Types of Banks prepared by Wendy

Overview Financial Institution Non-bank FI and Banks Commercial Banks Investment Banks Other Financial Institutions

Financial Institution Private or Public organization that provides a connection between borrowers and savers of money

Financial Institutions Investment bank Commercial Bank Credit Union Building Societies LETS

Non-Bank Financial Institution (NBFI) A financial institution that does not have full banking license. However, facilitates bank related services

Cashier’s cheque issuers NBFI Insurance firms Pawn shops Cashier’s cheque issuers Currency exchanges

Banks A financial institution licensed as a receiver of deposits. In most countries, banks are regulated by the national government or central bank.

Banks How are they different? An establishment authorized by a government to accept deposits, pay interest, clear checks, make loans, act as an intermediary in financial transactions, and provide other financial services to its customers. Let’s start with some unconventional banks and then we will discuss How are they different?

Commercial Banks Banks which enable individual customers or businesses to establish current or savings accounts, or take our personal loans.

Investment Banks Helps organizations use investment markets. Investment banks primarily work in the investment markets and do not take customer deposits. Investment banks help organizations use investment markets. For example, when a company wants to raise money by issuing stocks or bonds, an investment bank helps them through the process. Investment banks also consult on mergers and acquisitions, among other things. Investment banks primarily work in the investment markets and do not take customer deposits. However, some large investment banks also serve as commercial banks or retail banks.

Commercial v.s Investment - Manage deposit accounts for individual and businesses - Loans to public using $ held in deposit -Profit by high interest rates - Facilitate buying and selling of stocks, bonds and other investments -Help companies go public -Profit by providing selling investment service (fees and commission)

Other Financial Institutions

The LETS System Local Exchange Trading System By Michael Linton in 1983, British Columbia Non- Profit , community Credits A local exchange trading system (also local employment and trading system or local energy transfer system; abbreviated to LETS orLETSystem) is a locally initiated, democratically organised, not-for-profit community enterprise that provides a community information service and record transactions of members exchanging goods and services by using the currency of locally created LETS Credits Michael Linton originated the term "local exchange trading system" in 1983 and for a time ran the Comox Valley LETSystems in Courtenay, British Columbia.[2] The system he designed was intended as an adjunct to the national currency, rather than a replacement for it,[3] although there are examples of individuals who have managed to replace their use of national currency through inventive usage of LETS.[citation needed] LETS networks use interest-free local credit so direct swaps do not need to be made. For instance, a member may earn credit by doing childcare for one person and spend it later on carpentry with another person in the same network.

Credit Unions Developed in Germany Non-Profit Organization Mutual Savings Attractive lending/borrowing rates Expanding

Building Societies Developed in the UK in 1980s Community, mutual organization Mortgage Developed in the UK, was meant for people to help each other save funds in order to buy houses. Based on community mindset otherwise called “mutual bodies” In the 1980s, British banking laws were changed to allow building societies to offer banking services equivalent to normal banks. The management of a number of societies still felt that they were unable to compete with the banks, and a new Building Societies Actwas passed in 1986 in response to their concerns. This permitted societies to 'demutualise'. If more than 75% of members voted in favour, the building society would then become a limited company like any other. Members' mutual rights were exchanged for shares in this new company.

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