UNIT FIVE BANK ORGANIZATION

UNIT FIVE BANK ORGANIZATION

• 
  full-service philosophy
  
• 
  large scale service
  
• 
  deposits
  
• 
  payments
  
• 
  credits
  
• 
  monopolist
  
• 
  legal money
  
• 
  inflation
  
• 
  open market
  
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  primary market
  
• 
  secondary market
  

The way in which a bank is organized and operates is determined by its objectives and by the type of economy in which it conducts its business. A bank may not necessarily be in business to make a profit. Central banks, for example, provide a country with a number of services, while development banks exist to increase the economic growth of a country and raise the living standard of its population. On the other hand, the aim of commercial banks is to earn profits. They therefore provide and develop services that can be sold at a price that will yield a profit.

A commercial bank which provides the same range of services year after is less likely to be successful than one which assesses changes in the demand for its products and which try to match products to its customers’ needs. New services are constantly being introduced and developed by commercial banks, and the full-service philosophy of many banks means that they are akin to financial supermarkets, offering a wide variety of services. However, not every bank may want to offer every kind of financial service.

Many banks offer a combination of wholesale and retail banking. The former provides large-scale services to companies, government agencies and other banks. The latter mainly provides smaller-scale services to the general public. Both types of banking, however, have three essential functions, which are:

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  deposits
  
• 
  payments
  
• 
  credits
  

Several factors have combined to make banking and international business. These include the growth of multinational companies and of international capital markets, the increased competition between the banks themselves, and important improvement in communications and transportation. The major banks of the world have established extensive international operations by acquiring banks in other country, by expanding their own branch network abroad and by establishing correspondent relationship with foreign banks so as to develop profitable joint operations. The operations of these major commercial banks are dynamic and rapidly changing, and their organization is of a global nature.

Central banks are public owned. A country organizes its central bank as an independent system or as a government system. As a national monopolist in issuing legal money, the central bank is bankers’ bank that controls and that is the creditor of all financial institutions in a nation.

In the macroeconomic State control, the central bank is charged with the responsibility of carrying out the monetary policy in order to increase the output of the economy, create employs and control the inflation. In the pursuance of an active monetary policy, a central bank exerts its influence mainly by causing the amount of money supply to increase (called a loose policy) to reflate in the times of deflation or to diminish (called a tight policy) to desinflate in inflation.

On open markets, Central Bank regulates or participates in the regulating body of all Capital markets and Money markets in order to coordinate the monetary policy and guarantee the purchasing power of the domestic currency. Capital and money markets are the two aspects of a Finance market where money savers (or buyers) meet money borrowers (or sellers) through financial intermediaries.

In external economic relations, the Central Bank controls the circulation of foreign exchange by the ECR (Exchange Control Regulations) and operates foreign assistances and foreign investments by counterpart funds in order to keep sufficient reserves for the economy.

Investments bank and the capital markets

Investment banks are institutions that specialize in raising capital for industries and other organizations. In credit operations, they operate on medium and long term bases and do not accept short-term deposits from the public. They deal mainly with holding companies. Their main duties are: providing investment consultancy, underwriting new issues of stocks or corporate bonds and trading them on the primary markets, buying and selling securities on secondary markets as brokers.

A capital market is a centre for raising capital needed by governments, commercial or industrial concerns and other organizations. Transactions made between brokers and jobbers who deal as bull investors or bear investors at exchange markets are mostly speculation on future prices of commodity, foreign exchange or securities. Operating an exchange market is a group of brokers administered by a government-control board called a Commodity Exchange services, a Foreign Exchange services, or a Securities Exchange services. At these services they exchange certificates that secure the value of commodities, currencies, stocks and bonds that will be paid for some time in the future.

Commercial banks and the money markets

Commercial banks are financial intermediaries that deal direct with the public, take deposits and make loans from them, guarantee and transfer payments, hold valuables and trade precious metals… Commercial banks are now not merely deposit banks or retail banks, they also involve in investments and are Universal banks. In the world, they are organized as a branch-banking system (as in Europe, Vietnam) or as unit-banking system (introduced in USA)

By its transactions in holding valuables and deposits, commercial banks are the Treasures of businesses and organizations. By its transactions in credit operations and payment settlements, they create the large part of money for the economy. Commercial banks are very active in both money and capital markets.

Money markets are centers where short-term securities (credits of less than one-year term) are transacted. Operating in these markets , in addition to commercial banks, are borrowers and lenders who are industrial and commercial entrepreneurs as well as operators of non-deposit financial institutions ( such as credit unions, insurance companies, saving banks, pension funds,…) More and more, the pattern of money-capital combination market is seen everywhere in the world.

1. 
   Which way is a bank organized in? and how does it operate?
   
2. 
   What role does each type of bank play in economy?
   
3. 
   What does many banks offered?
   
4. 
   What are differences between wholesale banking and retail banking?
   
5. 
   What are factors to make banking an international business?
   
6. 
   What are main functions of Central bank?
   
7. 
   What are financial markets?
   
8. 
   What are main functions of Investment banks?
   
9. 
   What are capital markets?
   
10. 
    What are main functions of Commercial banks?
    
11. 
    What are money markets?
    

Read the text below and find the right word. Write a word from the box to fill each of the gaps.

bond gilts inflation portfolio preference prices securities

value convertible index lend price redeemable unit

Translate the following text into English paying special attention to standard use of terms and clarify of expression.

Điều chỉnh khối cung tiền tệ

Kinh tế dựa vào cách dùng tiền.Trên thị trường, tiền giấy NH chỉ là một số bách phân nhỏ của khối cung tiền tệ.Phần lớn tiền lại ở dạng bút tệ và không có giá trị thanh toán ngay, như các tài khoản NH và các loại hình đầu tư dài hạn.Do đó, một phương thức hữu hiệu NHTW dùng để kiểm soát nền kinh tế là làm tăng hay giảm khối tiền vay và vốn tiền gửi ngân hàng. Sau khi trích một khoản dự trữ số tiền ký thác, NH thương mại lại dùng số tiền đó để cho vay , và như vậy sẽ làm tăng khối cung tiền tệ.Do đó, khối tiền vay NH chỉ bị hạn chế bởi số tiền gửi vào và bởi khoản dự trữ do NHTW bắt buộc.NHTW dùng tỷ lệ dự trữ pháp định này để kiểm soát khối cung tiền tệ.

Để kiểm soát khối cung tiền tệ, còn một cách nữa là nâng hay hạ lãi suất.Các NH mượn tiền của NHTW để cho khách vay.Nếu NHTW quyết định thay đổi tỉ suất chiết khấu, lãi suất khắp nước cũng thay đổi theo.Lãi suất thấp khuyến khích đầu tư và chi tiêu, lãi suất cao làm giảm tiền vay và hạn chế chi tiêu trong kinh doanh.

Khối cung tiền tệ cũng có thể được điều chỉnh bằng công trái chính phủ.Bằng việc mua vào một khối lượng lớn trái phiếu, NHTW sẽ bơm thêm tiền để lưu thông trong kinh tế.Bằng việc bán ra các công trái, NHTW sẽ rút đi một số tiền khỏi sự lưu thông.