Banking Proposal : Banking Plan

1486 WordsNov 28, 20146 Pages
Banking Proposal Name Institution Course Professor Date Banking Proposal Intro- Thesis In our society people interact with the banking industry everyday. As of 2014 the industry had revenues of $426 billion (IBIS, 2014). Monetary policy effects how citizens and corporations approach the economy. Banks have the ability to influence monetary decision-making of each individual causing change in the state of the economy. Following is a discussion of how banks affect behavior of people in the economy. Role in the Market Banks play a huge role in the market. Their monetary policies can increase or decrease the amount of spending in the economy. The Federal Reserve Bank, the United States central bank, has the most power of all banks. It is considered to be the bank’s bank. It was established by an act of congress in 1913, which created the Federal Reserve System. This system regulates the banks in the economy. Since the Fed has so much control its policies directly influence all banks. This is typically steered by the interest rates. What Causes Interest Rates to Fluctuate? As stated before interest rates are influenced by many different factors, “bank rates in general, follow policy changes, bank rates also change in response to market conditions, independently of changes in the official target rates” (Lim, 2013). For example the financial crisis in 2008, caused by the housing market, resulted in tight credit conditions and high interest rates.
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