Banks - What is their purpose?
Banks – (part 1)
Given the current financial crisis that has been sweeping over the planet I am finding it an opportune time to actually look at the role of banks and how they have evolved to be in our world. We’ll also be looking at money (later posting), what it is and how it operates.
The definition of banks vary from country to country. Their history has influenced economies and politics for centuries and did you know that the first modern bank was founded in Italy in 1406?
This blog is dedicated to sharing information that relates to and deals with banks and money. Now with that said….
1st Central Bank in USA
What do banks do?
Traditional banks serve to accept deposits and make loans. They act as safe stores of wealth for savers and as predictable sources of loans for borrowers. In this way, the major business of banks is that of a financial intermediary between savers and borrowers. The bank simplifies this process by eliminating the need for savers to find the right borrowers and the right time to directly make a loan.
Banks are generally trusted by the public. When people put their savings into banks, they receive little more than a paper receipt in return. There are organisations in place, in each respective country, to ensure that banks are trustworthy with individuals’ money and reasonable in the loans that they make. Deposits are insured by government and non government organisations on accounts to a predetermined level and will be returned to the depositor even if the bank fails. Individual banks also have a board of directors to regulate the sizes and interest rates of loans the bank makes. This board is charged with ensuring that the bank is taking reasonable risks with its depositors’ money.
Individual banks serve as the issuing and regulating bodies for many financial services often employed by consumers. In this way, banks are able to give depositors access to their money while also maintaining a large number of loans.
In the next post we will continue what is known as the definition of banks and banking moving towards answering the question - are they serving the people, or are the people serving them?
Until next time…
4Quan
Warrior for Truth
(things that make you go hmm..)