CHAPTER 1

AN OVERVIEW OF BANKS

KEY TOPICS IN CHAPTER

What is a bank?

What do banks do?

Summers: Quality Management, 2nd. ed.

2009 Pearson Education, Upper Saddle River, NJ 07458.

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WHAT IS A
BANK?

A bank is a financial institution whose

primary activity is to act as a payment
agent for customers and to borrow and
lend money.

It is an institution for receiving, keeping,

and lending money.

Summers: Quality Management, 2nd. ed.

2009 Pearson Education, Upper Saddle River, NJ 07458.

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UNDANG UNDANG RI NOMOR 7 TAHUN

1992 SEBAGAIMANA TELAH DIUBAH
DENGAN
adalah: Badan
usaha yang10 TAHUN
UNDANGBank
UNDANG
RI NOMOR
1998
menghimpun dana dari masyarakat
dalam bentuk simpanan dan
menyalurkannya kepada masyarakat
dalam bentuk kredit dan atau bentuk
bentuk lainnya dalam rangka
meningkatkan taraf hidup orang banyak
Summers: Quality Management, 2nd. ed.

2009 Pearson Education, Upper Saddle River, NJ 07458.

All rights reserved

WHY IS

Bank Indonesia called Bank

Central

Bank Mandiri called Commercial

Bank

Bank Prismadana called Rural

Credit Bank
Summers: Quality Management, 2nd. ed.

2009 Pearson Education, Upper Saddle River, NJ 07458.

All rights reserved

BANK CENTRAL

Central banks are normally government

owned banks, often charged with quasiregulatory responsibilities, supervising
commercial banks, and controlling the
cash interest rate

Summers: Quality Management, 2nd. ed.

2009 Pearson Education, Upper Saddle River, NJ 07458.

All rights reserved

STATUS AND
POSITION OF BANK
INDONESIA

Is an independent state institution and

freedom from interference by the
Government or any other external
parties

Such unique status and position are

necessary so that Bank Indonesia can
implement its role and function as
monetary authority more effectively
and efficiently.

Summers: Quality Management, 2nd. ed.

2009 Pearson Education, Upper Saddle River, NJ 07458.

All rights reserved

COMMERCIAL BANKS

An institution which accepts deposits,

makes business loans, and offers
related services.

Summers: Quality Management, 2nd. ed.

2009 Pearson Education, Upper Saddle River, NJ 07458.

All rights reserved

RURAL CREDIT
BANKS

Bank that give their services in rural

area

They have limited services, they can

only collect and lend money. There are
no such kliring, giro, check, etc

Summers: Quality Management, 2nd. ed.

2009 Pearson Education, Upper Saddle River, NJ 07458.

All rights reserved

Summers: Quality Management, 2nd. ed.

2009 Pearson Education, Upper Saddle River, NJ 07458.

All rights reserved

WHAT DO BANKS DO FOR

THEIR CUSTOMERS?

Payment system

Financial intermediation

Other financial services

Summers: Quality Management, 2nd. ed.

2009 Pearson Education, Upper Saddle River, NJ 07458.

All rights reserved

WHAT DO BANKS DO FOR

THEIR CUSTOMERS?

Payments

Coin and currency; currency exchange

Retail payments system

Payments system for business and

government

Summers: Quality Management, 2nd. ed.

2009 Pearson Education, Upper Saddle River, NJ 07458.

All rights reserved

WHAT DO BANKS DO FOR

THEIR CUSTOMERS?

Financial intermediation

IDR
50 M

IDR
5000

12%

6%

Summers: Quality Management, 2nd. ed.

2009 Pearson Education, Upper Saddle River, NJ 07458.

All rights reserved

Funding
Such as demand deposit, saving deposit, time deposit

Lending
Investment credit: The loan used to buy capital goods
such as, machine, land and construction
Working capital credit: Used for company working capital
Consumer credit : Credit used to buy consumer goods

Summers: Quality Management, 2nd. ed.

2009 Pearson Education, Upper Saddle River, NJ 07458.

All rights reserved

WHAT DO BANKS DO FOR

THEIR CUSTOMERS?

Other financial services

safe deposit box

bank card/atm

bank guarantee

bank referent

letter of credit

Summers: Quality Management, 2nd. ed.

2009 Pearson Education, Upper Saddle River, NJ 07458.

All rights reserved

WHY DO BANKS PERFORM

THOSE SERVICES?
Goal
Size of cash flow

Maximize
shareholder
wealth

Timing of cash flow

Risk of cash flow

Constraints
Market
competition

Social

Summers: Quality Management, 2nd. ed.

Legal and
regulatory
2009 Pearson Education, Upper Saddle River, NJ 07458.
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WHY DO BANKS
PERFORM THOSE
SERVICES?
The main revenue/profit for a bank comes
from

Spread based: The difference between lending

interest and funding interest

Fee based: The revenue that comes from bank

fee

Summers: Quality Management, 2nd. ed.

2009 Pearson Education, Upper Saddle River, NJ 07458.

All rights reserved

QUESTIONS?

Summers: Quality Management, 2nd. ed.

2009 Pearson Education, Upper Saddle River, NJ 07458.

All rights reserved