Overview of Banking

Definition: Banking refers to the business of accepting deposits, providing loans, and offering financial services.

Commercial Banks:
- Offer services to the public and businesses.
- Accept deposits and provide loans.
- Generate profit through interest and fees.
Investment Banks:
- Specialize in raising capital for companies.
- Facilitate mergers and acquisitions.
- Provide advisory services on financial transactions.
Central Banks:
- Regulate the banking industry.
- Control monetary policy and currency issuance.
- Examples include the Federal Reserve (USA) and the European Central Bank.
Retail Banks:
- Serve individual consumers and small businesses.
- Provide savings accounts, checking accounts, and mortgages.
Online Banks:
- Operate primarily through the internet, offering lower fees and higher interest rates on savings.

Accepting Deposits: Safekeeping of funds for individuals and businesses.
Providing Loans: Offering credit to individuals and businesses for various needs.
Payment Services: Facilitating transactions through checks, debit/credit cards, and electronic transfers.
Wealth Management: Offering financial planning and investment services.

Banks are subject to regulations to ensure stability and consumer protection.
Key regulatory bodies include the Federal Reserve, FDIC (USA), and Basel Committee on Banking Supervision.
Regulations cover capital reserves, lending practices, and anti-money laundering (AML) measures.

Accounts:
- Savings Accounts
- Checking Accounts
- Certificates of Deposit (CDs)
Loans:
- Personal Loans
- Mortgages
- Business Loans
Investment Services:
- Mutual Funds
- Stocks and Bonds
- Retirement Accounts

Digital Banking: Growth of online banking platforms and mobile apps.
Fintech: Integration of technology in financial services (e.g., blockchain, peer-to-peer lending).
Sustainability: Increasing focus on green banking and ethical investment practices.

Credit Risk: The risk of borrowers defaulting on loans.
Liquidity Risk: The risk that a bank cannot meet its short-term financial obligations.
Operational Risk: Potential losses from internal failures or external events.
Market Risk: Losses due to fluctuations in market prices or interest rates.

Banking involves accepting deposits, issuing loans, and offering various financial services for both individuals and businesses.

Commercial Banks:
- Serve the public and businesses by accepting deposits and offering loans.
- Generate revenue primarily through interest earned on loans and various fees.
Investment Banks:
- Focus on capital raising for corporations and assist in mergers and acquisitions.
- Provide advisory services for complex financial transactions, guiding companies through investment strategies.
Central Banks:
- Govern and regulate the banking sector while implementing monetary policy.
- Responsible for issuing currency; notable examples are the Federal Reserve in the USA and the European Central Bank.
Retail Banks:
- Designed for individual consumers and small enterprises.
- Offer traditional banking products such as savings accounts, checking accounts, and mortgage loans.
Online Banks:
- Predominantly operate via the internet, often resulting in lower operational costs.
- Typically provide higher interest rates on savings and lower fees compared to traditional banks.

Accepting Deposits:
- Banks safeguard funds for both individuals and businesses, providing a secure avenue for saving.
Providing Loans:
- Banks extend credit for various needs, facilitating purchases and investments.
Payment Services:
- Enable transactions through multiple channels like checks, debit/credit cards, and digital transfers.
Wealth Management:
- Provide financial planning and investment advisory services, helping clients grow their assets.

Banking institutions adhere to regulatory frameworks to ensure economic stability and safeguard consumer interests.
Major regulatory bodies include the Federal Reserve, FDIC in the USA, and the Basel Committee, overseeing capital reserves and lending practices.
Regulations encompass anti-money laundering (AML) protocols and other compliance measures to promote ethical banking.

Accounts:
- Savings Accounts: Allow for interest accrual on deposited funds.
- Checking Accounts: Facilitate everyday transactions with easy access to funds.
- Certificates of Deposit (CDs): Offer fixed interest rates for a specified term.
Loans:
- Personal Loans: Unsecured loans for individual needs.
- Mortgages: Secured loans for purchasing property.
- Business Loans: Financing solutions tailored to business operations.
Investment Services:
- Mutual Funds: Pool of funds managed for diversified investments.
- Stocks and Bonds: Direct investment opportunities in companies and debt markets.
- Retirement Accounts: Specialized accounts for long-term savings and investment.

Digital Banking:
- Rapid growth of online platforms and mobile applications to enhance user experience.
Fintech:
- Incorporation of technology in finance, such as blockchain technology and peer-to-peer lending.
Sustainability:
- Increasing emphasis on green banking initiatives and ethical investment strategies.

Credit Risk:
- The possibility that borrowers may fail to repay their loans.
Liquidity Risk:
- When a bank struggles to fulfill short-term financial commitments.
Operational Risk:
- Potential loss resulting from internal processes, systems failures, or external events.
Market Risk:
- Exposure to losses due to volatility in market prices or interest rates.

Essential for driving economic growth by enabling trade and investment flows.
Provides a secure infrastructure for money management and savings.
Plays a vital role in shaping monetary policy and ensuring overall financial stability.