Introduction to Banking - What Is Special About Banking

INTRODUCTION TO BANKING What is Special About Banking 1 Chapter one INTRODUCTION What is a money box? ? What is so special about banks? ? A bank is a pecuniary intermediator that offers additional services, but it is these functions that constitute banks? distinguishing features. ? Banks play an eventful design in channeling cash in hand from saves to borrowers. ? What is the difference between banks and otherwise fiscal institutions? ? 2 THE NATURE OF financial INTERMEDIATION ? ? ? ? We must understand financial intermediation to understand how banks work This helps us understand the role of banks in the economy. Financial intermediaries and financial markets main role is to reserve a mechanism by which funds be transferred and allocated to their nigh productive opportunities. A bank is a financial intermediary whose core activity is to provide loans to borrowers and collect deposits from savers. 3 THE NATURE OF fiscal INTERMEDIATION ? ? ? ? banks collect surplus funds from savers and allocate them to those with deficit of funds (borrowers). They channel funds from savers to borrowers, thereby increasing economic dexterity by promoting better allocation of resources. Direct Finance is when borrowers rule their funds directly from savers.

A Financial Claim is a claim to the payment of a future sum of bills and/or a period payment of money. It carries obligations to the issuer to pay enliven periodically. 4 THE NATURE OF FINANCIAL INTERMEDIATION Financial claims are generated whenever borrowing takes place. ? Borrowers are referred to as deficit units, lenders are surplus units. ? Financial claims underside be in the form of any financial asset, e.g. money, bank deposit accounts, bonds, shares, loans. ? The issuer of the claim has a financial liability. ? 5 THE NATURE OF FINANCIAL INTERMEDIATION ? Barriers to direct financing include: Difficulty and expense of matching the complex needs of borrowers and... If you want to get a integral essay, order it on our website: Orderessay

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