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Chapter One

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  1. Chapter One An Overview of Banks and the Financial-Services Sector

  2. What is a Bank? Economic functions it serves Services it offers to its customers Legal basis for its existence

  3. What is a bank today? Financial institutions that offer the widest range of financial services. Other financial service providers provide some of the services provided by a banks but not all of them within one institution.

  4. Powerful forces reshaping Banking and the financial services industry Bank and non-bank financial firms are declining in numbers, consolidating into fewer but also much larger companies Banks and other financial services companies are converging towards each other, each proliferating the number of services they offer

  5. Powerful forces reshaping Banking and the financial services industry The result is that the boundaries between banking, insurance companies, security firms finance companies and other financial services companies is narrowing Banks are becoming one stop financial service conglomerates due to competition and deregulation.

  6. The Different Kinds of Financial Service Firms Calling Themselves Banks Commercial Banks Savings Banks Cooperative Banks Mortgage Banks Community Banks Money Center Banks Investment Banks Merchant Banks International Banks Wholesale Banks Retail Banks Limited Purpose Banks Bankers’ Banks Minority Banks National Banks Insured Banks Member Banks Affiliated Banks Virtual Banks Fringe Banks Universal Banks

  7. The Financial Service Competitors of Banks Credit Unions Money Market Funds Mutual Funds (Investment Companies) Hedge Funds Security Brokers and Dealers Investment Banks Finance Companies Financial Holding Companies Life and Property-Casualty Insurance Companies

  8. Financial System in Bangladesh Formal Sector, Semi-Formal Sector, Informal Sector 8

  9. Financial System in Bangladesh Formal Sector: Banks, Non-Bank Financial Institutions (FIs), Insurance Companies, Brokerage Houses, Merchant Banks etc.; Micro Finance Institutions (MFIs). Semi-Formal Sector: House Building Finance Corporation (HBFC), Palli Karma Sahayak Foundation (PKSF), Samabay Bank, Grameen Bank etc., NGOs informal sector includes private intermediaries 9

  10. The Roles of Commercial Banks and Their Closest Competitors Intermediation Role Payment Role Guarantor Role Risk Management Role The Investment Banking Role Savings/Investment Advisor Role Safekeeping Agency Role

  11. Traditional Services Offered By Banks Principal or Primary Functions: Acceptance of Deposit Lending Investment

  12. Traditional Services Offered By Banks Subsidiary Functions: Collection and payment of Cheques Payment on behalf of Customers Purchase and sale of stocks Offering Trust Services Acting as agent Safekeeping of Valuables Carrying Out Currency Exchange Discounting Commercial Notes and Making Business Loans Acting as a source of agent Supporting Government Activities with Credit Providing remittance facilities

  13. More Recent Services Offered by Banks Granting Consumer Loans Providing Financial Advice Managing Cash (cash management) Offering Equipment Leasing Making Venture Capital Loans Selling Insurance Policies Selling Retirement Plans

  14. Offering Security Brokerage and Investment Banking Services Underwriting Securities Offering Mutual Funds and Annuities Offering Merchant Banking Services Offering Risk Management and Hedging Services

  15. Trends Affecting Banks and Other Financial Service Firms Today Service Proliferation Rising Competition Government Deregulation Increased Interest Rate Sensitivity Technological Change and Automation Consolidation and Geographic Expansion E-Banking and E-Commerce Convergence Globalization Consolidation Increased branches Fewer but larger banks