A bank is a commercial or state institution that provides financial services, including

issuing money in form of coins, banknotes or debit cards, receiving deposits of money,
lending money and processing transactions. A commercial bank accepts deposits from
customers and in turn makes loans based on those deposits. Some banks (called Banks of
issue) issue banknotes as legal tender. Many banks offer ancillary financial services to
make additional profit; for example: selling insurance products, investment products or
stock broking. Most banks also rent safe deposit boxes in their vault.

BRD-SG in Iaşi - A small branch dedicated to retail services

Currently in most jurisdictions commercial banks are regulated and require permission to
operate. Operational authority is granted by bank regulatory authorities and provide rights
to conduct the most fundamental banking services such as accepting deposits and making
loans. A commercial bank is usually defined as an institution that both accepts deposits
and makes loans; there are also financial institutions that provide selected banking
services without meeting the legal definition of a bank (see banking institutions).

Banks have a long history, and have influenced economies and politics for centuries. In
history, the primary purpose of a bank was to provide liquidity to trading companies.
Banks advanced funds to allow businesses to purchase inventory, and collected those
funds back with interest when the goods were sold. For centuries, the banking industry
only dealt with businesses, not consumers. Commercial lending today is a very intense
activity, with banks carefully analysing the financial condition of its business clients to
determine the level of risk in each loan transaction. Banking services have expanded to
include services directed at individuals and risk in these much smaller transactions are
pooled.

A bank generates a profit from the differential between what level of interest it pays for
deposits and other sources of funds, and what level of interest it charges in its lending
activities. This difference is referred to as the spread between the cost of funds and the
loan interest rate. Historically, profitability from lending activities has been cyclic and
dependent on the needs and strengths of loan customers. In recent history, investors have
demanded a more stable revenue stream and banks have therefore placed more emphasis
on transaction fees, primarily loan fees but also including service charges on array of
deposit activities and ancillary services (international banking, foreign exchange,
insurance, investments, wire transfers, etc.). However, lending activities still provide the
bulk of a commercial bank's income.

The name bank derives from the Italian word banco, desk, used during the Renaissance
by Florentines bankers, who used to make their transactions above a desk covered by a
green tablecloth.[citation needed

Contents
[hide]

• 1 Services typically offered by banks

• 2 Types of banks
o 2.1 Types of retail banks
o 2.2 Types of investment banks
o 2.3 Both combined
o 2.4 Other types of banks
 2.4.1 Islamic Banking
• 3 Banks in the economy
o 3.1 Role in the money supply
o 3.2 Size of global banking industry
o 3.3 Bank crisis
• 4 Regulation
• 5 Public perceptions of banks
• 6 Profitability
• 7 Bank size information
o 7.1 Top ten banking groups in the world ranked by Shareholder equity
($m)
o 7.2 Top ten banking groups in the world ranked by assets
o 7.3 Top ten banks in the world ranked by market capitalisation
o 7.4 Top ten bank holding companies in the world ranked by profit
o 7.5 Top ten banking groups in the world ranked by Tier 1 capital
• 8 History of banking
• 9 See also
o 9.1 Country specific information
o 9.2 Types of institution
o 9.3 Terms and concepts
o 9.4 Related lists
• 10 External links

• 11 Notes

[edit] Services typically offered by banks

Although the basic type of services offered by a bank depends upon the type of bank and
the country, services provided usually include:

• Taking deposits from their customers and issuing current (UK) or checking (US)
accounts and savings accounts to individuals and businesses
• Extending loans to individuals and businesses
• Cashing cheques
• Facilitating money transactions such as wire transfers and cashiers checks
• Issuing credit cards, ATM cards, and debit cards
• Storing valuables, particularly in a safe deposit box
• Cashing and distributing bank rolls
• Consumer & commercial financial advisory services
• Pension & retirement planning

Financial transactions can be performed through many different channels:

• A branch, banking centre or financial centre is a retail location where a bank or

financial institution offers a wide array of face to face service to its customers

• ATM is a computerised telecommunications device that provides a financial

institution's customers a method of financial transactions in a public space without
the need for a human clerk or bank teller

• Mail is part of the postal system which itself is a system wherein written
documents typically enclosed in envelopes, and also small packages containing
other matter, are delivered to destinations around the world

• Telephone banking is a service provided by a financial institution which allows its

customers to perform transactions over the telephone

• Online banking is a term used for performing transactions, payments etc. over the
Internet through a bank, credit union or building society's secure website

[edit] Types of banks

Banks' activities can be divided into retail banking, dealing directly with individuals and
small businesses; business banking, providing services to mid-market business; corporate
banking, directed at large business entities; and investment banking, relating to activities
on the financial markets. Most banks are profit-making, private enterprises. However,
some are owned by government, or are non-profits.

Central banks are non-commercial bodies or government agencies often charged with
controlling interest rates and money supply across the whole economy. They generally
provide liquidity to the banking system and act as Lender of last resort in event of a
crisis.
[edit] Types of retail banks

• Commercial bank: the term used for a normal bank to distinguish it from an
investment bank. After the Great Depression, the U.S. Congress required that
banks only engage in banking activities, whereas investment banks were limited
to capital market activities. Since the two no longer have to be under separate
ownership, some use the term "commercial bank" to refer to a bank or a division
of a bank that mostly deals with deposits and loans from corporations or large
businesses.
• Community Banks: locally operated financial institutions that empower
employees to make local decisions to serve their customers and the partners
• Community development banks: regulated banks that provide financial services
and credit to underserved markets or populations.
• Postal savings banks: savings banks associated with national postal systems.
• Private banks: manage the assets of high net worth individuals.
• Offshore banks: banks located in jurisdictions with low taxation and regulation.
Many offshore banks are essentially private banks.
• Savings bank: in Europe, savings banks take their roots in the 19th or sometimes
even 18th century. Their original objective was to provide easily accessible
savings products to all strata of the population. In some countries, savings banks
were created on public initiative, while in others socially committed individuals
created foundations to put in place the necessary infrastructure. Nowadays,
European savings banks have kept their focus on retail banking: payments,
savings products, credits and insurances for individuals or small and medium-
sized enterprises. Apart from this retail focus, they also differ from commercial
banks by their broadly decentralised distribution network, providing local and
regional outreach and by their socially responsible approach to business and
society.

• Building societies and Landesbanks: conduct retail banking.

• Ethical banks: banks that prioritize the transparency of all operations and make
only social-responsible investments.

[edit] Types of investment banks

• Investment banks "underwrite" (guarantee the sale of) stock and bond issues,
trade for their own accounts, make markets, and advise corporations on capital
markets activities such as mergers and acquisitions.
• Merchant banks were traditionally banks which engaged in trade financing. The
modern definition, however, refers to banks which provide capital to firms in the
form of shares rather than loans. Unlike Venture capital firms, they tend not to
invest in new companies.

[edit] Both combined

 • Universal banks, more commonly known as a financial services company, engage
in several of these activities. For example, First Bank (a very large bank) is
involved in commercial and retail lending, and its subsidiaries in tax-havens offer
offshore banking services to customers in other countries. Other large financial
institutions are similarly diversified and engage in multiple activities. In Europe
and Asia, big banks are very diversified groups that, among other services, also
distribute insurance, hence the term bancassurance is the term used to describe the
sale of insurance products in a bank. The word is a combination of "banque or
bank" and "assurance" signifying that both banking and insurance are provided by
the same corporate entity.

[edit] Other types of banks

[edit] Islamic Banking

• Islamic banks adhere to the concepts of Islamic law. Islamic banking revolves
around several well established concepts which are based on Islamic canons.
Since the concept of interest is forbidden in Islam, all banking activities must
avoid interest. Instead of interest, the bank earns profit (mark-up) and fees on
financing facilities that it extends to the customers. Also, deposit makers earn a
share of the bank’s profit as opposed to a predetermined interest.[citation needed]

[edit] Banks in the economy

[edit] Role in the money supply

A bank raises funds by attracting deposits, borrowing money in the inter-bank market, or
issuing financial instruments in the money market or a capital market. The bank then
lends out most of these funds to borrowers.

However, it would not be prudent for a bank to lend out all of its balance sheet. It must
keep a certain proportion of its funds in reserve so that it can repay depositors who
withdraw their deposits. Bank reserves are typically kept in the form of a deposit with a
central bank. This behaviour is called fractional-reserve banking and it is a central issue
of monetary policy. Note that under Basel I (and the new round of Basel II), banks no
longer keep deposits with central banks, but must maintain defined capital ratios.[citation
needed]

[edit] Size of global banking industry

Worldwide assets of the largest 1,000 banks grew 15.5% in 2005 to reach a record $60.5
trillion. This follows a 19.3% increase in the previous year. EU banks held the largest
share, 50% at the end of 2005, up from 38% a decade earlier. The growth in Europe’s
share was mostly at the expense of Japanese banks whose share more than halved during
this period from 33% to 13%. The share of US banks also rose, from 10% to 14%. Most
of the remainder was from other Asian and European countries.[citation needed]

The US had by far the most banks (7,540 at end-2005) and branches (75,000) in the
world. The large number of banks in the US is an indicator of its geography and
regulatory structure, resulting in a large number of small to medium sized institutions in
its banking system. Japan had 129 banks and 12,000 branches. In 2004, Germany,
France, and Italy had more than 30,000 branches each—more than double the 15,000
branches in the UK.[1]

[edit] Bank crisis

Banks are susceptible to many forms of risk which have triggered occasional systemic
crises. Risks include liquidity risk (the risk that many depositors will request withdrawals
beyond available funds), credit risk (the risk that those who owe money to the bank will
not repay), and interest rate risk (the risk that the bank will become unprofitable if rising
interest rates force it to pay relatively more on its deposits than it receives on its loans),
among others.

Banking crises have developed many times throughout history when one or more risks
materialize for a banking sector as a whole. Prominent examples include the U.S. Savings
and Loan crisis in 1980s and early 1990s, the Japanese banking crisis during the 1990s,
the bank run that occurred during the Great Depression, and the recent liquidation by the
central Bank of Nigeria, where about 25 banks were liquidated.[citation needed]

[edit] Regulation
Main article: Bank regulation

Bank regulations are a form of government regulation which subject banks to certain
requirements, restrictions and guidelines, aiming to uphold the soundness and integrity of
the financial system. The combination of the instability of banks as well as their
important facilitating role in the economy led to banking being thoroughly regulated. The
amount of capital a bank is required to hold is a function of the amount and quality of its
assets. Major banks are subject to the Basel Capital Accord promulgated by the Bank for
International Settlements. In addition, banks are usually required to purchase deposit
insurance to make sure smaller investors are not wiped out in the event of a bank failure.

Another reason banks are thoroughly regulated is that ultimately, no government can
allow the banking system to fail. There is almost always a lender of last resort—in the
event of a liquidity crisis (where short term obligations exceed short term assets) some
element of government will step in to lend banks enough money to avoid bankruptcy.

[edit] Public perceptions of banks

 The examples and perspective in this article or section may not represent a
worldwide view of the subject.
Please improve this article or discuss the issue on the talk page.

In United States history, the National Bank was a major political issue during the
presidency of Andrew Jackson. Jackson fought against the bank as a symbol of greed and
profit-mongering, antithetical to the democratic ideals of the United States.[citation needed]

Currently, many people consider that various banking policies take advantage of
customers. In Canada, for example, the New Democratic Party has called for the abolition
of user fees for automated teller transactions.[2] Other specific concerns are policies that
permit banks to hold deposited funds for several days, to apply withdrawals before
deposits or from greatest to least, which is most likely to cause the greatest overdraft, that
allow backdating funds transfers and fee assessments, and that authorize electronic funds
transfers despite an overdraft.[citation needed]

In response to the perceived greed and socially-irresponsible all-for-the-profit attitude of

banks, in the last few decades a new type of banks called ethical banks have emerged,
which only make social-responsible investments (for instance, no investment in the arms
industry) and are transparent in all its operations.

In the US, credit unions have also gained popularity as an alternative financial resource
for many consumers. Also, in various European countries, cooperative banks are
regularly gaining market share in retail banking.[citation needed]

[edit] Profitability
Large banks in the United States are some of the most profitable corporations, especially
relative to the small market shares they have. This amount is even higher if one counts
the credit divisions of companies like Ford, which are responsible for a large proportion
of those companies' profits.[citation needed]

In the past 10 years in the United States, banks have taken many measures to ensure that
they remain profitable while responding to ever-changing market conditions. First, this
includes the Gramm-Leach-Bliley Act, which allows banks again to merge with
investment and insurance houses. Merging banking, investment, and insurance functions
allows traditional banks to respond to increasing consumer demands for "one-stop
shopping" by enabling cross-selling of products (which, the banks hope, will also
increase profitability). Second, they have expanded the use of risk-based pricing from
business lending to consumer lending, which means charging higher interest rates to
those customers that are considered to be a higher credit risk and thus increased chance of
default on loans. This helps to offset the losses from bad loans, lowers the price of loans
to those who have better credit histories, and offers credit products to high risk customers
who would otherwise been denied credit. Third, they have sought to increase the methods
of payment processing available to the general public and business clients. These
products include debit cards, pre-paid cards, smart-cards, and credit cards. These
products make it easier for consumers to conveniently make transactions and smooth
their consumption over time (in some countries with under-developed financial systems,
it is still common to deal strictly in cash, including carrying suitcases filled with cash to
purchase a home). However, with convenience there is also increased risk that consumers
will mis-manage their financial resources and accumulate excessive debt. Banks make
money from card products through interest payments and fees charged to consumers and
transaction fees to companies that accept the cards.

The banking industry's main obstacles to increasing profits are existing regulatory
burdens, new government regulation, and increasing competition from non-traditional
financial institutions.

[edit] Bank size information

[edit] Top ten banking groups in the world ranked by Shareholder equity
($m)

The 2006 bank atlas was compiled from commercial banks’ annual reports and financial
statements for 2006 and 2005.[3] Figures in U.S. dollars

Country Company Shareholder equity ($m)

United States Citigroup 112537 $mln

United States JPMorgan Chase 107211 $mln

United States Bank of America 101224 $mln

United Kingdom HSBC 98226 $mln

Japan Mitsubishi UFJ Financial Group 83281 $mln

France Credit Agricole Group 65137 $mln

United Kingdom Royal Bank of Scotland Group 64453 $mln

[edit] Top ten banking groups in the world ranked by assets

Figures in U.S. dollars, and as at end-2004[4]

Rank Country Company Assets (US $)

1 Switzerland UBS 1,533 billion

2 United States Citigroup 1,484 billion

3 Japan Mizuho Financial Group 1,296 billion

4 United Kingdom HSBC Holdings 1,277 billion

5 France Credit Agricole Group 1,243 billion

6 France BNP Paribas 1,234 billion

7 United States JPMorgan Chase & Co. 1,157 billion

8 Germany Deutsche Bank 1,144 billion

9 United Kingdom Royal Bank of Scotland 1,119 billion

10 United States Bank of America 1,110 billion

[edit] Top ten banks in the world ranked by market capitalisation

Figures in U.S. dollars, and as at 26 July 2006[5]

Rank Country Company Market Capitalisation (US $)

1 United States Citigroup 275 billion

2 China ICBC 250 billion

3 United States Bank of America 230 billion

4 United Kingdom HSBC 200 billion

5 United States JPMorgan Chase 150 billion

6 Japan Mitsubishi UFJ 145 billion

7 Italy Unicredit 130 billion (2007)

8 United States Wells Fargo 120 billion

9 Switzerland UBS 110 billion

10 United Kingdom Royal Bank of Scotland 100 billion

As at 16 May 2007, following the January 2007 merger between Banca Intesa and
Sanpaolo SPA, Italy's newly formed Intesa Sanpoalo has a market cap of $104.7 billion.

[edit] Top ten bank holding companies in the world ranked by profit

Figures in U.S. dollars, and as 2006

Rank Country Company Profit (US $)

1 United States Citigroup 22.13 billion

2 United States Bank of America 21.13 billion

3 United Kingdom HSBC 14.55 billion

4 United States JP Morgan Chase 14.44 billion

5 United Kingdom Royal Bank of Scotland 12.1 billion

6 Switzerland UBS 9.79 billion

7 United States Goldman Sachs 9.34 billion

8 United States Wells Fargo 8.48 billion

9 United States Wachovia 7.79 billion

10 United States Morgan Stanley 7.45 billion

[edit] Top ten banking groups in the world ranked by Tier 1 capital

Figures in U.S. dollars, and as at end-2005[6]

Rank Country Company Tier 1 Capital (US $)

1 United Kingdom HSBC 79 billion

2 United States Citigroup 75 billion

3 United States Bank of America 73 billion

4 United States JP Morgan Chase 72 billion

5 Japan Mitsubishi UFJ Financial Group 64 billion

6 France Credit Agricole Group 60 billion

7 United Kingdom Royal Bank of Scotland 48 billion

8 Japan Sumitomo Mitsui Financial Group 40 billion

9 Japan Mizuho Financial Group 39 billion

10 Spain Santander Central Hispano 38 billion

[edit] History of banking

Main article: History of banking

• Florentine banking — The Medicis and Pittis among others

• Banknotes — Introduction of paper money
• Bank of Amsterdam
• Bank of Sweden — The rise of the national banks
• Bank of England — The evolution of modern central banking policies
• Bank of America — The invention of centralized check and payment processing
technology
• Swiss bank
• United States Banking
• History of Money and Banking in the United States by Murray N. Rothbard.

Full text (510 pages) in pdf formatPDF (1.22 MiB)

• Imperial Bank of Persia — History of banking in the Middle-East

• For Thomas Aquinas' discussion of usury, see Thought of Thomas Aquinas Part I
[edit] See also
[edit] Country specific information

• Banking in Canada
• Banking in the United States
• Banks of the United Kingdom
• List of bank mergers in United States
• Banking in Switzerland
• Australian banks
• Banking in India
• Banking in Russia

[edit] Types of institution

• Article XII New York Investment Company

• Cooperative bank
• Corporate central credit union
• Credit union
• Edge/Agreement Corporation
• Industrial Loan Company
• Mutual savings bank
• Nondeposit trust company
• Savings and loan association
• Savings bank
• Ethical bank
• Islamic Banking
• Bankers' bank
• Mortgage bank

[edit] Terms and concepts

• Bank regulation
• Bank robbery
• Finance
• IBAN
• Internet banking
• Mobile Banking
• Money
• Overdraft
• Overdraft Protection
• Piggy Bank
• SWIFT
• Venture capital
• Wire transfer
 • Pigmy Deposit Scheme

[edit] Related lists

• List of banks
• list of finance topics
• list of accounting topics
• list of economics topics
• Guide to E-payments
• List of stock exchanges

[edit] External links

• FDIC bank market share data
• Euromoney: The world's largest banks (2006). The world’s largest 250 banks,
ranked by shareholder equity. Annual guide to leading banks across the globe by
market capitalization, plus other key statistics, including the largest banks in
every region.
• Tiwari, Rajnish and Buse, Stephan (2006): The German Banking Sector:
Competition, Consolidation and ContentmentPDF (43.5 KiB), Hamburg University
of Technology (TU Hamburg-Harburg)
• Brunner, A., Decressin, J. / Hardy, D. / Kudela, B. (2004): Germany’s Three-
Pillar Banking System – Cross-Country Perspectives in Europe, Occasional
Paper, International Monetary Fund, Washington DC 2004.
• Rothbard, Murray N. / Richardson & Snyder. 1983. The Mystery of Banking Full
177-page text in pdf formatPDF (2.67 MiB).
• http://www.bankana.com Directory listing of US banks by State, County, and City
and also list type of service provided, map and driving directions to each office.
• http://www.banks.com.au An independant reviewer of the Australian banking
sector.

[edit] Notes

Wikimedia Commons has media related to:

Banks

Look up bank, banking in Wiktionary, the free dictionary.

1. ^
http://www.ifsl.org.uk/uploads/CBS_Banking_200
6.pdfPDF chart 28, page 15

2. ^ New Democratic Party (2007-01-25).

NDP proposes an end to ATM fees. Retrieved on
2007-05-23. “The NDP thinks hard working
Canadians should not be charged by banks when
they deposit, withdraw or transfer their own money
using an ATM”

3. ^ http://www.euromoney.com/page.asp?
PageID=2050 Euromoney, Bank atlas: The world's
biggest banks. List of the world's ten largest banks
by Shareholder equity, 2006

4. ^
http://www.economist.com/surveys/displaystory.cf
m?story_id=6908408 The Economist, Thinking
big, List of the world's ten largest banks by assets
in 2004

5. ^
http://www.economist.com/displayStory.cfm?
story_id=7226067 The Economist, On Citi's tail,
List of the world's biggest banks, by market
capitalisation, as at 26 June 2006

6. ^
http://www.economist.com/markets/indicators/displ
aystory.cfm?story_id=7141354 The Economist,
The world's biggest banks, List of the world's ten
largest banks by Tier 1 capital at the end of 2005