Banking Essay, Research Paper
Typical commercial bank organization. ?* Shareholders?* Board of Directors?*Chairman of the Board?* President?* Specific officer positions,
divisions, and departments.
Customers must feel confident. Some banks are organized as bank holding companies. The BHC owns the stock of the bank or banks and is under the
jurisdiction of the Federal Reserve. Some BHC?s will enter into banking-related activities such as brokerage or insurance services. A bank holding company can own
banks in more than one state, thus facilitating interstate banking. It can be one bank or many banks.
The three functions of banking? Deposit function ?*Most common type of demand deposit is the checking account. M1 which is defined as coin and
currency in circulation, demand deposits at banks(with some exceptions), traveler?s checks, and funds withdraw able on demand at other financial institutions. M1 is
the most widely quoted money supply figure because it reflects funds that are immediately available for spending.– the Payments function ?*coin and currency,
checks and electronic funds transfer ? The Credit Function?* Loans, credit
1791-1811 was the first bank of the U.S.
1811-1816 bank failures start to increase.
1816-1836 congress tries to create the second bank of U.S.
1836-1863 chaos in the banking system
1863 National bank act formed and ratified
1913 Federal reserve act
1929 Stock market crashed
1933 Glass-Steagall act
1934 securities Exchange act
1935 went in to effect
1980 depository institutions deregulation and monetary control act of 1980
1982 Garn – ST Germain Act
1991 FDICIA (FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT)
1992 know your customer guidelines.
National Bank was created to instill public confidence in banks. National banks were privately owned but were chartered?authorized to conduct banking business-by
the federal government. Nationally charter banks have strict requirements
National Bank Act?1. Created national banks 2. created the office of he comptroller of the currency (its function was and still is to charter, examine, and issue
regulations governing national banks.) 3. Introduced the national banknote, and 4. Established a system of required reserves.
Creation of the Federal Reserve System- regulates money and credit supples. The purpose was to redress the flawed check collection system, the
inflexible currency, and the pyramided reserves.
Board of Governors consists of seven members appointed by the president of the United states and confirmed by the Senate. 14 year terms Board
responsibilities are- Supervise the operations of the Federal Reserve System? Set reserve requirements? Approve discount rates set by the 12 Reserve banks? appoint
three of the nine directors of each Reserve bank? approve the presidents of the Reserve banks? Direct the supervision and regulation of member banks and bank
holing companies? examine the operations of the Reserve banks? Represent the Federal Reserve System in its relations with the president and Congress
Functions of the Federal Reserve banks. Propose discount rates? Hold reserve balances of depository institutions? lend at the discount rate to member
banks? furnish currency? Collect and clear checks? Transfer funds for depository institutions? handle U.S. government debit and credit balances.
Federal Reserve services? Coin and currency? check clearing and collection? wire transfer? automated clearing house? settlement? securities
Deposit function is the traditional banking function of accepting funds of credit to checking, savings, and other types of deposit accounts and, in the case
of checks, converting them into usable, available funds.
Items deposited are coin and currency, checks, drafts, traveler?s checks, money orders, bonds, bond coupons, interbank transfers, foreign currency,
foreign items, checks drawn on other banks, negotiable notes, drafts with documents attached, and all sorts of other items into their accounts. A Hold is a restriction
on the payment of all or part of the balance in an account.
Authority to Open accounts the bank must establish the identity of the person opening the account, determine that the person has the legal capacity to
open the account, and ensure that the person is authorized to open the account
Public funds Accounts is use to describe all relationships opened for any department, agency, authority, or other component of any federal, state, of local
government or political subdivision.
Cashier?s check is issued by a national bank and drawn on that bank: the bank is both the drawer and the drawee. A treasurer?s check is issued by a
state bank and drawn on that bank. Certified check is a check for which funds have been set aside by the bank on which it is drawn.
Special endorsement is when only a certain person can negoitate the check. Restrictive endorsement the payee or the holder of the insrument, in addition
to signinghis or her name, identifies the purpose of the transfer and restricts the use to which the instrument can be put.