“What’s special about banks?” Benston (2004) raised this question while offering six bank functions that render it ‘special’. Raising this question again today at a point in time where the banking system has been through a major crisis and a number of non-bank financial institutions have emerged to take up bank-like roles, this question may be aptly expanded and reframed in the following way: Is the role played by banks any different as compared to other non-bank financial institutions? Is there still any role which is specific to the way banks operate and cannot be replicated by these other institutions? Is it possible in the near future that banks will become obsolete and will completely be taken over by other non-bank institutions? This essay is an attempt at answering these questions in context of the various theories of banking and financial intermediation that have been put forth in the past. A review of the heterogeneous literature on this question will make it clear that it is an ongoing debate without any settled robust conclusion.
In order to evaluate the specialness of banks, it is important to look at the evolution of banks over the period of time and how there has been a shift in the structure of the industry with the entry of non-bank financial institutions. Discussed in depth will be the various conflicting theories of banking behaviour that have been presented in the past, to arrive at the conclusion that attributing ‘specialness’ to banks is contingent
There are various categories of banking; these include retail banking, directly dealing with small businesses and persons. Commercial and Corporate banking which offers services to medium and large businesses (Koch & MacDonald 2010). Private banking, deals with individuals, offering them one on one service. The last category is investment banking. These help clients to raise capital and often invest in financial markets. Most global banking institutions provide all these services combined. With all these institutions in existence within the same localities and offering similar services, there is a need to regulate the industry so as to protect the consumer and provide fair working environment for all banks (Du & Girma, 2011).
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.
Andrew Bailey (2013) “The future of UK banking - challenges ahead for promoting a stable sector”. Bank of England [online]. Available from:
Whether a reader agrees or disagrees with how the centralized banking system was created, the foundation for which it was built off of has continued to grow over a century with key fundamentals still in place today. The author’s implications demonstrate that an economists, the intellectuals, were responsible for the banking reform that led to a structured banking system. Could this all have been possible without the influence of the economists? In my opinion, the author has provided enough evidence that would allow the reader to properly analyze and have confidence in the integrity of the article.
11. Peter J. Wallison. Hidden in Plain Sight. New York, NY: Encounter Books, 2015, 17. the major functions provided by big banks into different organizations be reconsidered?12
The American Banking system has always focused on order, resiliency and the ability to withstand the storm. When comparing banking systems, it is required analyze both the strengths and the weaknesses of each system. While examining the American banking system, a key strength that is presented is the pride if its resiliency, “these improvements in the resiliency of the banking system have been reinforced by a series of key capital and liquidity rules that have been enacted in the United States, including the Basel III capital and liquidity frameworks as adopted in more stringent form” (The State of American Banking).
1. Introduction In New Zealand, banks was established to serve the finacial need of people in the period of be settled by European. Nowadays, New Zealand is one of the most competitive and flexible banking industries in the world because of environment and banks’ strategic capabilities. In this assigment, the broad macro-environment that influences banking industry will be analysed through PESTEL framework and Porter’s five forces. There are large banks in New Zealand such as ANZ bank, BNZ bank, and Kiwibank; however, just Kiwibank are deeply analysed in this assignment. Moreover, through Porter’s five forces, there are identification and discussion of the relative importance for Kiwibank. Furthermore, the analysis of Kiwibank’s strategic
There will always be someone who takes control of things. Those who are innately dominant will often possess a strong influence over others; some people in society have a tendency to lead while others follow. However, when the effect of power is negative, it becomes able to destroy the very thing it has control of. In Pedagogy of the Oppressed, the author, Paulo Freire, highlights such negativities in the classroom setting in an education system he calls the “banking concept”. This idea prevents active thinking and instead, the students absorb empty facts, keeping them stored in their memory. Although he discusses the alternative, more positive “problem-posing” concept, the banking principle seems to be more prominent in Chinua Achebe’s Things
These banks should ideally be divested of any sort of commercial interest, and must act in the best interest of its nation’s economic stability. A lot of meaning is carried out in being identified as ‘independent’ authority, where the bank possess powers to take its own decisions, approve its own legislature, follow its own policies and offer stability to the nation’s economy.
Banking, from its early days of inception, has undergone rapid changes, most especially within the past ten years, also as a result of major world events such as the 9/11 terror attacks and the consequential reactions of governments and within the industry itself. (Morgan McKinley UK)
This Act provided an immediate instrument for UK banks to be transported into public ownership and then - if there is one - to make a further transfer to a buyer in situations where it is necessary to maintain stability in the UK financial system . This was also a good response because by using this act it allowed The Treasury to nationalize Northern Rock and parts of Bradford & Bingley . Nationalization safeguarded the bank’s future, which was crucial for the country’s financial well-being, this is great because it could be monitored closely by the government on behalf of the taxpayer - preventing the banks from making the same detrimental mistakes . However, this act was replaced by the Banking Act 2009 that made provision for the nationalization of banks, it amended the law on bank insolvency and administration. This shows the that the Banking Act 2008 is an inadequate response because it was in need of reformation due to nationalization not being successful in the hands of the public, rather only a short term solution. Furthermore, it can be argued that politicians are not the right people to run the banks. They do not have the commercial abilities essential to run such important and challenging financial institutions. If experienced veterans of the banking industry were unsuccessful in evading the pitfalls recently, inexperienced government personnel are very unlikely to succeed. It can be said that the financial, and in
The crises showed just how interconnected the banking system is throughout the world. The Lehman Brothers bank closure in 2008 created a major financial crisis around the world due to its influence (The Economist, 2013). It took the government’s massive bail outs to prevent total collapse of the financial system and to some extent economic collapse of the country. This government action set a precedent and to some sent a message that the reckless action by the banks in the name of profit is fine because they now have a safety net. It is a good example of how the collapse of a big financial institution that has national and global influence can affect several interrelated firms to the detriment of the country’s economic interests. This paper therefore, examines the notion “too big to fail” in relation to banking.
Banking can be defined as a process through which the finances of a country is controlled and created. These finances are loaned to gain profit through interest. In recent times banks perform varied functions like ATM cards, safeguarding of valuable things, providing lockers, credit cards and online banking. Banks and banking Katy and in other American cities has helped the world economy. The simple method of safeguarding money and lending it to the borrowers leads to a productive flow of money. This process has helped in the development of economies of varied countries.
In this essay I will be addressing the “Too Big To Fail” (TBTF) problem in the current banking system. I will be discussing the risks associated with this policy, and the real problems behind it. I will then examine some solutions that have been proposed to solve the “too big to fail” problem. The policy ‘too big to fail’ refers to the idea that a bank has become so large that its failure could cause a disastrous effect to the rest of the economy, and so the government will provide assistance, in the form of perhaps a bailout/oversee a merger, to prevent this from happening. This is to protect the creditors and allow the bank to continue operating. If a bank does fail then this could cause a domino effect throughout
Private banking industry has changed in a very basic way, driven by many key factors such as: free competition systems, modern developments in information technology (in particular, developments of the internet), and changing demographics. Private banks now operate in an environment shaped by increasing and shifting regulations, and in markets influenced by the uncontrolled situations of the world economy and geopolitical issues.