Banking Services, Regulations, and Central Banks

Posted on Jan 13, 2025 in Business Administration and Management (BAM)

Banking Services

Banks offer a wide range of services, including:

  • They are involved with transferring funds from savers to borrowers and in paying for goods and services.
  • They act as financial intermediaries.
  • They act as general financial service providers.
  • They are involved in checking accounts and savings plans.
  • They provide loans for business, consumers, and governments.
  • They provide security trading, underwriting, insurance protection, financial planning, and the management of pension plans.
  • They provide advice for merging companies and numerous innovative services. Many retailing and industrial companies have stepped forward in recent decades to offer loans, credit cards, savings plans, and other traditional banking services.
  • Banks are demanding relief from traditional rules and lobbying for expanded authority to reach into new markets all around the globe.

Bank Regulators

Comptroller of the Currency (OCC)

  • The OCC assures the need for and charters new national banks.
  • It regularly examines those institutions. These examinations vary in frequency and intensity with the bank’s financial condition.
  • The OCC will examine every national bank at least once every 12-18 months.
  • The OCC’s office must approve all applications for the establishment of new branch offices by national banks and any merger where national banks are involved.
  • The OCC controls a national bank that is insolvent or in danger of imposing substantial loss on its depositors.

Federal Reserve System

  • It serves the banking industry as a lender of last resort, providing loans to financial institutions.
  • It helps to stabilize the financial markets in order to preserve public confidence.
  • The Fed was also created to provide important services to the banking industry, that is, the establishment of a nationwide network to clear and collect checks.
  • Its important job is to control money and credit conditions to promote economic stability.

Federal Deposit Insurance Corporation (FDIC)

  • It was created to guarantee the public’s deposits up to a stipulated maximum amount.
  • It has helped to reduce the number of potential bank runs significantly, though it has not prevented bank failures.
  • Each insured bank is required to pay the FDIC system an insurance premium based upon its volume of insurance-eligible deposits and its risks.

Central Banking System

  • The principal role of a central bank is to carry out monetary policy, which involves making sure the supply and cost of money and credit from the system contribute to the nation’s economic goals.
  • One of the most important financial institutions in any economy is the central bank.
  • Some of the world’s best-known central banks are as follows: the Fed, the ECB, and the Bank of Japan, which carry an image of great financial power and prestige.
  • The central bank of the US is called the Federal Reserve System.
  • The nations belonging to the new European Union also have a central bank called the European Central Bank.

European Central Bank (ECB)

In January 1999, 11 member nations of the European Union launched a new monetary system based on a single currency, the euro, one monetary policy, and a single central bank, which is the ECB.

  • It takes the leadership to control inflationary forces to promote a better European economy and also helps to stabilize the value of the euro in international markets.
  • The main goal is to maintain price stability.
  • The principal policy tools of the ECB to help achieve greater price stability are open market operations and reserve requirements.