Sunday, October 6, 2019

Is it still necessary to know what constitutes a bank Essay

Is it still necessary to know what constitutes a bank - Essay Example To eliminate vagueness or ambiguity of a concept entails the formulation of a definition. However, one’s definition extends to the breadth of his/her exposure to the subject matter. At times, though, development becomes rapid that one’s knowledge or awareness regarding the subject lags behind. This could be said when seeking an exact definition of what a bank is. Advancements in technology and business have resulted in more efficient banking operations. The same have also resulted in increasingly complex banking systems and the laws governing banking operations, thus, making it relatively more difficult to come up with an encompassing definition across ages and disciplines. In the ancient times, it would be relatively easier to find a definition for banks due to the simplicity of the system and that people used common services. Over the years, some additional functions including the acceptance of deposits, transferring of money from one account to the other, extending of loans and investing of funds have become notable (Heaton). With the worldwide improvements in transportation and infrastructure, people have become increasingly mobile, trade on the international level occurred. At the rate trade both on the national and international levels has developed, banks have exponentially increased their functions and the services they provide. In this regard, aside from being economic agents, banks have evolved into becoming legal entities as well. Banks can be defined by economic agents based on their functions and classification, which are as follows: -Banks (commercial banks) are privately or state- owned, offering a broad range of financial services to myriad economic agents subject to control and regulation of government agency concerned. They finance credit needs of individuals, firms and governments. Moreover, they receive deposits, transfer funds, issue traveler's checks and letters of credit, and safe keep valuables. Aside from these, they also serve as trustees for economic agents, act as agents for purchase and sale of assets and disseminate relevant information pertaining to the economy. (Menzies) Banks (savings banks) that promote savings especially for moderate-income earners where deposits of clients are invested in government obligation or treasury bills and other medium- to long-term industrial obligations (Menzies). They extend loans for single-family homes and other residential properties as well as business consumer loans and mortgages ("What's the Difference"). Banks (investment banks) primarily function to finance investments of both private enterprises and government across various levels. They market a variety of stocks and bond issues as well as arrange mergers and assist in a number of specialized lending fields. (Menzies) Although the functions of these banks have become less distinct over the years, differences lie in the regulatory and supervisory structures ("What's the Difference"). Depending on their legal classification, these banks are regulated by different government agencies and regulatory bodies. Their operations are governed by laws stipulated in the UK Banking Act 1987. There are also some financial intermediaries with functions similar to a bank, but not classified as banks. The definitions given above do not seem to differentiate these non-bank institutions from banks in terms of function. Non-bank financial institutions may include the following: Credit Unions. These are cooperative financial institutions formed by groups of people who pool their funds which serve as based deposits. Similarly, they accept deposits in a variety of accounts just like banks. ("What's the Diff

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