Comparative Study of Commercial Banks and Co-Operative Banks

The Merriam Webster dictionary defines the noun “bank” as “an establishment for the custody, loan, exchange, or issue of money, for the extension of credit, and for facilitating the transmission of funds.” In essence it is an institution that serves as a medium of flow of funds between users and savers. A bank is a financial institution that links the flow of funds from savers to users and back. For the purpose of this audit report we will broadly classify banks into two major categories: commercial banks and investment banks.

Refer to those kind of deposits that can be easily withdrawn by individuals without any prior notice to the bank. In other words, the owners of these deposits are allowed to withdraw money anytime by simply writing a cheque. These deposits are the part

Banks owe their customers a number of duties so long as the banker-customer relationship is formed . The banker-customer relationship will normally be governed by the law of contract. However,

The banking industry has over the years evolved from simple to large and complex organization. They have grown from one street building into having multiple branches some of which are international. Their clients range from individual and institutions to governments and other banks. Banks do not manufacture physical things. Their work is simply services for money (Koch & MacDonald 2010). Such services include storing, lending and managing money. All people and institutions, as well as governments, need money to operate accordingly.

Banks are institutions in which people put their money for safekeeping, to save, to use to pay their bills, or to earn interest on. Banks are allowed to use that money to make loans and earn interest for the bank's’ owners. Different types of banks offer different types of services. For example, commercial banks originally just served businesses, and savings banks and credit unions were used by individuals, especially those who couldn’t qualify for loans at regular banks. This is no longer the case. Although commercial banks and thrift institutions used to serve different purposes, today they all offer many of the same types of services including bank accounts, loans, credit, certificates of deposits (CDs), and much more.

deposit to satisfy the Minimum Balance Requirement. Once the savings is opened and funded, the

The history of central banking in America is a very interesting topic that carries a direct impact on today’s banking. The paper focuses on how the centralized banking system started with special emphasis on the First and the Second banks of America and the inception of the Federal banking system. Highlighted also are the circumstances that led to the established of the financial organs alongside the relevance of the Federal Reserve today (Fischer, 2015). The topic directly impacts on how financial crisis and all the economic challenges are being handled today. The Federal Reserve is still the one which regulates all the fiscal activities of America. The Federal Reserve refers to the centralized banking organization of America. The banking system was established early in the 20th century through the adoption of the Federal Reserve legislation. The inception of the central system was majorly triggered by a sequence of fiscal worries specifically the famous 1907 fright. The Federal Reserve Act had notably passed through several hearings, debates alongside changes and was upheld by the majority in the congress. The Federal Reserve System came as the third central banking system of America, after the first and the second banks of America (Bordo, 2015).

A.) The national bank, though surrounded by political and economic controversy, was valuable in certain aspects of the development of the United States. According to the fifth reading, the banking system showcased remarkable intelligence, efficiency, energy, and most importantly, independence. The bank served as a sense of security unattainable by local banks. In addition to providing security and independence, the national bank facilitated the majority of foreign and domestic trade.

Banks take deposits from savers and pay interest on these accounts. They receive interest on loans when they pass these funds on to borrowers. The spread between the rate they pay for funds and the rate they receive from borrowers is where their profits are derived from. This practice of combining deposits from many sources which can be lent to many borrowers forms a interchange of funds

b) They are called “the stuff from which bankers create loans” because as stated, money deposited as a term is used as loans meaning whatever is deposited

Many nations have implemented deposit insurance for the protection of the depositors from losses that result from the inability of a bank to meet its debts. As an element of safety net in the banking system, deposit insurance is meant to increase financial stability. A Deposit Insurance system (DIS) main objective is to make sure that that firms and households do not loose savings as well as deposits they hold in banks in case of bank insolvency (Fdic.gov, 2014). It creates some confidence within the financial system and promotes favorable services by banks. Therefore, DIS is not meant just for the protection of depositors in a single bank but also ensure overall financial stability. Borrowed money is increasing becoming the main source

Simply putting, banks accept deposits from public; keep some of those deposits with them and lend the rest to businesses and individuals. Businesses and individuals in turn pay interest on

Bank regulations are based on a general core of principles. Banks have two important economic functions. First, they operate a payments system, in which a modern

1. The banking system which was strengthened and benefits both the banking system and the people

bank against which the check is cleared acquires reserves and deposits equal to the amount of the check.