Chapter 25
Financial Institutions and
Banking Services
Banks as a Business
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Banks offer services to its customers
– Checking Accounts
– Savings Accounts
– Loans
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Bank charters
– Federal charter = National Bank
– State charter = State Bank
Two Types of Banks
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Deposit-Type Institutions
– Accept deposits for people and businesses to
use in the future.
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Nondeposit Institutions
– Do not accept deposits.
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FDIC – Federal Deposit Insurance Corp.
– Federal Agency that helps to regulate banks and
other financial institutions.
FDIC
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Protects depositor’s money in case the bank
or financial institution fails, as long as it is
regulated by the FDIC
– Insures all accounts under the same name at
each bank up to an amount of $100,000
– Government Agency, but receives it’s money
from the banks.
– Almost 99 percent of the banks are members of
the FDIC
Deposit-Type Banks
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Commercial Banks –
– Full-Service Banks
– Offer checking accounts, provide savings
accounts, make loans to individuals and
businesses, and other services
– In larger banks, these services may be broken
into different departments.
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Savings department
Trust department
Real Estate department
Investment department
Deposit Type Banks
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Savings and Loan Association –
– Normally, specialize in savings accounts and
making loans for home mortgages
– Presently, they are leaning more toward offering a
greater variety of services, so now they are
becoming savings banks.
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Mutual Savings Bank
– Provides a variety of services
 Savings accounts and to make loans to homebuyers
– Owned by its depositors
 The profits of a Mutual Savings Bank go to the depositor
Deposit-Type Banks
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Credit Unions
– User-Owned, Not-For-Profit, Cooperative Institution
– Normally its members have something in common with
one another.
– Services offered
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Savings deposits
Loans for a variety of purposes
Special Checking accounts
Credit Cards
Mortgages
Home Equity loans
Safe-Deposit Boxes
Investment services
Electronic banking services
Loans to small firms
Nondeposit Financial
Institutions

Life Insurance Companies
– provide financial security for dependants
– Through careful investing in new and existing
companies, life insurance companies can help
to expand business in our economy.
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Investment Companies
– Allow people to choose investment
opportunities for long-term growth of their
money.
Nondeposit Financial
Institutions

Consumer Finance Companies
– Specializes in making loans for long-lasting or
durable goods, such as cars and refrigerators,
and for financial emergencies.

Mortgage Companies
– Provide loans for purchasing a new home or
other real estate
Nondeposit Financial
Institutions

Check-Cashing Outlets
– May cash paychecks or obtain other financial
services.
– CCOs offer a wide variety of services such as
electronic tax filing, money orders, private
postal boxes, utility bill payment, and the sale
of bus and subway tokens.
Types of Financial Services

Accepting Deposits
 Transferring Funds
 Lending Money
 Storing Valuables
 Providing financial advice and investment
services
 Managing trusts
Accepting Deposits
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Safe storage of funds for future use is an
almost universal need.
 One of the main services offered by
financial institutions
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Interest –
– The amount that the bank pays its customers to
use their money.
Transferring Funds
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Money can easily be transferred from one
account to another through simply writing a
check
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Electronic Funds Transfer
– A system through which funds are moved
electronically from one account to another and
from one bank to another
Other EFT Services
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Point – of – Sale Transaction
– Debit Card – use at stores, gas stations, and or
restaurants to pay for purchases.
– Direct Deposit – your paycheck is
automatically deposited in your checking or
savings account.
– Home Banking – payments are made and loans
are obtained by customers using telephones and
computers.
Lending Money
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Many people, businesses, and governments
borrow money at some time.
– Individuals
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pay for car or to pay for college tuition
– Business
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Borrow money to build a new warehouse or to buy more
merchandise for resale
Banks want to make loans like this….
– Majority of their revenue is from the interest they
charge borrowers.
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Banks also issue Credit Cards (Visa and MasterCard)
Storing Valuables
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Safe-Deposit Boxes
– In the bank, an area where you can pay to store
your valuables.
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Jewelry
Bond and stock certificates
Birth records
List of insurance policies
will
Providing Financial Advice
and Investment Services
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Many banks can advise customers about
such things as whether it is wise to buy a
certain house, how to manage money better,
or how to exchange U.S. currency for
foreign currency.
Investments
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Are savings that are put to work to earn
more money.
– Money in a savings account is a type of
investment because the savings account earns
interest.
– Bonds are another form of investment which
customers can make from either the federal or
state government, businesses, or school
districts.
Managing Trusts
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Trust Companies
– Businesses that manage people’s money and property
for them.
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Normally used by young people and by elders.
– Young people who inherit money may not have the skill
and experience to invest wisely.
– Elder people who are ill may ask the trust department
of a bank to manage their money.
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The bank or company then invests the money and
keeps the customer informed with what is going
on with their money.
The Federal Reserve System
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Federal Reserve Bank – is a bank where
individuals cannot make deposits or open an
account at. Only other banks can do that. This is
a bank for banks, its relationship to other banks is
similar to that or your bank to you.
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Federal Reserve System – supervise and regulate
member banks in order to help the banks serve the
public efficiently.
Financial Institutions and
Economic Growth
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Bank Services are commonly used to:
– Build homes
– Start new businesses
– Plant crops
– Finance educations
– Buy goods
– Pave streets
– Build hospitals
– Buy new business equipment
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“Banking services are made possible
through the savings you and others deposit.
Deposits into banks to not sit idle in bank
vaults. They are put to work. When you
and others deposit money into a bank, you
are create jobs and economic growth that
benefit your community and society.”