International banks (bank activities) Flashcards
For classical retail banks, the main source of funding
is…………………..this funding will transform into…………………..
Deposits
loans, other investments, and fixed assets that will be reported on the assets side of the balance sheet
Traditional bank balance sheet
Assets
cash
liquidity assets
other investments
fixed assets
legal reserves
Liabilities
customer deposits
equity
Traditional banks activities
that banks can engage in,
*Accepting deposits.
*Issuing e-money (or digital money), i.e., electronic
money used on the internet.
* Implementing or carrying out contracts of insurance
as principal وكيل
* Dealing in investments (as principal كوكيل or agent).
* Managing investments.
* Advising on investments.
* Managing and safeguarding and administering investments.
* Arranging deals in investments and arranging
regulated mortgage activities.
Advising on regulated mortgage contracts.
* Entering and administering a regulated mortgage
contract.
* Establishing and managing collective investment
schemes (for example, investment funds and mutual
funds).
* Establishing and managing pension schemes
a wide range of industrial firms have begun to conduct traditional financial services, for example……………
BMW in Germany supply banking and insurance
services, mutual funds.
How to calculate total credit and what things impact amount of total credit
total credit= multplier x deposits
multplier = 1/legal reserves
the thing that amount the total credit is the amount of total reserves the less the reserves the more lending the more the total credit
the bank applies **contractionary monetary policy ** انكماش لقتليل كمية الاموال بالدولة
MODERN ACTIVITIES of the bank
(PAYMENT SERVICES ) cards mostly
a) Cheque Payments (Debit Transfers):
Cheques are written claims to take money from one person’s bank account and give it to another.
They’re often used by individuals and small businesses to pay bills or make purchases.
b) Credit Transfers (Bank Giro Credits):
Credit transfers are when you ask your bank to send money directly from your account to someone else’s.
People use them to pay bills or send money in advance for things they’re buying.
c) Standing Orders:
Standing orders are instructions you give your bank to regularly send a fixed amount of money to someone else’s account.
They’re usually used for things like paying rent or subscriptions.
d) Direct Debits:
Direct debits are agreements between you and a company, allowing them to take money from your account.
They’re often used for variable payments like utility bills.
e) Credit Cards:
Credit cards let you buy things on credit up to a certain limit.
You pay back what you’ve spent later, usually with interest if not paid in full by a certain date.
f) Pre-paid Credit Cards:
Pre-paid credit cards work like regular credit cards, but you load money onto them beforehand بتستلف من البنك قبل متستخدمها و محدود بس باللي استلقته.
They’re good for people who can’t get a regular credit card or want to control their spending.
g) Debit Cards:
Debit cards let you take money directly from your bank account to pay for things.
You can also use them to withdraw cash from ATMs.
h) Delayed Debit Cards:
Delayed debit cards let you make purchases up to a certain limit without paying immediately.
But you have to settle the full amount later, usually at the end of the month.
i) Travel and Entertainment Cards (Charge Cards):
These cards let you delay payment until the end of the month, but you have to pay the full amount then.
Unlike credit cards, you can’t carry over unpaid balances. if tou pay late ou pay high interesy than credit card to discourage late payment
j) Memory-Chip Cards:
for example, pre-paid phone
cards
Memory-chip cards perform specific functions, like prepaid phone cards or store value cards بتحافظ علي الفلوس عليها.
They’re often used for small transactions and offer extra security features.
MODERN ACTIVITIES of the bank
( INVESTMENT, PENSIONS & INSURANCE SERVICES ) cards mostly
a) Investment Products:
Banks offer different ways for regular people to invest their money.
This can include things like** mutual funds** (where many people pool their money to invest in** stocks or bonds**), buying shares in companies, or other types of investments.
Sometimes, these investment products are mixed with savings options, and banks might offer them together.
b) Pension Services:
Banks help people save money for when they retire.
People put money into a pension fund, and it’s invested for the long term.
When they retire, they get a regular income from the pension fund.
These pension services are separate from the pensions provided by the government.
c) Insurance Services:
Insurance protects people from bad things that might happen.
Banks offer different types of insurance, like life insurance (which pays out money if someone dies) or non-life insurance (which covers things like travel or property).
In some countries, there’s also insurance that pays out if someone gets sick and can’t work (income protection) or if they get very sick (critical illness insurance).
d) Payment Protection Insurance (PPI):
PPI is insurance that helps cover debts, like loans or overdrafts, if something goes wrong.
It’s sold by banks and other lenders as an extra product when people borrow money.
If something happens, like the person gets sick or loses their job, PPI can help cover the repayments for a while
MODERN ACTIVITIES of the bank
( DEPOSITS & LENDING SERVICES ) cards mostly
a) Current or Checking Accounts:
**
These accounts are used for everyday transactions** like paying bills or buying things.
They usually don’t earn much interest, if any.
Banks offer different types of current accounts tailored to different needs, with various services included.
**b) Time or Savings Deposits:
**
With these accounts, you put money aside for a certain period.
You might earn interest on the money you save, either at a fixed or variable rate.
Banks offer a variety of savings options, from regular fixed-term deposits to ones with flexible terms and rates.
**c) Consumer Loans and Mortgages:
**
Banks lend money to individuals for things like buying a car, renovating a home, or purchasing property.
Consumer loans can be either secured (backed by collateral like a house or car) or unsecured.
Interest rates on these loans can vary, sometimes staying the same (fixed) or changing (variable).
Mortgages are loans specifically for buying property, and they often last for many years (like 20 or 30).
Different types of mortgages are available, each with its own features and terms, such as fixed-rate or variable-rate mortgages.
BANKS BENEFITS
(for depositer/ borrower/ economy)
For Depositors:
**
a. Greater Liquidity: Depositing money in a bank makes it easier to access than lending directly to someone else.(lending indirectly through banks)**
b. Reduced Risk: Banks spread out the risk of lending money, making it safer for depositors. They also offer guaranteed interest rates.
c. Marketable Securities: Banks issue certificates for deposits, like Certificates of Deposit (CDs), which can be sold if needed, making funds more liquid.
d. Lower Transaction Costs: It’s cheaper to deposit money in a bank compared to other lending options.
For Borrowers:
a. Longer-Term Loans: Banks offer loans for longer periods than other lenders.
b.** Larger Loan Amounts**: Banks are willing to lend more money than other lenders.
c.** Lower Transaction Costs**: It’s cheaper for borrowers to get loans from banks than from other lenders.
d.** Lower Interest Rates**: Borrowing from banks usually means lower interest rates due to reduced costs for the bank.
**For the Economy:
**
a. Efficient Use of Funds: Banks help evaluate lending opportunities, leading to better use of money in the economy.
b. Increased Borrowing and Lending: Banks make lending safer and cheaper, encouraging more borrowing and lending.
c. Support for High-Risk Ventures مشاريع: Banks can handle risk, making it easier for high-risk ventures to get funding, which is** crucial for future economic growth**.
d.** Funding for Investment:** Banks provide funds at reasonable rates, which can boost production, exports, and employment, ultimately improving living standards.
