A bank is known as a financial intermediary that accepts deposits and directs those deposits into lending activities either through capital markets or directly. A bank directly connects customers with capital deficits to customers that have capital surpluses.
Banking is generally categorized as a highly regulated industry. Government restrictions regarding financial activities by banks have changed over timer and location. Basel II is the current set of the global bank capital standards. In some other countries like Germany, banks have historically owned principal and major stakes in many industrial corporations. In the United States, US banks are prohibited from owning non-financial companies. Banks in Japan are known to be the nexus of “keiretsu” or a cross-share holding entity.
So far, the oldest bank that is ever known and is still in existence is the Monte dei Paschi di Siena. This bank is situated Siena, Italy and never stopped its operation since 1472.
Banks are already in existence during the ancient times. Letters of credit were first issued some time in the year 300 AD. These letters were sent in the Persian Sassanid Empire and they are known asakks. Akks system is otherwise known as the check system and was generally used by the Muslim traders since the days of Harun al-Rashid of the Abbasid Caliphate during the 9th century. During those times, a Muslim trader could cash an early form of the check in China which is drawn on Baghdad sources. This was a tradition that was strengthened during the 13th and 14th centuries, during the reign of the Mongolian Empire. Checks were also used in the land of Egypt during the 12th century. The fragments that were found also shows the dates and the name of the issuer were also evident on those fragments which were found in Cairo Geniza. The earliest state deposit bank is known as the Banco di San Giorgio or Bank of Saint George and was founded at Genoa, Italy in 1407. Tracing the modern way of banking is evident during the medieval and early Renaissance period of Italy. Modern banking also took place during those times in the rich places like Genoa, Venice, and Florence.
Presently, banks do not only offer the check system as a form of payment. Other systems are now allowed by banks as a means of payment like EFTPOS, telegraphic transfer, and ATM.
Banks borrow money by accepting current account deposits and they lend money by making advances to their customers on current accounts, by investing in marketable debt securities, by making installment loans, and other types of money lending.
Here are more of the commercial roles of a bank
* Issue bank notes
* Process payments
* Issue bank drafts and checks
* Accepts money on term deposit
* Lending money
* Provides documentary and standby letters
* Safekeeping of documents
* Currency exchange
* Acts as a “financial supermarket.”