Banking Operations Lesson 1 Notes:
In the final, what went wrong in the Lebanese Bankin sector question will come.
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Banks give credit to households, individuals, small to medium sized firms, and government(
after studying and analyzing what they’ll be used for) because large corps issue bonds
15% of the money should be in reserve at the central bank.
You cannot lend more than 65% of your deposits in foreign currency.
In Lebanon, the biggest 10 banks held 85% of the cash. The first 5 held 70%. There are 50
banks in lebanon.
Usually, banks give short term credit.
There should be maturity matching between loans and deposits. (Time)
In Lebanon, there was 186 billion in deposits, but only 50 billion were lent out to businesses.
The rest went to the government.
The Lebanese government was paying 10% interest, they would give depositors 7% and keep
the rest for themselves. 50 - 60% of banks’ money was in the government fund. This was due
to greed.
Definition of bank: economic function (money supply, demand, financial intermediary, supply
liquidity, transfer funds from savers to borrowers), services to its customers (wire transfers,
account plan, cheques…), and legal basis for its existence.
Large companies are invading the banking sector in USA (Ford already has a finance sector
tat will give you a loan to buy a cart, in Walmart they provide a card for their services/
banking services). The banks asked the congress to work in insurance and securities trading.
Types of banks: in Lebanon: commercial banks, specialized banks (Islamic banks), investment
banks.
In USA: commercial banks, money center banks, community banks, saving banks, cooperative
banks (similar to credit unions), mortgage banks, investment banks.
Legal basis for banking, in Lebanon: chartered by central bank (license)
There shouldn’t be 50 banks in Lebanon, max 15 ideally.
In USA, federal reserve regulates banking sector.
Challenges for banking sector: change in financial system(payment services, debit/credit
card, online payments, risk protective services/derivatives, liquidity services, credit services,
concentration/ how much you can lend to one customer)
Leading competitors with banks (check book, or ppt)
Traditional services
New services (Leasing, selling insurance policies, making venture capital loans, selling and
managing retirement plans, offering risk management and hedging services…)
Key trends affecting banking industry: digital banks, service proliferation, rising competition
from other financial institutions , see more…