40 Questions
What are the key trends affecting all financial-service firms?
Service proliferation, rising competition, government deregulation and then reregulation, crisis, reform, and change, increasingly interest-sensitive mix of funds, technological change and automation, consolidation and geographic expansion, convergence, and globalization.
What is the primary goal of some banks in becoming one-stop financial-service conglomerates?
To reach out to a wider range of customers and provide a variety of services.
What is happening to banking's share of the financial marketplace?
It is decreasing.
What are the powerful forces shaping financial markets and institutions today?
Crisis, reform, and change, technological change, globalization, and consolidation.
What are the closest and toughest competitors of banks?
Other financial-service providers, such as non-bank financial institutions.
What are some examples of professionals who work inside financial firms?
Loan Officers, Credit Analysts, Managers of Operations, Branch Managers, Systems Analysts, Auditing and Control Personnel, Trust Department Specialists, and Tellers.
What is driving the need for banks to adapt to changing market conditions?
The crisis, reform, and change in the financial-services industry.
What is the significance of technological change in the financial-services industry?
It is a powerful force driving change and automation.
What is the purpose of the joke about a bank in the introduction?
To highlight the irony that banks only lend to those who can prove they don't need it.
What kind of services do banks provide to millions of people, businesses, and governments?
Hundreds of different services, vital to their well-being and the well-being of communities and nations.
What is the primary source of credit for millions of individuals and families?
Banks.
What type of loans do banks grant more than any other financial-service provider?
Installment loans to consumers.
What is the role of banks in providing short-term working capital for businesses?
They are an important source.
What percentage of total assets are held by U.S. banks?
About one-fifth.
What is the growing trend in banks' lending activities?
Making long-term loans to fund new investments.
What is the significance of banks in the financial system?
They are the principal source of credit and provide vital services to millions of people, businesses, and governments.
What is the concern regarding the decline of banking's market share?
That traditional banking is dying.
How do experts counter the idea that traditional banking is dying?
By arguing that banking is changing by offering new services and changing its form.
What have the banking industry's largest customers found ways to do?
Borrow in the open market to obtain the funds they need.
Why may traditional measures of the industry's importance no longer be accurate?
Because bankers have become more diverse and competitive in the modern world.
What type of financial institutions are competing with banks?
Savings Associations, Credit Unions, Fringe Banks, and others.
What are some examples of financial institutions that compete with banks?
Money Market Funds, Mutual Funds, Hedge Funds, and Security Brokers and Dealers.
What other financial institutions compete with banks?
Investment Banks, Finance Companies, Financial Holding Companies, and Life and Property/Casualty Insurance Companies.
Why is it important to recognize the changing nature of the banking industry?
Because it has implications for the industry's future and competitiveness.
What services have banks offered for centuries?
Carrying out currency exchange, discounting commercial notes and making business loans, offering savings deposits, safekeeping of valuables and certification of value, supporting government activities with credit, and offering checking accounts.
What is one of the financial services that banks began offering in the past century?
Granting consumer loans
What is one of the investment products offered by banks and their financial-service competitors?
Mutual Funds
What is one of the services that banks offer to support businesses?
Offering equipment leasing
What is one of the ways that banks support government activities?
With credit
What is one of the services that banks offer to individuals and families?
Savings deposits
What is one of the risk management services offered by banks?
Hedging services
What percentage of assets in the financial system are held by banks in other nations?
Half or more
What is one of the services that banks offer to support international trade?
Carrying out currency exchange
What are the three ways to define a bank?
The economic functions it performs, the services it offers its customers, and the legal basis for its existence
What have bank service menus expanded to include?
Investment banking, insurance protection, financial planning, advice for merging companies, and risk-management services
What type of banks are industry leaders and offer a wide range of financial services?
Money-center banks
What type of banks serve local communities and offer personalized services?
Community banks
What do money-center banks do to expand their business?
Acquire smaller businesses
What type of competition do money-center banks face?
Tough global competition
What is a key difference between money-center banks and community banks?
Their size and scope of services
Study Notes
Key Trends Affecting All Financial-Service Firms
- Service proliferation is a key trend affecting financial-service firms
- Rising competition is another trend affecting financial-service firms
- Government deregulation and then reregulation are key trends affecting financial-service firms
- Crisis, reform, and change in banking and financial services are significant trends
- An increasingly interest-sensitive mix of funds is a trend affecting financial-service firms
- Technological change and automation are key trends affecting financial-service firms
- Consolidation and geographic expansion are trends affecting financial-service firms
- Convergence and globalization are also key trends affecting financial-service firms
Career Opportunities in Banking and Financial Services
- Various professionals work inside financial firms, including: • Loan Officers • Credit Analysts • Managers of Operations • Branch Managers • Systems Analysts • Auditing and Control Personnel • Trust Department Specialists • Tellers
Overview of the Changing Financial-Services Sector
- The financial-services sector is undergoing significant changes
- Powerful forces are reshaping the industry
- The financial system and competing financial-service institutions are evolving
- Old and new services are being offered to the public
- Key trends are affecting all financial-service firms
What Is a Bank?
- A bank can be defined in terms of its economic functions, services offered, and legal basis
- Banks provide hundreds of services to millions of people, businesses, and governments worldwide
- Banks are the principal source of credit for individuals, families, and governments
- Banks hold a significant portion of total assets in the financial system
The Financial System and Competing Financial-Service Institutions
- Banks face competition from various financial institutions, including: • Savings Associations • Credit Unions • Fringe Banks • Money Market Funds • Mutual Funds • Hedge Funds • Security Brokers and Dealers • Investment Banks • Finance Companies • Financial Holding Companies • Life and Property/Casualty Insurance Companies
Services Banks and Their Closest Competitors Offer the Public
- Banks have offered traditional services for centuries, including: • Currency exchange • Discounting commercial notes and making business loans • Offering savings deposits • Safekeeping of valuables and certification of value • Supporting government activities with credit • Offering checking accounts • Offering trust services
- Banks and their competitors have begun offering new services in the past century, including: • Granting consumer loans • Financial advising • Managing cash • Offering equipment leasing • Making venture capital loans • Selling insurance policies • Selling and managing retirement plans • Dealing in securities • Offering mutual funds, annuities, and other investment products • Offering merchant banking services • Offering risk management and hedging services
This quiz covers key trends affecting financial-service firms, including crisis, reform, and changes in banking and financial services. Topics include service proliferation, rising competition, government deregulation, and technological change.
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