What is bank?

A bank is a financial intermediary that accepts deposits and channels those deposits into lending
activities, either directly or through capital markets. A bank connects customers with capital
deficits to customers with capital surpluses.
for e.g standerd charter,united bank limited,habib bank limited,M.C.B

Banking is generally a highly regulated industry, and government restrictions on financial

activities by banks have varied over time and location. The current set of global bank capital
standards are called Basel II. In some countries such as Germany, banks have historically owned
major stakes in industrial corporations while in other countries such as the United States banks
are prohibited from owning non-financial companies. In Japan, banks are usually the nexus of a
cross-share holding entity known as the keiretsu. In Iceland banks had very light regulation prior
to the 2008 collapse.

The oldest bank still in existence is Monte dei Paschi di Siena, headquartered in Siena, Italy,
which has been operating continuously since 1472

What Is The Importance Of The Banks?

Banks play very important role in the economic life of the nation. The
health of the economy is closely related to the soundness of its
banking system. Although banks create no new wealth but their
borrowing, lending and related activities facilitate the process of
production, distribution, exchange and consumption of wealth. In this
way they become very effective partners in the process of economic
development. Today modern banks are very useful for the utilization
of the resources of the country. The banks are mobilizing the savings
of the people for the investment purposes. If there would be no banks
then a great portion of a capital of the country would remain idle.
A bank as a matter of fact is just like a heart in the economic structure
and the Capital provided by it is like blood in it. As long as blood is in
circulation the organs will remain sound and healthy. If the blood is
not supplied to any organ then that part would become useless, so if
the finance is not provided to Agricultural sector or industrial sector, it
will be destroyed. Loan facility provided by banks works as an
incentive to the producer to increase the production. Many difficulties
in the international payments have been over come and volume of
transactions has been increased. Cheques, drafts bills of exchange
and letters of credit are very important instruments of the banks. The
banks collect these instruments drawn on banks in other cities or
countries and proceeds according to the accounts of the customer's
concerns.Banladesh another example where micro finance a new
sector emerged and held its ground beautifully plus gave such a
boost to economy that changed live and standard of living over
there.Yes pioneer Muhammad yunas played a big role in developing
and making it a success but yet it was banks which helped
bangladesh to bring poverty level down.Be it developed economies or
underdeveloped banks play vital role.Modern banks are playing lots
of new roles and making life of common consumer as well as
business men easy.

The Beginning of Banking System

The idea of banking began as long ago as 1,800 BC in Babylon. In

those days moneylenders made loans to people. In Greece and
Rome banks made loans and accepted deposits. They also changed
money.
In the Bible Jesus famously drove the money changers out of the
temple in Jerusalem.However with the collapse of the Roman Empire
trade slumped and banking temporarily ended. However it began to
revive again in the 12th and 13th centuries in the Italian towns of
Florence and Genoa.In the 16th century a German family called the
Fuggers from Augsburg became very important bankers.

The Growth of Banking in Britain

In England banking developed in the 17th century. Sometimes people

deposited their money with goldsmiths for safety. The goldsmiths
issued a note promising to pay the bearer a certain sum on demand.
In time people began to exchange these notes instead of coins
because it was easier and safer. Goldsmiths began to lend the
money deposited with them in return for a high rate of interest. They
also paid interest to people who deposited money in order to attract
their savings.However not only individuals borrowed money.
Governments also needed to borrow, especially in wartime. The
government borrowed money from wealthy individuals and later
repaid them with interest from taxation.Meanwhile the Bank of
Scotland was founded in 1695. A group of financiers joined together
to provide the money required to set up the bank and loan the
government A £1.2 million (a massive sum in those days). In return
the bank received 8% interest on the loan and the right to issue
notes. The Bank of England was also allowed to lend money and to
buy and sell gold.The Bank of England is sometimes called the 'Old
Lady of Threadneedle Street'. In fact it moved to Threadneedle Street
in 1734. However banking crises are nothing new. In 1793, in 1814-
1816 and in 1825 there were 'runs' on banks when people lost
confidence and tried to withdraw their money. The result each time
was a wave of bank failures.In 1826 the law was changed to allow
large banks with many shareholders to form outside London. Many of
the small country banks merged with the large banks.In 1833
banknotes issued by the Bank of England were made legal tender,
they must be accepted as payment for a debt

Modern Banking

Modern banking began with the Bank Charter Act of 1844. The Act
split the Bank of England (which was still legally a private bank) into
two departments -a banking department and an issuing department.
From then on the Bank of England could only issue notes if they were
backed up by gold or government securities.The Bank Charter Act
also forbade new banks to issue bank notes. When banks merged
they lost the right to issue bank notes. So gradually the Bank of
England became the only bank in England that could issue notes. At
the end of the 19th century and in the 20th century many banks
merged until in the late 20th century banking was dominated by the
'big four', Barclays, Lloyds, Midland and National Westminster.
Meanwhile in the 19th century the use of cheques for drawing money
and settling accounts became much more common.In 1946 the Bank
of England was finally nationalised.Also in 1946 the International
Bank for Reconstruction and Development (otherwise known as the
World Bank) was formed.

Definitions
By Professor Crowhter
"Establishment authorized by a government to accept deposits, pay
interest, clear checks, make loans, act as an intermediary in financial
transactions, and provide other financial services to its customers".
2- "A financial institution that is licensed to deal with money and its
substitutes by accepting time and demand deposits, making loans,
and investing in securities. The bank generates profits from the
difference in the interest rates charged and paid."

Types of banks

1) Commercial banks
2) Retail banks
3) Investment banks
4) Central banks

Commercial banks
Commercial banks handle banking needs for large and small
businesses, including:

* Basic accounts such as savings and checking

* Lending money for real and capital purchases
* Lines of credit
* Letters of credit
* Lockbox services
* Payment and transaction processing
* Foreign exchange
Commercial banks often function as retail banks as well, serving
individuals along with businesses. Businesses have unique needs
that consumers don’t have. For example, some businesses need a
commercial bank that can accommodate a large volume of credit card
payments and cash deposits.

Retail banks

A retail bank is a bank that works with consumers, otherwise known

as 'retail customers'.Retail banks provide basic banking services to
the general public, including:

* Checking and savings accounts

* CDs
 * Safe deposit boxes
* Mortgages and second mortgages
* Auto loans
* Unsecured and revolving loans such as credit cards

Retail banks are the banks you most often see in cities on crowded
intersections, the ones you probably use for your personal checking
account. In addition to helping consumers, retail banks often serve
businesses as well - so they can also serve as commercial banks.

Investment banks
Investment banks help organizations use investment markets. For
example, when a company wants to raise money by issuing stocks or
bonds, an investment bank helps them through the process.
Investment banks also consult on mergers and acquisitions, among
other things.Investment banks primarily work in the investment
markets and do not take customer deposits. However, some large
investment banks also serve as commercial banks or retail banks.

* Checking accounts
* Stocks and bound issuig

Central banks
A central bank is an organization responsible for managing banking
activity. Within the USA the central bank is the Federal Reserve, or
'the Fed'. Other countries have central banks as well. Their roles are
similar, but they may have different objectives.

The central bank has three primary goals:

* Conduct monetary policy

* Supervise and regulate financial firms
* Provide financial services

Banking Functions
* Selecting the Bank Accounts
 * Checking
* Deposits
* Reconciling The Bank Accounts
* Advancing loans

Difference between banks and credit unions

Most people never notice the differences between credit unions and
banks. The first question comes in mind, Owns a Who Credit Union?
If all the customers own the credit union, then who has time to run the
place? Credit unions actually have the same types of personnel as
banks. Upper management consists of a board of directors who
makes decisions on credit union operations. This board is composed
of elected volunteers. They don’t do it for pay – rather, they’re credit
union members who want a say in how the place is run.

Who Can be a Credit Union Member?

So, what does it take to be a member of a credit union? It depends on

the credit union. Credit unions simply have to limit their offerings to
people who have a common bond. This bond may be the geographic
community, a workplace, a religion, or other type of bond.Credit
unions cannot simply offer their services to anybody who has a pulse.
Instead, they are limited to working with those who share the
common bond. If a credit union fails to limit membership in this way,
they risk losing their status as a credit union.Once you join a credit
union, you may be able to use branches of different credit unions
around the country with CU Service Centers.

What Products do Credit Unions Offer?

In its simplest form, a credit union gets money from its customers and
loans that money out to other customers.Credit unions will typically
offer the same products and services as larger banks. However,
some credit unions will choose not to offer every product and service
out there. The reason is that these credit unions do not do the same
amount of volume that larger banks do. Banks can afford to have
“loss-leaders” or products that get customers in the door. Credit
unions will more likely only offer the products and services that a
large portion of the membership is likely to use.

Is Your Money Safe at a Credit Union?

Credit union deposits are insured very much like your bank deposits.
The organization that insures the two types of institutions is different.
However, the quality of insurance is the same in my mind - backed by
the full faith and credit of the US government.

Banks in Pakistan
In Pakistan, the banking system play an important role in the
development of Pakistan. They have a greater impact on the
economy.

* ABN AMRO Pakistan

* Askari Commercial Bank Ltd.
* Bank Alfalah
* Habib Bank Limited
* National Bank of Pakistan
* Soneri Bank Ltd
* Bank Al Habib Limited
* The Bank of Khyber
* Allied Bank Limited
* Bank of Punjab
* Faysal Bank
* First Women Bank Limited
* United Bank Limited Pakistan
* Industrial Development Bank of Pakistan
* PICIC Commercial
* NIB Bank
* SaudiPak Bank
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