What is banking?(write full 1 page)
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Answer:
Banking is an industry that handles cash, credit, and other financial transactions. Banks provide a safe place to store extra cash and credit. They offer savings accounts, certificates of deposit, and checking accounts. Banks use these deposits to make loans. These loans include home mortgages, business loans, and car loans.
Banking is one of the key drivers of the U.S. economy. Why? It provides the liquidity needed for families and businesses to invest for the future. Bank loans and credit mean families don't have to save up before going to college or buying a house. Companies use loans to start hiring immediately to build for future demand and expansion.
How It Works
Banks are a safe place to deposit excess cash. The Federal Deposit Insurance Corporation (FDIC) insures them. Banks also pay savers interest rates or a small percent of the deposit.
Banks can turn every one of those saved dollars into $10. They are only required to keep 10 percent of each deposit on hand. That regulation is called the reserve requirement. Banks lend the other 90 percent out. They make money by charging higher interest rates on their loans than they pay for deposits.
Types of Banks
Commercial banks provide services to private individuals and to businesses. Retail banking provides credit, deposit, and money management to individuals and families.
Community banks are smaller than commercial banks. They concentrate on the local market. They provide more personalized service and build relationships with their customers.
Step-by-step explanation:
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Step-by-step explanation:
Banking is an industry that handles cash, credit, and other financial transactions. Banks provide a safe place to store extra cash and credit. They offer savings accounts, certificates of deposit, and checking accounts. Banks use these deposits to make loans. These loans include home mortgages, business loans, and car loans.
Banking is one of the key drivers of the U.S. economy. Why? It provides the liquidity needed for families and businesses to invest for the future. Bank loans and credit mean families don't have to save up before going to college or buying a house. Companies use loans to start hiring immediately to build for future demand and expansion.
How It Works
Banks are a safe place to deposit excess cash. The Federal Deposit Insurance Corporation (FDIC) insures them. Banks also pay savers interest rates or a small percent of the deposit.
Banks can turn every one of those saved dollars into $10. They are only required to keep 10 percent of each deposit on hand. That regulation is called the reserve requirement. Banks lend the other 90 percent out. They make money by charging higher interest rates on their loans than they pay for deposits.
Types of Banks
Commercial banks provide services to private individuals and to businesses. Retail banking provides credit, deposit, and money management to individuals and families.
Community banks are smaller than commercial banks. They concentrate on the local market. They provide more personalized service and build relationships with their customers.
Internet banking provides these services via the world wide web. The sector is also called also called E-banking, online banking, and net banking. Most other banks now offer online services. There are many online-only banks. Since they have no branches, they can pass cost savings onto the consumer. Some of the best are Ally Bank, ING, Synchrony, and Discover.
How Banking Has Changed
Between 1980 and 2000, the banking business doubled. If you count all the assets and the securities they created, it would be almost as large as the entire U.S. gross domestic product. During that time, the profitability of banking grew even faster. Banking represented 13 percent of all corporate profits during the late 1970s. By 2007, it represented 30 percent of all profits.
The largest banks grew the fastest. From 1990 to 1999, the 10 largest banks' share of all bank assets increased from 26 to 45 percent. Their share of deposits also grew during that period, from 17 to 34 percent. The two largest banks did the best. Citigroup assets rose from $700 billion in 1998 to $2.2 trillion in 2007. It had $1.1 trillion in off-balance sheet assets. Bank of America grew from $570 billion to $1.7 trillion during that same period.
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