Banking Law study unit 1 Flashcards
ROLES OF BANKS IN COMMERCE ECONMY
- Money channeled from on to another where it can be put to productive use.
- Loan intermediary
- Proper management of credit,
- liquidity and
- interest risk
BUSINESS OF THE BANK
(a) the acceptance of deposits from the general public as a regular feature of the business in question;
(b)the soliciting of or advertising for deposits;
(c) the utilization of money, Interest or other income earned on money, accepted by way of deposit
EXCLUSIONS OF THE BUSINESS OF THE BANK
Deposits from less than 20 individuals - agragate = R500 000
WHAT IS A DEPOSIT
amount of money paid by one person to another person subject to an agreement;
an equal amount or any part thereof will be conditionally or unconditionally repaid
WHAT IS THE PRIMARY MANDATE OF THE SARB IN TERMS OF SECTION 224 OF THE CONSTITUTION?
- The primary object of the South African Reserve Bank is to protect the value of the currency in the interest of balanced and sustainable economic growth in the Republic.
- The South African Reserve Bank, in support of its primary objective, must perform its functions independently and without fear, favour or prejudice.
HISTORY AND OPERATION OF THE BANKS
- 1921 – WWI
- Commercial banks issue notes – backed by gold
- Losses for banks – Government to relieve them from obligation gold in exchange for note – on demand
- 1932 – drop gold standard – link value of currency to Pound Sterling
- 1961 – Rand as currency introduced
- 1985 – Dual Rand System (more or less the same situation as Russia)
- In 2000, South Africa became the 13th country to adopt an inflation-targeting monetary policy framework, targeting an inflation band of between 3 and 6 percent for consumer inflation.
- 2008 - This crisis led to an increased focus within the Bank on financial stability objectives.
WHAT IS THE PRIMARY PUPOSE OF THE SARB ?
The primary purpose of the Bank is to achieve and maintain price stability in the interest of balanced and sustainable economic growth.
KEY FUNCTIONS OF THE SARB
formulating and implementing monetary policy;
promoting financial stability;
regulating and supervising the banking and insurance industry through the Prudential Authority;
issuing banknotes and coins;
WHAT ARE THE 3 DIFFERENT TYPES OF BANKS
FIRST TIER BANKS
SECOND TIER BANKS
THIRD TIER BANKS
WHAT ARE THE NAMES OF THE BANKS IN THE FIRST TIER BANK
commercial bnaks
investment banks
land bank
development bank
NAME AND DISCUSS THE FUNCTIONS OF THE DIFFERENT BANKS IN THE FIRST TIER
- Commercial bank their clients are individuals, businesses, organizations;
- Investment bank : Assist client in raising money through the issuing of securities;
- Land Bank’: its a Government owned;
- Specific Act; Promote and finance development in agricultural sector
- Development bank’:
- Government owned and it functions to finance large infrastructure projects
WHAT ARE THE NAMES OF THE BANKS IN THE SECOND TIER BANK
mutual banks
Postbank
co-operative banks
NAME AND DISCUSS THE FUNCTIONS OF THE DIFFERENT BANKS IN THE SECOND TIER
- Mutual banks:Attempts to involve communities
- postbank: objective to encourage saving; Also other services normally associated with a commercial bank
- co-operative bank : For communities with limited access to conventional banking;Government’s Mzansi initiative
WHAT ARE THE NAMES OF THE BANKS IN THE THIRD TIER BANK
village banks
dedicated bank
stokvel
mobile banking
NAME AND DISCUSS THE FUNCTIONS OF THE DIFFERENT BANKS IN THE THIRD TIER
- Village bank:Organised and owned by members;To encourage saving;Service fees moderate to low
- Dedicated banks: Bill not passed yet; Main objective to make banking services available in areas whereor to consumers to whom such services have up to the present not been readily available.
- Stokvel: NOT a bank according to the Banks Act; Encourage saving; provide ‘bank-like’ services
- Mobile banking;Provided by cellular companies; use cellphone as a paying device;Low cost; 6 Acts governing sector
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