks,
bonds- Fidelity
6. Hedge Funds
: risky investment, non-traditional
investments
7. Security Brokers and Dealers
: buy and sell for customers
8. Investment Banks
: provide professional advices to invest
9. Finance Companies
: offer loans to commercial firms
(auto, appliance…)
10.Financial Holding Companies:
credit card company + insurance & finance + security broker/dealer firms
11. Life and Property-Casualty Insurance Companies
: provide protections on risks to persons, property and manage the pension plans to business and retirement funds of individuals
The Roles of Commercial Banks and
Their Closest Competitors
1. Intermediation Role
: receive savings and
lending
2. Payment Role
: issuing, clearing checks,
electronics payments
3 Guarantor Role
: guarantee to payoff customers
4. Risk Management Role:
prepare financially for risk of loss to property, persons, financial assets
5. The Investment Banking Role
: help in
marketing securities and raising funds
6. Savings/Investment Advisor Role
: building an
investing saving
7. Safekeeping/Certification of Value Role
: safeguarding valuables and certifying true value
8. Agency Role:
acting on behalf to manage
and protect property for customer
9. Policy Role
: serving as a conduit for
government policy
Trends affecting financial services
firms
Service proliferation
Rising competition
Deregulation
Interest sensitivity of funds
Technological advances
Consolidation and geographic expansion
Convergence
Globalization
Securitization
What do banks do for their customers?
Safety deposit boxes
Fee services: lockboxes & letters of credit
Insurance-related activities
4 Securities-related services: underwriting brokerage
Leasing
Trust services