Banks act as payment agents by conducting checking or current accounts for customers, paying cheques drawn by customers on the

bank, and collecting cheques deposited to customers' current accounts. Banks also enable customer payments via other payment methods such as telegraphic transfer, EFTPOS, and ATM. Banks borrow money by accepting funds deposited on current accounts, by accepting term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current accounts, by making installment loans, and by investing in marketable debt securities and other forms of money lending. Banks provide almost all payment services, and a bank account is considered indispensable by most businesses, individuals and governments. Non-banks that provide payment services such as remittance companies are not normally considered an adequate substitute for having a bank account. Banks borrow most funds from households and non-financial businesses, and lend most funds to households and non-financial businesses, but non-bank lenders provide a significant and in many cases adequate substitute for bank loans, and money market funds, cash management trusts and other non-bank financial institutions in many cases provide an adequate substitute to banks for lending savings to. role The commercial role of banks is not limited to banking, and includes: issue of banknotes (promissory notes issued by a banker and payable to bearer on demand) processing of payments by way of telegraphic transfer, EFTPOS, internet banking or other means issuing bank drafts and bank cheques accepting money on term deposit lending money by way of overdraft, installment loan or otherwise providing documentary and standby letters of credit (trade finance), guarantees, performance bonds, securities underwriting commitments and other forms of off-balance sheet exposures safekeeping of documents and other items in safe deposit boxes currency exchange acting as a 'financial supermarket' for the sale, distribution or brokerage, with or without advice, of insurance, unit trusts and similar financial products

Channels Banks offer many different channels to access their banking and other services: A branch, banking centre or financial centre is a retail location where a bank or financial institution offers a wide array of face-to-face service to its customers. ATM is a computerised telecommunications device that provides a financial institution's customers a method of financial transactions in a public space without the need for a human clerk or bank teller. Most banks now have more ATMs than branches, and ATMs are providing a wider range of services to a wider range of users. For example in Hong Kong, most ATMs enable anyone to deposit cash to any customer of the bank's account by feeding in the notes and entering the account number to be credited. Also, most ATMs enable card holders from other banks to get their account balance and withdraw cash, even if the card is issued by a foreign bank. Mail is part of the postal system which itself is a system wherein written documents typically enclosed in envelopes, and also small packages containing other matter, are delivered to destinations around the world. This can be used to deposit cheques and to send orders to the bank to pay money to third parties. Banks also normally use mail to deliver periodic account statements to customers.

Telephone banking is a service provided by a financial institution which allows its customers to perform transactions over the telephone. This normally includes bill payments for bills from major billers (e.g. for electricity). Online banking is a term used for performing transactions, payments etc. over the Internet through a bank, credit union or building society's secure website. Mobile banking is a method of using one's mobile phone to conduct simple banking transactions by remotely linking into a banking network. Video banking is a term used for performing banking transactions or professional banking consultations via a remote video and audio connection. Video banking can be performed via purpose built banking transaction machines (similar to an Automated teller machine), or via a videoconference enabled bank branch.

Economic functions The economic functions of banks include: 1. issue of money, in the form of banknotes and current accounts subject to cheque or payment at the customer's order. These claims on banks can act as money because they are negotiable and/or repayable on demand, and hence valued at par. They are effectively transferable by mere delivery, in the case of banknotes, or by drawing a cheque that the payee may bank or cash. netting and settlement of payments banks act as both collection and paying agents for customers, participating in interbank clearing and settlement systems to collect, present, be presented with, and pay payment instruments. This enables banks to economise on reserves held for settlement of payments, since inward and outward payments offset each other. It also enables the offsetting of payment flows between geographical areas, reducing the cost of settlement between them. credit intermediation banks borrow and lend back-to-back on their own account as middle men. credit quality improvement banks lend money to ordinary commercial and personal borrowers (ordinary credit quality), but are high quality borrowers. The improvement comes from diversification of the bank's assets and capital which provides a buffer to absorb losses without defaulting on its obligations. However, banknotes and deposits are generally unsecured; if the bank gets into difficulty and pledges assets as security, to raise the funding it needs to continue to operate, this puts the note holders and depositors in an economically subordinated position. maturity transformation banks borrow more on demand debt and short term debt, but provide more long term loans. In other words, they borrow short and lend long. With a stronger credit quality than most other borrowers, banks can do this by aggregating issues (e.g. accepting deposits and issuing banknotes) and redemptions (e.g. withdrawals and redemptions of banknotes), maintaining reserves of cash, investing in marketable securities that can be readily converted to cash if needed, and raising replacement funding as needed from various sources (e.g. wholesale cash markets and securities markets).

2.

3. 4.

5.

Type -in banking is still a popular type of banking. As in the past, it still involves bank tellers and specialized bank officers. Consumers must walk into a bank to use this service. Normally, in order to withdraw money or deposit it, a person must fill out a slip of paper with the account and specific monetary amount and show a form of identification to a bank teller. The advantage of walk-in banking is the face-to-face connection between the banker and a teller. Also, unlike drive-thru and ATM banking, a person can apply for a loan and invest money during a walk-in. Type -thru banking is probably the least popular form of banking today, but is still used enough by consumers to create a need for it. It allows consumers to stay in their vehicle and drive up to a machine equipped with a

container, chute and intercom. This machine is connected to a bank and is run by one or two bank tellers. A person can withdraw or deposit money at a drive-thru. He must fill out a slip with his account and specific monetary amount and put it in the container. The container travels through the chute to the bank teller, who will complete the banker's request. This is where the intercom comes into play. The bank teller and banker use it to communicate and discuss the specific banking request. Type -hour access to his bank account. Walk-in and drivethru banking do not offer this perk. In order to use an ATM, a person must have an ATM, card with personal identification number (PIN) number and access to an ATM machine. Any ATM machine can be used, but charges apply if the ATM machine is not affiliated with the bank listed on the ATM card. This charge varies from bank to bank. By sliding an ATM card into an ATM machine, it is activated and then through touching buttons on the machine, a consumer is able to withdraw or deposit money. Type use of a PIN, different from the one used for the ATM card. By going to the website of a bank and entering it, a consumer can get into his account, withdraw money, deposit money, pay bills, request loans and invest money. Online banking is growing in popularity because of its convenience. Significance ATM to do many kinds of banking outside of the normal working hours. History Banks date back to ancient times. During the 3rd century AD, banks in Persia and other territories in the Persian Sassanid Empire issued letters of credit known as akks. Muslim traders are known to have used the cheque or akk system since the time of Harun al-Rashid (9th century) of the Abbasid Caliphate. In the 9th century, a Muslim [2] businessman could cash an early form of the cheque in China drawn on sources in Baghdad, a tradition that was significantly strengthened in the 13th and 14th centuries, during the Mongol Empire. Indeed, fragments found in the Cairo Geniza indicate that in the 12th century cheques remarkably similar to our own were in use, only smaller to save costs on the paper. They contain a sum to be paid and then the order "May so and so pay the bearer such and such an amount". The date and name of the issuer are also apparent. The earliest known state deposit bank, [3] Banco di San Giorgio (Bank of St. George), was founded in 1407 at Genoa, Italy. Banking in the modern sense of the word can be traced to medieval and early Renaissance Italy, to the rich cities in the north like Florence, Venice and Genoa. The Bardi and Peruzzi families were dominated banking in 14th century Florence, establishing [4] branches in many other parts of Europe . Perhaps the most famous Italian bank was the Medici bank, set up by [5] Giovanni Medici in 1397 . Origin of the word The name bank derives from the Italian word banco "desk/bench", used during the Renaissance by Jewish [6] Florentine bankers, who used to make their transactions above a desk covered by a green tablecloth. However, there are traces of banking activity even in times ancient , which indicates that the word 'bank' might not necessarily come from the word 'banco'. In fact, the word traces its origins back to the Ancient Roman Empire, where moneylenders would set up their stalls in the middle of enclosed courtyards called macella on a long bench called a bancu, from which the words

banco and bank are derived. As a moneychanger, the merchant at the bancu did not so much invest money as [7] merely convert the foreign currency into the only legal tender in Romethat of the Imperial Mint. The earliest evidence of money-changing activity is depicted on a silver drachm coin from ancient Hellenic colony Trapezus on the Black Sea, modern Trabzon, c. 350325 BC, presented in the British Museum in London. The coin shows a banker's table (trapeza) laden with coins, a pun on the name of the city. In fact, even today in Modern Greek the word Trapeza () means both a table and a bank.

Regulation Main article: Banking regulation See also: Basel II Currently in most jurisdictions commercial banks are regulated by government entities and require a special bank licence to operate. Usually the definition of the business of banking for the purposes of regulation is extended to include acceptance of deposits, even if they are not repayable to the customer's orderalthough money lending, by itself, is generally not included in the definition. Unlike most other regulated industries, the regulator is typically also a participant in the market, i.e. a governmentowned (central) bank. Central banks also typically have a monopoly on the business of issuing banknotes. However, in some countries this is not the case. In the UK, for example, the Financial Services Authority licences banks, and some commercial banks (such as the Bank of Scotland) issue their own banknotes in addition to those issued by the Bank of England, the UK government's central bank. Banking law is based on a contractual analysis of the relationship between the bank (defined above) and the customerdefined as any entity for which the bank agrees to conduct an account. The law implies rights and obligations into this relationship as follows: 1. The bank account balance is the financial position between the bank and the customer: when the account is in credit, the bank owes the balance to the customer; when the account is overdrawn, the customer owes the balance to the bank. The bank agrees to pay the customer's cheques up to the amount standing to the credit of the customer's account, plus any agreed overdraft limit. The bank may not pay from the customer's account without a mandate from the customer, e.g. a cheque drawn by the customer. The bank agrees to promptly collect the cheques deposited to the customer's account as the customer's agent, and to credit the proceeds to the customer's account. The bank has a right to combine the customer's accounts, since each account is just an aspect of the same credit relationship. The bank has a lien on cheques deposited to the customer's account, to the extent that the customer is indebted to the bank. The bank must not disclose details of transactions through the customer's accountunless the customer consents, there is a public duty to disclose, the bank's interests require it, or the law demands it. The bank must not close a customer's account without reasonable notice, since cheques are outstanding in the ordinary course of business for several days.

2. 3. 4. 5. 6. 7. 8.

These implied contractual terms may be modified by express agreement between the customer and the bank. The statutes and regulations in force within a particular jurisdiction may also modify the above terms and/or create new rights, obligations or limitations relevant to the bank-customer relationship.

Some types of financial institution, such as building societies and credit unions, may be partly or wholly exempt from bank licence requirements, and therefore regulated under separate rules. The requirements for the issue of a bank licence vary between jurisdictions but typically include: 1. 2. 3. 4. Minimum capital Minimum capital ratio 'Fit and Proper' requirements for the bank's controllers, owners, directors, and/or senior officers Approval of the bank's business plan as being sufficiently prudent and plausible.

Types of banks Banks' activities can be divided into retail banking, dealing directly with individuals and small businesses; business banking, providing services to mid-market business; corporate banking, directed at large business entities; private banking, providing wealth management services to high net worth individuals and families; and investment banking, relating to activities on the financial markets. Most banks are profit-making, private enterprises. However, some are owned by government, or are non-profit organizations.