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Definition of the Bank
The bank is an institution that obtains the approval of the government authorities in order to accept financial deposits, pay checks, provide miscellaneous loans to individuals and enterprises, and participate as intermediaries in transactions and financial services. The bank is defined as an organization that provides individuals and institutions with the ability to invest, borrow, Between currencies, and other tariffs for the bank is a financial institution with a legal license to allow it to provide financial loans, and the receipt of deposits, and the provision of money services, such as currency exchange, wealth management, and the provision of safe deposit funds.
The emergence of banks
Historical sources point out that the origins of the banks date back to the Babylonian era. It is believed that the oldest historical bank was established in the city of Sibar near the Euphrates River, and there is another view that the existence of banks dates back to the Greek era. The Greeks published the art of exchange that the Romans took from them , And the emergence of commercial banks coincided with the spread of paper money; so the first form of these banks exchange shops that were dealing with the purchase and sale of currencies, and founded the first commercial bank in 1517 in Venice, and later founded a bank in Amsterdam in 1609, and then spread banks in All the countries of the world.
Since the 18th century, the number of banks gradually increased. In the 19th century, with the advent of the industrial revolution in Europe, this led to its entry into the era of production, which required a lot of money. The need arose for banks that resembled the joint stock companies, This led to the emergence of specialized banks in industrial, agricultural and real estate credits.
During the 20th century, banks faced many challenges. They were characterized by the development and renewal of business that emerged in many key areas such as the emergence of modern technological innovations, their use in providing banking services, the provision of modern products related to developments in the financial market, In the development of banking trading methods.
Types of Banks
The development of the banks has contributed to the emergence of many of their own species, each type of specialization in a particular area of banking, and each type of bank has different characteristics, and can be summarized types of banks according to the following :
- Central banks are also known as issuing banks, banks that provide government banking services and occupy an important place in the money market. The central bank is the basis of the banking system. It differs from other banks, namely commercial banks, whose main objective is not to make maximum profits, The main functions of the central banks are to issue money, whether paper or metal, and are the main banks and supervisors of all commercial banks. Therefore, the Central Bank was renamed the Bank of Banks.
- Commercial banks are also known as deposit banks; they are credit institutions that are interested in obtaining deposits from individuals, in exchange for the ability to withdraw them on demand. Therefore, these banks deal with short-term credits. The banking institution can not be considered a commercial bank if it does not provide And withdrawal of financial deposits. These banks also deal with all financial assets only, such as securities, loans, and do not use any kind of real assets.
- Investment banks: Banks are characterized by their operations to build or develop fixed capital, such as real estate, factories, and agricultural land. Their operations are therefore based on non-withdrawable funds, time deposits and borrowing from others during a given period of time, , But the difference between them is the bank's attempt to borrow and attract deposits from individuals and institutions and link them with the granting of interest, while time deposits are dependent on applicants seeking to invest their money in these banks; in order to obtain financial benefits.
- Savings and savings institutions are specialized institutions that collect financial savings for individuals, are often on demand and constitute savings books; they may also be considered as savings for a term; their withdrawal depends on a given date and then become bonds or treasury bills.
- Business banks are banks that have their own nature; they do not deal with the public, they are limited to financing the operations of the various institutions; by lending, acquiring or participating in their capital; .
The nature of banks' work
Banks are characterized by the nature of their business associated with the use of retail funds for trading, and the following information about the most important of these works :
- The bank's role in preserving the funds of individuals; therefore, it must maintain its own level of confidence; it must abide by the return of the rights to the owners. It also includes all the guarantees required from individuals when they receive loans from the bank; From the recovery of money provided in the form of loans, because it is a special money for individuals and institutions of depositors.
- Liquidity: Saving money to individuals when they need it, and is part of the bank's financial deposits. This explains the main reason for the need for liquidity in the bank so that it can provide sufficient cash for customer withdrawals.
- Profitability: This is the sum of the previous two transactions. Care for liquidity is a guarantee of profitability. As the bank's profits increase, its ability to extend loans increases, thus contributing to credit to customers and covering banking operations.
See also
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