Banks are one of the oldest institutions in society, they offer different financial services , they work with the money of the people who deposit it, with which they make loans in a process known as financial intermediation.

Banks are fundamental in the economy and their role in progress is vital, as evidenced by ancient Babylonian records of loans, however, already in biblical and Abrahamic times where they were known as tables, as in Spanish, it was the the back of the stores where the business was probably conducted or managed.

What is the purpose of banks?

With the passage of time the functions of banks have become more complex, however, it is still important to channel capital, issue loans, open an account and offer financial services. It is worth noting that on many occasions to qualify for a certain loan, the bank must first verify your interest and if you are suitable for said loan.

At first, the objective of the banks was to save the wealth of the wealthy with this money, they began to make loans between these same people and thus the banking entities arose that at first were collectors and merchants and not institutions as such.

What the banks stand for?

As we mentioned before, banks have had to diversify their functions over time to stay in business, however, deposits continue to be one of their main functions along with loans, although today they have had to modernize with the internet, with transfers and transactions that can be made remotely and even through a smart phone.

Some of the tasks performed in a bank are:

Banks serve to channel savings

This occurs through the capture of money from its clients, who are in a certain way rewarded for preferring a certain bank. In this way, when a person has more money than he needs, the bank offers to keep it in exchange for a small profit.

The bank allows you to keep the money insured

Through the centuries this has been one of the main functions of the band, to keep the money of its clients safe, for this they have sophisticated security systems, to guarantee that the money does not end up in the wrong hands or is stolen.

The bank makes loans and credits

Banks give credits to their clients, who later must return the money with some interest and it is precisely the profit that the bank obtains, this is fundamental in any society in the world since thanks to this the economy moves, such as at the time of open a new business, buy a car or a house.

Other functions of banks

As we have seen, banks are important to efficiently manage our finances, since through them we receive payment of the salary when we work for a certain company, today even services such as the telephone, electricity or water bill are managed through payments or online bank transfers.

Bank transfers

Transfers are an essential part of the services offered by banks and consist of sending a certain amount of money to the account of a beneficiary, for this service, as for many others, the bank usually applies a small fee to pay for said transaction, However, when the account is within the same entity, that is, in the same bank, it is called a transfer and there are no charges.

Banks facilitate currency exchange

This is another function of banks, this service consists of the exchange or sale of foreign currency. Each entity will set an exchange rate and this is done frequently when a person does business online, especially today where globalization has led us to be more connected and trade is more common worldwide.

What are savings accounts and what are they for?

This is a key point in the tasks and benefits that banking entities can bring you, since apart from the loans which we already mentioned, through them you can also save and make your money grow.

  • Savings accounts are accounts in which you have the money in sight and with which you can manage it through a debit card.
  • They are used to earn interest during the time that these funds are not used.
  • Through debit notes, funds can be withdrawn when necessary.

Saving money differs from investing, since in an investment you use an amount of money with the risk of receiving a profit in return or not. In this sense, saving is very different and banks have different services in which you can put your money as the fixed term.

What services does an investment bank offer?

In the world of finance there is often talk of risking to win and exactly this happens in the world of investing. It is necessary to risk a large investment if you are looking for high profitability, while if you prefer to play it safe, the profitability will be lower.

  • There are what are called fixed income investment products and those are variable income. Variable income products refer to shares that are sold on the stock market, in which their value is unknown at the time of purchase and the promissory notes, bonds and debts are part of the fixed income.

What are financing services?

This is the service of banks related to loans. We mention that loans is one of the functions of a bank, they are a fixed amount of money, which you receive on the condition of returning it in a certain period of time paying a certain amount of interest.

The most prominent of these services offered by banks are mortgage loans, which are those that are intended to acquire or reform a property. Another characteristic of mortgage loans is that the property itself is used as a guarantee of payment.

There are also personal loans or consumer loans, these can have a variety of purposes, from vacations to the acquisition of a vehicle. They are usually reserved for the clients of a specific entity and are often difficult to obtain and their interest payable is usually high.

Types of banks

Banks can be defined according to the origin of the capital with which I work, in which case public, private or mixed banks are divided.

Public banking

They are the banks that work with public funds, generally through the government, they are basically state-owned companies and can operate at the national level or even at the international level.

Private banking

It is the type of bank that functions as an intermediary between companies, people and even the state. These banks work with their own money, unlike public banks that work with state money and mixed banks are those banks or financial intensities that have both types of capital, that is, they work with private money and with state money.

What is the central bank?

It is the authority on monetary matters in most countries. They execute the monetary policies of the country, generally they are public entities and in most modern societies autonomous entities and independent of the government of that country.

Role of the central bank

They are responsible for maintaining price stability through the management of interest rates, they are also responsible for preserving the monetary value. The central bank also functions as the bank of all the others, so another of its functions is related to maintaining the stability of the financial system.

  • Gold reserves are kept and managed at the central bank.
  • They provide the money that corresponds to the legal tender.

National and international banks

A national bank refers to the fact that its autonomy is only within the country, although previously it was referred to as a national bank to what is now known as the central bank. On the other hand, international banks are those that operate outside the country’s own borders.

Disadvantages of banks

Despite the fact that banks bring broad advantages to the social system and keep society moving, it is worth noting that over time banks have been seen as cold heartless entities that were in charge of favoring a privileged social sector at the expense from the work of others, who were exploited and forced to pay high interest rates, often ending up losing their homes and properties.

On the other hand, throughout history they have been the target of robberies and are subject to accidents such as the stock market crash in 2009, for this reason today many people prefer to put their money in virtual currencies or cryptocurrencies and this is where there is a clash between the traditional economy and the future of the economy.

Samantha Robson
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Dr. Samantha Robson ( CRN: 0510146-5) is a nutritionist and website content reviewer related to her area of ​​expertise. With a postgraduate degree in Nutrition from The University of Arizona, she is a specialist in Sports Nutrition from Oxford University and is also a member of the International Society of Sports Nutrition.

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