BANK
A bank is a commercial or state institution that provides financial services, including issuing money in form of coins, banknotes or debit cards, receiving deposits of money, lending money and processing transactions. A commercial bank accepts deposits from customers and in turn makes loans based on those deposits. Some banks (called Banks of issue) issue banknotes as legal tender. Many banks offer ancillary financial services to make additional profit; for most banks also rent safe deposit boxes in their branches.
Currently in most jurisdictions commercial banks are regulated and require permission to operate. Operational authority is granted by bank regulation bank regulatory authorities and provide rights to conduct the most fundamental banking services such as accepting deposits and making loans. A commercial bank is usually defined as an institution that accepts both deposits and makes loans; there are also financial institutions that provide selected banking services without meeting the legal definition of a bank. Banks have influenced economies and politics for centuries. The primary purpose of a bank was to provide loans to trading companies. Banks provide funds to allow businesses to purchase inventory, and collected those funds back with interest when the goods were sold. For centuries, the banking industry only dealt with businesses, not consumers. Commercial lending today is a very intense activity, with banks carefully analysing the financial condition of its business clients to determine the level of risk in each loan transaction. Banking services have expanded to include services directed at individuals and risk in these much smaller transactions are pooled.
A bank generates a profit from the differential between what level of interest it pays for deposits and other sources of funds, and what level of interest it charges in its lending activities. This difference is referred to as the spread between the cost of funds and the loan interest rate. Historically, profitability from lending activities has been cyclic and dependent on the needs and strengths of loan customers. In recent history, investors have demanded a more stable revenue stream and banks have therefore placed more emphasis on transaction fees, primarily loan fees but also including service charges on array of deposit activities and ancillary services (international banking, foreign exchange, insurance, investments, wire transfers, etc.). However, lending activities still provide the bulk of a commercial bank's income.
The name bank derives from the Italian word banco, desk, used during the Renaissance by Florentines bankers, who used to make their transactions above a desk covered by a green tablecloth.
Services typically offered by banks
Although the basic type of services offered by a bank depends upon the type of bank and the country, services provided usually include:
- Taking deposits from their customers and issuing current (UK) or checking (US) accounts and savings accounts to individuals and businesses
- Extending loans to individuals and businesses
- Cashing cheques
- Facilitating money transactions such as wire transfers and cashiers checks
- Issuing credit cards, ATM cards, and debit cards
- Storing valuables, particularly in a safe deposit box
- Cashing and distributing bank rolls
- Consumer & commercial financial advisory services
- Pension & retirement planning
Financial transactions can be performed through many different channels:
- A branch, banking centre or financial centre is a retail location where a bank or financial institution offers a wide array of face to face service to its customers
- ATM is a computerised telecommunications device that provides a financial institution's customers a method of financial transactions in a public space without the need for a human clerk or bank teller
- Mail is part of the postal system which itself is a system wherein written documents typically enclosed in envelopes, and also small packages containing other matter, are delivered to destinations around the world
- Telephone banking is a service provided by a financial institution which allows its customers to perform transactions over the telephone
- Online banking is a term used for performing transactions, payments etc. over the Internet through a bank, credit union or building society's secure website
Types of banks
Banks' activities can be divided into retail banking, dealing directly with individuals and small businesses; business banking, providing services to mid-market business; corporate banking, directed at large business entities; and investment banking, relating to activities on the financial markets. Most banks are profit-making, private enterprises. However, some are owned by government, or are non-profits.
Central banks are non-commercial bodies or government agencies often charged with controlling interest rates and money supply across the whole economy. They generally provide liquidity to the banking system and act as Lender of last resort in event of a crisis.
Types of retail banks
- Commercial bank: the term used for a normal bank to distinguish it from an investment bank. After the Great Depression, the U.S. Congress required that banks only engage in banking activities, whereas investment banks were limited to capital market activities. Since the two no longer have to be under separate ownership, some use the term "commercial bank" to refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses.
- Community Banks: locally operated financial institutions that empower employees to make local decisions to serve their customers and the partners
- Community development banks: regulated banks that provide financial services and credit to underserved markets or populations.
- Postal savings banks: savings banks associated with national postal systems.
- Private banks: manage the assets of high net worth individuals.
- Offshore banks: banks located in jurisdictions with low taxation and regulation. Many offshore banks are essentially private banks.
- Savings bank: in Europe, savings banks take their roots in the 19th or sometimes even 18th century. Their original objective was to provide easily accessible savings products to all strata of the population. In some countries, savings banks were created on public initiative, while in others socially committed individuals created foundations to put in place the necessary infrastructure. Nowadays, European savings banks have kept their focus on retail banking: payments, savings products, credits and insurances for individuals or small and medium-sized enterprises. Apart from this retail focus, they also differ from commercial banks by their broadly decentralised distribution network, providing local and regional outreach and by their socially responsible approach to business and society.
- Building societies and Landesbanks: conduct retail banking.
- Ethical banks: banks that prioritize the transparency of all operations and make only social-responsible investments.
Bank crisis
Banks are susceptible to many forms of risk which have triggered occasional systemic crises. Risks include liquidity risk (the risk that many depositors will request withdrawals beyond available funds), credit risk (the risk that those who owe money to the bank will not repay), and interest rate risk (the risk that the bank will become unprofitable if rising interest rates force it to pay relatively more on its deposits than it receives on its loans), among others.
Banking crises have developed many times throughout history when one or more risks materialize for a banking sector as a whole. Prominent examples include the U.S. Savings and Loan crisis in 1980s and early 1990s, the Japanese banking crisis during the 1990s, the bank run that occurred during the Great Depression, and the recent liquidation by the central Bank of Nigeria, where about 25 banks were liquidated.
Bank size information
Top ten banking groups in the world ranked by Shareholder equity ($m)
The 2006 bank atlas was compiled from commercial banks’ annual reports and financial statements for 2006 and 2005.[3] Figures in U.S. dollars
| Country | Company | Shareholder equity ($m) |
|---|---|---|
 United States | Citigroup | 112537 $mln |
| United States | JPMorgan Chase | 107211 $mln |
| United States | Bank of America | 101224 $mln |
 United Kingdom | HSBC | 98226 $mln |
 Japan | Mitsubishi UFJ Financial Group | 83281 $mln |
 France | Credit Agricole Group | 65137 $mln |
| United Kingdom | Royal Bank of Scotland Group | 64453 $mln |
Top ten banking groups in the world ranked by assets
Figures in U.S. dollars, and as at end-2004[4]
| Rank | Country | Company | Assets (US $) |
|---|---|---|---|
| 1 |  Switzerland | UBS | 1,533 billion |
| 2 | United States | Citigroup | 1,484 billion |
| 3 | Japan | Mizuho Financial Group | 1,296 billion |
| 4 | United Kingdom | HSBC Holdings | 1,277 billion |
| 5 | France | Credit Agricole Group | 1,243 billion |
| 6 | France | BNP Paribas | 1,234 billion |
| 7 | United States | JPMorgan Chase & Co. | 1,157 billion |
| 8 |  Germany | Deutsche Bank | 1,144 billion |
| 9 | United Kingdom | Royal Bank of Scotland | 1,119 billion |
| 10 | United States | Bank of America | 1,110 billion |
Top ten banks in the world ranked by market capitalisation
Figures in U.S. dollars, and as at 26 July 2006[5]
| Rank | Country | Company | Market Capitalisation (US $) |
|---|---|---|---|
| 1 | United States | Citigroup | 275 billion |
| 2 |  China | ICBC | 250 billion |
| 3 | United States | Bank of America | 230 billion |
| 4 | United Kingdom | HSBC | 200 billion |
| 5 | United States | JPMorgan Chase | 165 billion |
| 6 | Japan | Mitsubishi UFJ | 145 billion |
| 7 |  Italy | Unicredit | 130 billion (2007) |
| 8 | United States | Wells Fargo | 120 billion |
| 9 | Switzerland | UBS | 110 billion |
| 10 | United Kingdom | Royal Bank of Scotland | 100 billion |
As at 16 May 2007, following the January 2007 merger between Banca Intesa and Sanpaolo SPA, Italy's newly formed Intesa Sanpaolo has a market cap of $104.7 billion.
Top ten bank holding companies in the world ranked by profit
Figures in U.S. dollars, and as 2006
| Rank | Country | Company | Profit (US $) |
|---|---|---|---|
| 1 | United States | Citigroup | 22.13 billion |
| 2 | United States | Bank of America | 21.13 billion |
| 3 | United Kingdom | HSBC | 14.55 billion |
| 4 | United States | JP Morgan Chase | 14.44 billion |
| 5 | United Kingdom | Royal Bank of Scotland | 12.1 billion |
| 6 | Switzerland | UBS | 9.79 billion |
| 7 | United States | Goldman Sachs | 9.34 billion |
| 8 | United States | Wells Fargo | 8.48 billion |
| 9 | United States | Wachovia | 7.79 billion |
| 10 | United States | Morgan Stanley | 7.45 billion |
Top ten banking groups in the world ranked by Tier 1 capital
Figures in U.S. dollars, and as at end-2005[6]
| Rank | Country | Company | Tier 1 Capital (US $) |
|---|---|---|---|
| 1 | United Kingdom | HSBC | 79 billion |
| 2 | United States | Citigroup | 75 billion |
| 3 | United States | Bank of America | 73 billion |
| 4 | United States | JP Morgan Chase | 72 billion |
| 5 | Japan | Mitsubishi UFJ Financial Group | 64 billion |
| 6 | France | Credit Agricole Group | 60 billion |
| 7 | United Kingdom | Royal Bank of Scotland | 48 billion |
| 8 | Japan | Sumitomo Mitsui Financial Group | 40 billion |
| 9 | Japan | Mizuho Financial Group | 39 billion |
| 10 |  Spain | Santander Central Hispano | 38 billion |
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