Financial Dictionary -> Banking

Banking has become one of the most powerful industries worldwide. Learning more about banking is imperative for anybody who wants to get ahead in the financial game. This section of the site answers questions like what is a bank, what is a financial institution, what is a credit union, what is an ATM, and many more.

Types of Banking Institutions

There are different types of financial establishments, from private and offshore banks to commodity development, exchange, spare, mortgage, industrial development, and commercial and savings banks. The main function of savings banks is to accept customers’ deposits in exchange for interest payments. They offer insurance products, credit, and savings accounts and specialize in retail banking. The fact that they have decentralized distribution networks is the main difference between savings and commercial establishments. Commercial banks offer a selection of products such as investment products, unsecured and secured loans, overdrafts, term deposits, and checking accounts. They also offer payment processing facilities (online banking, EFTPOS, telegraphic transfers, etc.) Mortgage banks specialize in mortgage loans and make profits by collecting loan servicing and origination fees. There are also investment banks that help businesses to issue bonds and stocks to raise funds for expansion, their normal operations, or other planned activities. Some larger financial establishments also function as retail or commercial banks. In addition to these types of financial institutions, there are online banks that offer a selection of investment, credit, and savings products and advertise lower rates and higher payback.

Products Offered by Banks

Financial institutions offer a diverse array of products and services, from private equity financing, wealth management, and merchant banking to money market and savings accounts, commercial and consumer mortgages, lines of credit, and insurance policies. Brick-and-mortar financial establishments offer a variety of savings and checking accounts such as regular and premium accounts, money market accounts, current accounts, and others. Banks advertise accounts with features and perks such as passbooks and checkbooks, unlimited withdrawals and deposits at any time, fixed maturity, competitive yields, and others.

We have described common bank account types including checking account and saving account. You can also find out what exactly are bank deposit, overdraft and overdraft protection, late charge, and cash advance.

In addition to bank accounts, financial establishments also offer installment loans and revolving credit. Installment loans come in a great variety, from consumer, vehicle, boat, and student loans to business loans. Some financial institutions cater to high net worth individuals and offer specialty and premium services that are custom tailored to serve the super wealthy. Private banks offer wealth management services to help clients preserve, manage, and grow their wealth. The range of services offered covers asset management, investment advice, philanthropy, estate planning, tax services, accounting advice, and more. Banks offer the full array of premium services such as third party treasury services, investment management, international tax consultancy, and financial and credit solutions. High net worth individuals are also offered fiduciary and trust services, private banking, and cash and liquidity management services. Some financial establishments also offer structuring, hedging, and trading solutions, along with generation-skipping tax planning, gift planning, income planning, and more. Banks function to provide expert advice on market activity, advice on portfolio diversification and different asset classes, and holistic financial and investment solutions. In fact, managers have execution capabilities and expertise to offer advice on different asset classes, covering the whole asset spectrum (i.e. equities, fixed income securities, and cash). Custom investment vehicles are also created to meet the unique requirements of clients.

Some banks hire external managers to cover the full spectrum. Investment vehicles are available across asset classes and are offered to institutional, business, and individual clients. Bank managers also offer financial counseling and portfolio management services as well as brokerage and transaction services. Many establishments also offer financial services to endowments and foundations. Some institutions maintain branches across borders and continents and specialize in urban investments and direct private investing. They also specialize in securities and focus on prime brokerage and trading. Bank managers specialize in investment solutions such as futures, equity derivatives, convertibles, commodities, and cash equities. They follow market trends and fluctuations and focus closely on growth and emerging markets. There are also establishments that offer middle market financing and advice on financial strategies such as lender finance, private capital investing, and specialty lending.

The focus is on long-term growth and capital investment. Whatever the type of bank, financial institutions emphasize commitment to values such as creativity, expertise, responsiveness, and fully underwritten transactions. The goal is to minimize syndication risk. Customers also benefit from specially tailored and streamlined solutions that offer long- and short-term benefits. Banks also emphasize the fact that they handle transactions of different size and type, including exit financings, restructurings, turnarounds, and growth and expansion financing. Some establishments also specialize in recapitalizations and management and leveraged buy-outs. Large banks serve as a one-stop solution and offer the full array of investment, credit, and retail services while small banks cater to individual customers and local communities.

In addition to commercial, savings, private, and mortgage banks which offer a diverse array of products, this section expands on the role and functions of central banks. Here you can learn also about the most powerful central bank in the world - the Federal Reserve, and how crucial are letters of credit in facilitating international commerce.

We'll be adding more banking articles soon, so bookmark this page and stay in touch.