Banking

• Commercial bank- is a financial institution that accepts demand deposits and makes commercial loan, as well as offering the widest array of services of any financial institutions
• traditional commercial -which is the usual institution with tellers, safe deposit boxes, vaults and ATMs
• merging nontraditional commercial bank- those that do not have physical branches and requires all customers to complete transaction by phone or internet
• Emerging nontraditional commercial bank- generally pay higher interest rates on investment and deposits and charge lower fees
• Creating money- Absence of loan, the producer cannot engage in further production because of a lack of funds
• Creating money- Money is created when the notes are used to buy goods and services
• Safe deposit box


  A vault available to customers on a rental basis where the owner places securities, deeds, insurance policies, or personal items that are valuable only to him
• Safe deposit box


  • Only the customer is allowed to open the box
  • Access to the box is controlled by the bank
• Safekeeping- bank requires the bank to take custody of the valuable and act as agent for customer, when valuable security like a Bond is placed under the care of the bank, the principal and interest will be collected by the bank upon maturity
• Brokerage services


  Commercial banks provide these services, making them more economical and convenient for clients due to the banks' nationwide coverage
• commercial banks are

  primary source of credit. This function enables them to render an important service to society
• Commercial bank- can facilitate payment in the currency required
• Forms of deposits

  • currency
  • checks issued by banks
  • Items for collection from banks
  • proceeds of loans
  • Traveler's check
  • drafts
  • promissory notes
  • Money order
• Types of deposits

  • Deposits as to source
  • *Private deposit are private individuals and businesses
  • *Public deposits are government whether national or local
  • Deposits as to the way they are created
  • * direct or primary deposits
  • * derivative or secondary deposits
• Director primary deposits- are those received by banks from a wide variety of sources
• Direct primary deposits

  1. households which deposit their paychecks and other receipts in checking accounts
  2. business which deposit their sales receipts, income from investment and other funs in demands accounts
  3. National and local governments which deposit tax collections and income from fees, fines, sale of securities.
• Direct deposits


  they are deposited directly over the counter by the depositors, also referred to as primary deposits because they arise at the discretion of the bank's customers
• Direct deposits do not increase in circulation
• Deposits as to Method of withdrawal

  • checkable deposits
  • Nontransaction deposits
• Checkable deposits  are accounts that allow the deposit holder to write checks or to execute other orders to pay on demand. These accounts are also called demand deposits because they are withdrawable on demand and they are also called current accounts because simultaneous deposits and withdrawals can be made on the account.
• Non-transaction deposits-  are those that cannot be withdrawn on demand or by checks, but the interest rates usually higher than those on checkable deposits
• Non-transaction deposits

  • Savings deposits
  • time deposits
• Saving deposit is a thrift account bearing a fixed interest rate but no specific maturity. Savings deposits bears lowest interest rate but permits the depositor to withdraw at will
• Time deposit is one that usually carried a fixed maturity and a stipulated interest rate but may be of any denomination, maturity, and yield agreed upon by the bank and depositors
• Types of commercial loans

  1. Real estate loans
  2. Financial institution loans
  3. agricultural loans
  4. commercial and industrial loans
  5. loans to individuals
  6. miscellaneous loans
• Real estate loans- those which are secured by real properties like land buildings and other structures are called real estate loans and have maturities of 10 to 30 years
• Real estate loans

  • Residential real estate loans
  • *these loans are granted for the purpose of constructing residential buildings
  • land development and construction loans
  • *loans for land development are granted to developers for the construction of streets, sewers and other building residential units for resale
• construction loans are those granted to contractors of buildings

  • Financial institution loans
  • *These are credits granted to banks, insurance companies, finance companies, credit unions, pensions funds companies
  • Agricultural loans
  • * These loans are those extended to producers of agricultural crops including fishery products
  • Commercial and industrial loans
  • * These loans are granted to business firms. business loans may be short-term and long-term
• Types of short-term business loans

  • Self-liquidating inventory loans
  • Working capital loans
  • Interim construction financing
  • Security dealer financing
  • Receivable financing
  • Asset based financing
• Self-liquidating inventory loans


  Used to finance the purchase of Inventory consisting of raw materials or finished goods
• Working capital loans


  Covers seasonal peaks in the production and credit needs of business
• Interim construction financing

  Finance the funding needs of builders before they can secure a long term mortgage loan for the construction, such loans provide funds needed to hire workers, rent or lease construction equipment, construction materials and land development
• Security dealer financing

  Finance the short term fund requirements of securities dealers specifically the purchase of new securities and the carrying of existing securities held until they are sold
• Receivable financing


  Finance the installment sales made by retailers usually in products like automobiles, appliances, and furniture
• Asset based financing


  Loan secured by the short term assets of firm that are expected to be converted into cash
• Long term asset business loans


  Loans designed to finance long and medium-term business investment, such as the purchase of equipment or the construction of physical facilities
• Term loans


  Designed to finance long and medium-term business investment, such as the purchase of equipment or the construction of physical facilities
• Revolving credit line


  A credit arrangement where a business customer is allowed to borrow up to a prespecified limit, replay all or only a portion of the loan, and reborrow as necessary until credit line expires
• Long term project loan


  Loans used to finance the construction of fixed assets designed to generate income in the future
• Loans to support the acquisition of other firms


  Finance mergers and acquisitions of business