Module 1- Topic 3. The Financial System and Competing Financial Service Institutions The Banking Sector Banks are the principal source of credit (loanable funds) for millions of in... Module 1- Topic 3. The Financial System and Competing Financial Service Institutions The Banking Sector Banks are the principal source of credit (loanable funds) for millions of individuals and families and for many units of government (school districts, cities, counties, etc.). As important as banks are to the economy as a whole and to the communities they call home, there is still much confusion about what exactly a bank is. A bank can be defined in terms of: (1) the economic functions it serves, (2) the services it offers its customers, or (3) the legal basis for its existence. Certainly, banks can be identified by the functions they perform in the economy. They are involved in transferring funds from savers to borrowers (financial intermediation) and in paying for goods and services. Historically, banks have been recognized for the great range of financial services they offer—from checking and debit accounts, credit cards, and savings plans to loans for businesses, consumers, and governments (Pagoso, 2012). However, bank service menus are expanding rapidly today to include investment banking (security underwriting), insurance protection, financial planning, advice for merging companies, the sale of risk management services to businesses and consumers, and numerous other innovative services. Banks no longer limit their service offerings to traditional services but have increasingly become general financial-service providers. Read more