Money Management
What is Banking?
A bank is a company that works with the
money that people give it. If you give your
money to a bank, it not only protects it
but pays you interest so that it can work
with the money. This is one of the reasons
why people save their money in a bank.
Money may also be safer there than at home.
What is Banking?
Interest is the extra money that you must
pay back when you borrow money.
Interest rate is the percentage that banks
give to savers when they leave their money
in a bank. It is also the rate they charge
customers for borrowing money
Types of Banks
• Investment Banks
• Commercial Banks
• Development Banks
• Central Banks
• Online Banks
• Savings and Loans
Types of Banks Continued
• Investment Banks
• Help organizations and large companies
raise money on the international
financial markets
• Commercial Banks
• Most important banks
• Services Include Accounts and loans
• Open to businesses and general public
Types of Banks Continued
• Development Banks
• Help Third World Countries
• Send Aid Workers
• Offer Technical Help
• Central Banks
• Manage a countries banking system
• Examples: The Federal Reserve,
European Central Bank, Bank of
England
Types of Banks Continued
• Online Banks
• Provide Higher Interest Rates
• Do not have overhead and fees of Brick
and Mortar Banks
• Savings and Loans
• Specialize in financing Houses
History
•
The Central Bank of The
United States is named
the Federal Reserve
The European Central
Bank is responsible for
the distribution and
value of the Euro
•
•
•
More Commonly known
as The Fed
The worlds largest banks
are located in Europe,
USA, Japan
History
Italy was the center of
banking during the middle
Ages. Jewish traders
emerge as the first bankers
and became very successful.
The Medici family
dominated Florence for over
two centuries. They set up
Europe’s largest bank in the
15th century.
Basel Accord
A set of agreements set by the Basel Committee
on Bank Supervision (BCBS), which provides
recommendations on banking regulations in
regards to capital risk, market risk and
operational risk. The purpose of the accords is to
ensure that financial institutions have enough
capital on account to meet obligations and absorb
unexpected losses.
Accord I
The first Basel Accord, known as Basel I, was
issued in 1988 and focuses on the capital
adequacy of financial institutions. The capital
adequacy risk, (the risk that a financial institution
will be hurt by an unexpected loss), categorizes
the assets of financial institution into five risk
categories (0%, 10%, 20%, 50%, 100%). Banks
that operate internationally are required to have a
risk weight of 8% or less.
Accord II
The second Basel Accord, known as Basel II, is to
be fully implemented by 2015. It focuses on three
main areas, including minimum capital
requirements, supervisory review and market
discipline, which are known as the three pillars.
The focus of this accord is to strengthen
international banking requirements as well as to
supervise and enforce these requirements .
Great Depression
In 1929 the first world wide
banking crises began.
During, The Great
Depression many people
lost their jobs, savings, and
homes. Many banks went
out of business or became
bankrupt. Many depositors
rushed banks in an attempt
to withdraw their money.
FDR
In 1933 Franklin D.
Roosevelt signed a
bill in which the
government
guaranteed the
savings of depositors
if the bank went out
of business
Today
The 2008 banking crisis hit in
America first and the spread
throughout the world. Banks
gave home owners mortgages
without checking the financial
back grounds. Housing prices
dropped and banks began to
loss money.