McGraw-Hill/Irwin Bank Management and Financial Services, 7/e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. WELCOME TO GB30503 INTERNATIONAL AND OFFSHORE BANKING

Chapter One An Overview of the Changing Financial- Services Sector Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Bank Management and Financial Services, 7/e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Introduction Banks today provide hundreds of different services to millions of people all over the world Banks are principal source of credit Banks provide financial information and advice Banks grant the most installment loans to customers Leading buyers of bonds and government notes 1-3

McGraw-Hill/Irwin Bank Management and Financial Services, 7/e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Key Topics Powerful Forces Reshaping the Industry What Is a Bank? The Financial System and Competing Financial-Service Institutions Old and New Services Offered to the Public Key Trends Affecting All Financial-Service Firms 1-4

McGraw-Hill/Irwin Bank Management and Financial Services, 7/e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. What is a Bank? Can be defined in terms of : i) the economic functions it serves ii) the services it offers its customers iii) the legal basis for its existence 1-5

McGraw-Hill/Irwin Bank Management and Financial Services, 7/e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Major functions: i) financial intermediation ii) credit and debit accounts iii) credit cards iv) saving plans to loans v) security underwriting vi) insurance protection vii) financial planning viii) advice for merging ix) the sale of risk-management services to business and consumers etc. 1-6

McGraw-Hill/Irwin Bank Management and Financial Services, 7/e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Banking Business Today Powerful Forces Reshaping the Industry Banks have increasingly become general financial-service providers Principal Competitors are also going through great changes as well. -security dealers, investment bankers, brokerage firms, credit unions, thrift institutions, mutual funds, insurance companies Several major industrial companies have taken over the control of banks and offer 1-7

McGraw-Hill/Irwin Bank Management and Financial Services, 7/e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Loans, credit cards, saving plans and other traditional banking services. Eg. General Electric, Harley-Davidson and Fort Motor Toyota, Mitsubshi 1-8

McGraw-Hill/Irwin Bank Management and Financial Services, 7/e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Legal Basis Legal meaning of a bank need to define. US- A bank is any business offering deposits subject to withdrawal on demand and making loans of a commercial or business nature. US-As nay institution that could qualify for deposit insurance administered by the Federal Deposit Insurance Corporation (FDIC) 1-9

McGraw-Hill/Irwin Bank Management and Financial Services, 7/e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. The Different Kinds of Financial Service Firms Calling Themselves Banks Commercial Banks Savings Banks Cooperative Banks Mortgage Banks Community Banks Money Center Banks Investment Banks Merchant Banks International Banks Wholesale Banks Retail Banks Limited Purpose Banks Bankers’ Banks Minority Banks National Banks State Banks Insured Banks Member Banks Affiliated Banks Virtual Banks Fringe Banks Universal Banks 1-10

McGraw-Hill/Irwin Bank Management and Financial Services, 7/e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. The Financial Service Competitors of Banks Savings Associations Credit Unions Money Market Funds Mutual Funds (Investment Companies) Hedge Funds Security Brokers and Dealers Investment Banks Finance Companies Financial Holding Companies Life and Property-Casualty Insurance Companies 1-11

McGraw-Hill/Irwin Bank Management and Financial Services, 7/e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Quick Quiz What is a bank? How does a bank differ from most other financial-service providers? Under current U.S. federal law what must a corporation do to qualify and be regulated as a commercial bank? What is happening to banking’s share of the financial marketplace and why? 1-12

McGraw-Hill/Irwin Bank Management and Financial Services, 7/e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Traditional Services Offered By Banks Carrying Out Currency Exchange Discounting Commercial Notes and Making Business Loans Offering Savings Deposits Safekeeping of Valuables Supporting Government Activities with Credit Offering Checking Accounts Offering Trust Services 1-13

McGraw-Hill/Irwin Bank Management and Financial Services, 7/e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. More Recent Services Offered by Banks Granting Consumer Loans Providing Financial Advice Managing Cash Offering Equipment Leasing Making Venture Capital Loans Selling Insurance Policies Selling Retirement Plans 1-14

McGraw-Hill/Irwin Bank Management and Financial Services, 7/e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Offering Security Brokerage and Investment Banking Services Underwriting Securities Offering Mutual Funds and Annuities Offering Merchant Banking Services Offering Risk Management and Hedging Services 1-15

McGraw-Hill/Irwin Bank Management and Financial Services, 7/e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Trends Affecting Banks and Other Financial Service Firms Today Service Proliferation Rising Competition Government Deregulation Increased Interest Rate Sensitivity Technological Change and Automation Consolidation and Geographic Expansion E-Banking and E-Commerce Convergence Globalization 1-16

McGraw-Hill/Irwin Bank Management and Financial Services, 7/e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Quick Quiz Why do banks and other financial intermediaries exist in modern society, according to the theory of finance? How have banking and the financial services market changed in recent years? What powerful forces are shaping financial markets and institutions today? Which of these forces do you think will continue into the future? 1-17

McGraw-Hill/Irwin Bank Management and Financial Services, 7/e © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Web Links Federal Deposit Insurance Company Federal Financial Institutions Examination Council Office of Thrift Supervision Credit Union National Association Morningstar, Inc. Security and Exchange Commission Careers in Finance Bank Job Search Bank Jobs