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| Systems of Banking |
What is the system of banking?
A banking system or system of banking is a network of groups or organizations that provide financial services to us. These institutions are responsible for managing payments, providing loans, accepting deposits and assisting in investments. The functions of a commercial banking system may include accepting deposits, approving loans, providing checking and savings accounts, and providing credit and debit card services.
Whenever a large number of entities or corporations come together and form a system it is known as a banking system. They perform their specific functions in the fundraising and resource allocation resources in the economic and financial markets.
The main purpose and explanation of the existence of this sector is that it is necessary to be in charge of certain agencies to conduct financial intermediation activities. Thus, it is possible that financial money has moved from one place to another by adjusting to certain risks and deadlines that characterize reality.
The bank is responsible for its own activities and nature in obtaining financial and financial resources through a large number of instruments built for such purposes as bonds, deposits or obligations.
Alternatively, this system of entities is responsible for facilitating their clients' access to these firms through banking tools such as clients and mortgages, in exchange for prior agreement on interest or commission on each activity.
In that sense, at an early stage of the study, it can be defined that the interest collected is the bank's profit, at the same time facing a series of expenses derived from the interest that it instead pays to its own creditors. The difference between the two variables is known as the profit or margin of a bank, to give a general example.
The evolution of the concept of banking has evolved throughout history, especially as it presents its nature in different civilizations from ancient Egypt. However, the rise of money as a means of payment was due to the rapid evolution of the banking business, which reached its formal establishment in the modern era and in the Renaissance.
What are the types of banking system?
- Central Bank,
- Commercial Bank,
- Exchange Bank,
- Savings Bank,
- Industrial Bank,
- Co-operative or Agricultural Bank, and
- Unity Bank.
The set of existing banks in the economic system is compatible with the banking or banking system. Having said all this, there are different types of banks in the sector, depending on the size of the entity and its operations. Below are five different types of banking systems that are currently commonly used around the world.
Private banking is a highly professional and global management of a client's assets. It seeks to meet the investment, asset, financial and tax planning needs of individuals or groups of families with high equity. Private banking is dedicated to financial advisors and asset management.
For this, many variables are considered, which requires creating a good client profile:
• Risk profile.
• Objectives of profitability.
• Liquidity needs.
• Temporal horizon.
• Fiscal situation.
For a private banking service to be what it is, there must be a bank-client relationship that stands to offer a personalized service. A distinction needs to be made between consumer banking and product banking:
Customer Banking: Focuses on building a profitable relationship with the customer, showing it as a whole and not as an addition to products and services.
Product Banking: Product placement is not based on the client, but commercial promotions, regardless of personalized service.
There are different ways to build a private banking service: American style (from investment banking to private banking), wholesale banking to corporate clients, and Swiss-Spanish style: private banking and patriotism. Seeks control over quality and its assets, which he wants to keep away from taxes, inflation, investment spending and investing in conservative products.
The main feature of private banking
It meets the global demand for client heritage through:
• Heritage, strategic and fiscal preparation.
• Intergenerational orientation.
• Individualized leadership.
• The highest and most full selection of goods and services.
• On the basis of a good interpersonal interaction with the customer.
• Key services for private banking
The range of services in private banking is very diverse:
• Family office facilities.
• Real estate asset investment.
• The availability of a large amount of mutual funds.
• SICAV and organized objects.
• Movable and non-movable asset management.
• Property tax optimization.
• Intergenerational readiness.
Home Banking System
All these resources, tools and provisions to bring banking services as close to the customer as possible are called home banking. Among these, we can get different types of banking services depending on the communication route.
Thus, for online banking, telemetric, telephone banking, various activities and check execution through telephone, digital banking, which is a broad term that collects all of the above, through digital applications.
In general, home banking is a broad concept that consists of the possibility of conducting transactions from all angles; Unless any transaction related to banking services.
The evolution of home banking
The term home banking began to be used in the late 1990s when the opportunity arose to be able to operate beyond the physical headquarters of a banking office and beyond.
In recent years, all banks have improved and adapted to start online banking or banking, so that today it is possible to run any kind of operation through various methods without going to any bank office.
This segregation has led to the emergence of pure digital banks in telemetric ways without physical banking offices, or traditional banks have created divisions and banks in parallel with digitally managed companies so that market share does not shrink.
Today, home banking has become a complement to traditional banking to play a key role in customer activity and consulting, radically transforming the sector and betting on digital banking, where some banks see it as a strategy.
Wholesale banking system
Wholesale banking is one for large-scale activities, usually large-scale enterprises or companies of large importance. Wholesale banking is also called wholesale banking, corporate banking or corporate banking.
Because this type of banking exists between client organizations and business entities they have a special and more personal focus than commercial banking. Targeted wholesale banking for large sums of money from large economic activities can be divided into two categories:
Investment Banking: Financial Structure, Consolidation and Acquisition (M&A), Consulting etc.
Corporate banking: management of liabilities (line of credit, factoring or confirmation), management of fixed assets (loans, leases, leases, etc.)
While commercial banking targets small savers and investors, wholesale banking has defined the market among customers who, due to their size, functionality and size, need more direct and private channels than the rest. Debt settlement, loans, custom financing, corporate bond sales and, above all, greater patriotic investment banking.
Model of wholesale banking
There are two ways where the model of wholesale banking can be found:
Commercial and Private Lines: In this case, the bank has offered the director of a company to work on behalf of the company which gives him the right to negotiate and the right to personally finance and process. This line of business is employed by large cited companies or large amounts of activity.
General Line: Even outside of commercial or retail banking, several business units of a number of companies have personal but general support.
In general, large banks have a fundamental role to play in managing the flow of money and investments, as they have highly-skilled and large account-oriented staff who cannot provide commercial banks with activities that require them to have several institutional agents for financing and investing. Act as their mediator.
Mixed banking system
It is called commercial banking or customer as well as wholesale or industrial banking and the one that operates public and private capital.
Initially, banking was divided into retail and commercial banking, industrial or corporate banking and especially investment or corporate banking, dedicated and large-scale activities for large corporations.
Until recently, banking was consolidated and dedicated to a pre-defined sector, however, with the expansion and empowerment of banks, traditional retail banking began to manage small and medium-sized enterprises with dedicated products and to manage large companies, industrial or commercial banking diversified its market. As a way to do this and to offset the weight loss of the industrial sector in the economy as a whole, the consumer was exposed to the consumer sector.
Mixed banking as an entity whose capital consists of a combination of state contributions and private capital
At the same time, the term mixed banking also refers to a bank whose capital is made up of public and private resources. Especially before the deregulation and opening up of the 60s and 90s of the twentieth century, the banking market has always been a tool of the official banking states to control certain amounts and manage your standards.
Over time, as the sector has grown more liberal, public banks have been synthesized by traditional private banking, with only the majority or minority in the public sector, where only a fraction of the capital was sold, but there was room for action and direction.
In this sense, mixed or semi-public banks are the main sponsors of SMEs and entrepreneurial financing lines, choosing the path of greater ease in financing and greater margins of return, thus showing its basic principles.
Fractional reserve banking
Fractions Reserve banking is a banking system in which banks keep a fraction of their clients' deposits. This fraction is known as the cash ratio. Under a fractional reserve banking system, banks do not have to save 100% of their customers' deposits.
In this way, they can repay the part of the deposit that they are not obliged to keep in stock, which allows them to avail their benefits and the deposits to be remunerated. This arrangement is based on the idea that depositors cannot withdraw all their money at the same time.
Fractional reserve banking lets an event known as a bank multiplier occur. Bank multiplier is the expansion effect of the amount of money when a bank accepts a deposit and maintains only a fraction of the reserve, lending the rest.
By paying the deposit, the bank allows two people to keep the same money at once. This process is repeated when the recipient deposits their money in a bank. This is why the currency base does not match the financial aggregates (M1, M2, M3 ...).
The effect of fractional reserve banking
The fractional reserves indicate that banks are at risk of liquidity as they are unable to withdraw huge amounts of deposits. There is a so-called banking panic when this situation of withdrawal of huge amount of funds occurs. To reduce this constant risk, fractional reserve systems usually have a last resort lender.
These donors are responsible for injecting liquidity into banks in complex situations to avoid banking panic. In most cases, the last resort payer is the state through the central bank. It is the same central bank that determines what percentage a bank should have in its reserves.
This percentage is called the cash reserve ratio and is one of the available monetary policy procedures of the central banks.
How does the banking system work?
When a person deposits money into their bank account, the bank can lend that money to other people. The depositing customer earns a small amount of money in return (interest on the deposit), and the lending customer pays a large amount of money to the bank in return.
What are the key functions of the banking system?
What Bank is awaiting us in the Future?
The technological revolution is affecting all sectors by transforming all kinds of industries. This is why in this digital age, more and more people are talking about the future of banking and its transformation into electronic banking, a field that contains extremely valuable raw materials; Customer Information.
Banking staff is an influential factor in clients coming to banks, so if technological changes affect staff, who will take care of the personalized relationship with the customer?, Who will try to reassure or help the client in his efforts? If the future of banking is based on any technological transformation, the banking sector needs to adapt to the needs of its clients:
Banking is usually protected by customer confidence because citizens need that confidence to deposit their savings, make investment plans, or simply establish the dominance of their salary or pension. If future banking is 100% internet-based then what will be the confidence of the customers?
The bank is the center of our personal money and we all need a bank account, credit, or debit card. If these efforts are converted and started digitally, it can create mistrust among citizens who are not supporters or familiar with this digital age.
• The number of mobile banking users is increasing year by year, more and more people are choosing mobile banking to check their finances, but for those who do not know the features of mobile banking, the bank can provide more information about this channel. This medium and the operations can be performed from anywhere without going to any bank branch.
• More expert staff to provide more precise information about the technological advancement of banking. If this change causes the offices to disappear and therefore cause employment, there should be staff who can provide the information needed to solve customer problems and have more detailed information about banking products or services.
• Steps they take to protect customers' data in electronic banking Strengthen cybersecurity and communicate. This major difficulty is due to the distrust of the client in this type of banking because no one wants their personal data to come out publicly and affect their intimate life.
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