2003. 09. 12.

jegyzetek.hu

NYV0011E

Krlek ne felejtsd el, hogy az anyagban elfordulhatnak hibk, trgyi tvedsek. Ha ilyet talltl, krlek jelezd neknk.
J tanulst kvn a jegyzetek.hu csapata!

Banking system
The banking system means all the banks of a country and the relation between them. There are
2 main banking system types in the world:

One-tier banking system: there is only one main bank, the central bank, which is in contact
with the businesses and the public, and is the only bank, which exercises the functions of a
bank.
(Central) Bank

Public and Businesses

Public and Businesses

Public and Businesses

Public and Businesses

Two-tier banking system: there are commercial banks and a Central Bank as well. The
Central Bank is on the top of the hierarchy, and is only exercising the functions of a central
bank. There are two main models of the two-tier banking system: the Anglo-Saxon (From the
big number of commercial banks a Central Bank has been elected) and the American (there
were a lot of commercial banks, and a system of Central Banks has been established FED
to supervise the commercial banks. The New York FED Bank is the most important one)

Central Bank
Commercial Banks

Commercial Banks

Public and Businesses Public and Businesses

Commercial Banks
Public and Businesses

Commercial Banks
Public and Businesses

In case of a two-tier banking system the Central Bank is politically, economically and financialpolitically independent. Its functions are:

Ensure the stability of the domestic currency

To pursue its own, independent policy

Emission of bank notes

To raise monetary reserves (gold, foreign exchange, securities), and to handle them

To be the governments bank

To be the bank of the banks

To be the lender of the last resort (if commercial banks run out of money the CB lends them
money but at higher interest rates)

http://www.jegyzetek.hu/

2003. 09. 12.

jegyzetek.hu

NYV0011E

Krlek ne felejtsd el, hogy az anyagban elfordulhatnak hibk, trgyi tvedsek. Ha ilyet talltl, krlek jelezd neknk.
J tanulst kvn a jegyzetek.hu csapata!

Banking in Britain
In Great-Britain there is a two-tier bank system. The Central Bank is known as The Bank or
The Old Lady of Threadneedle Street. The chief of The Bank is called the Governor (So
saying the chairman of The Bank is X.Y does not make any sense!!!).
In Britain there are a lot of types of bank:

Discount houses

Clearing banks

Trustee Saving Bank (TSB)

State banks

Acceptance house activities

Issuing house activities

Capital market activities

Foreign banks

Finance houses

Building societies

Merchant banks

Banking in the USA

In the USA there is a two-tier bank system as well, but there are a lot of National Banks,
because the USA is consist of 50 states. There are 12 Federal Reserve Districts. Each district has its
own National Bank, which are all required to belong to the Federal Reserve System (FRS)
established in 1913. Together they form the central banking authority under the control of the Federal
Reserve Board (FED) in Washington. The president of the FED is known as the Chairman (So saying
the president of the FED is X.Y. does not make any sense either!!!).
Credit unions and investment banks are special US banks.

Banking in Hungary
In Hungary the two-tier system was established in 1987. Till then Hungary had a one-tier
system and so did the other socialist countries. However, there were some other banks with special
functions:

Investment Bank: set up in 1948 to finance state investments. In 1992 its name was changed
to State Development Bank.

Pesti Magyar Kereskedelmi Bank: set up in 1948 to manage foreign payments. In 1950 the
activities were taken over by the Hungarian Foreign Trade Bank.

National Savings Bank: established in 1949 to be the domestic household bank.

Hungarian Credit Bank: set up in 1985 to be a subsidiary for the Central Bank (Magyar
Nemzeti Bank)

In the late 80s there were some other banks set up, which enhanced competition: CentralEuropean International Bank, Citibank Budapest,

http://www.jegyzetek.hu/

2003. 09. 12.

jegyzetek.hu

NYV0011E

Krlek ne felejtsd el, hogy az anyagban elfordulhatnak hibk, trgyi tvedsek. Ha ilyet talltl, krlek jelezd neknk.
J tanulst kvn a jegyzetek.hu csapata!

These were the most important things about the banking system. Your examiners might ask you
some other questions about money, functions of money, money supply, monetary policy or functioning
of a bank, because these are terms, which are strongly related to banking!
An explanation: in English the term bank means not only a bank, but a financial institute as
well.

http://www.jegyzetek.hu/