Banking and Finance - An Introduction
Finance and Banking refer to the financial science that studies the financial dynamics, interest, banking systems and markets. Finance is an integral part of the economic system as it offers the needed liquidity in the form of assets or currency needed for businesses and individuals to invest in the financial market for the future growth. Financial markets include stock markets, exchange markets, government bond markets and derivatives. All these play crucial role in financial markets.
As financial markets are interdependent one upon the other, banks provide valuable service in both arenas by providing monetary and fiscal assistance to their customers. They also participate actively in the economic activities of the country by providing financial support. Banks provide various types of services to their customers such as commercial banking, investment banking, cash management, asset management, mortgage, equities and commodity trading. It also plays a significant role in determining the macroeconomic performance of a country.
The term BANKRUPTCY is generally applied to describe the financial services provided by banks. The various types of banking are savings, commercial banking, investment banking, deposit banking, mortgage banking, payor banking etc. Banking basically means creating financial products such as loans, securities, commodities, commodity markets etc. for carrying out financial transactions and meet the monetary requirements of individuals, enterprises, organizations and governments. This is done by borrowing from banks and other lending institutions, creating various forms of financial products and offering banking services. It is the major source of the finance for both private individuals and Governments.
In order to offer financial services, banks need capital. They seek this from borrowers either through secured or unsecured options. The capital thus obtained is used to purchase assets such as debentures and securities, creating loans and purchasing financial products such as bills, bonds, equity stocks, derivatives, foreign currency and mortgage debt. These assets are then used to create new financial products, which the banks sell to earn interest and earn profits.
Financial institutions offer banking and all other financial services through banks. Apart from that, they also hire traders and advisers, who manage their day to day transactions. Financial experts at banks also provide counseling services to help the company improve its profit margins. There are many banks in the UK, which are major players in the financial market in the UK.
The role of a bank in the finance industry is increasingly growing each year. The increasing competition among banks has made it possible for them to provide better services and offer better products. In addition, as a result of increasing trade and commerce, finance has become an important sector in the economy of almost all countries. Therefore, banking and finance have become an indispensable part of a country's economy. Various types of banks exist in the UK, which include the building societies, the Building society and the Savings and loans.
Another type of bank is the public banking system, which is formed by a government or a monopoly of banks. In this system, all the commercial banks in the UK form a public institution, which provides various banking and finance products. The main function of public banking is to guarantee financial instruments such as deposits and savings, and provide housing finance.
Private lending companies form the other important grouping of banks in the UK. The main function of these companies is to provide low-risk financing to small businesses, companies and individuals. They do this by offering credit facilities, which are subordinate to the property market and available to the borrower only after he or she has established a credit rating. Private lending companies compete with the traditional financial institutions for credit. A number of non-bank finance companies have also started entering the banking and finance market, as more people prefer to finance their businesses through these companies.