Priority Banking

8/6/2019 Priority Banking

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PRIVILEGED BANKING

Privileged banking is relatively new in the Indian context. In this form of banking, the bankidentifies its privileged customers (often customers with deposits above 1 lakh-however this isdifferent for each individual bank) and some special benefits are provided to these first class

customers by the bank. Ex. They do not have to wait in the queue for transactions. They areassigned client relationship managers to take care of all their banking needs. These customerscan use banks premises for holding meetings, can access the Internet free of cost and severalother benefits are also provided. The basic purpose of this form of banking is to make theexperience of banking haslefree and less time consuming. This is not to be confused with wealthmanagement where the thrust is on providing first-class customers, customised services andexpert advice on various financial needs. This is generally carried out by the wealth managers ofthe bank. However privileged banking as part of its service offerings may include wealthmanagement.

Privileged banking

Here, in this section, get to know about privileged banking offerings by different leadingbanks in India.

The privileged banking is the relationship that arise strictly according to pecking order. Ifyou have the money, then the retail banks will waive all queues for banking transactions,offer financial management, freebies and better service. Once the deposits average of onetouches the "net relationship value" set by retail banks, the benefits of privileged bankingare available to the accountholder.

Privileged Account - Resident

We present to you Axis Bank - Privileged . A service that would ensure not only the highest level

of Privileged but also preferential treatment to selected customers like you.

Personalized Services

Relationship Team

You will enjoy access to Relationship Team who will be your point of contact at branch for all

your banking transactions thus ensuring that you would neither have to move from one

counter to the other nor stand in queues to await your turn.

Preferred recognition across branches

Complimentary three Zero Balance Privileged accounts in family relationshipPersonalized cheque book with unlimited at-par facilities*

Access to exclusive Premium Space , Premium Branches & Lounges *

Invitation to events

Annual Gifts


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Privileged Platinum Debit Card

y Complimentary Exclusive Platinum Debit Card

y Enhanced ATM Withdrawal limit ofRs. 1 lacs

y Higher Transaction limit (POS) limit ofRs.1.5 lacs

y Enhanced Personal Accident Insurance Cover ofRs. 5 lacs

y Exclusive benefits on Dining, Health, Personal Care ,Apparels, Jewellery ,Services & Travely Enhanced Lost Card liability Protection

y Accelerated Reward Points

y Zero Fuel Surcharge

y Complimentary access to Airport Lounges at select Domestic & International Airports in India

Convenience

y Complimentary Anywhere Banking*

y Privileged Processing of all requests

y Free Mobile Banking

y Free Internet Banking

y Monthly Mutual Fund Navigator and Market Reports

y Monthly e-statements

y Consolidated physical quarterly statements

y In house Quarterly lifestyle Magazine Privileged Pages

Preferential Pricing

y Complimentary Demat Account*

y Preferential lending solutions*

y Discounts On Travel Cardsy Preferential rates on Forex services*

y Gold Bars at preferential rates

Services on Privileged

y Virtual Relationship Manger

y Preferred recognition across all Axis Bank branches

y Separate queue at CPU for account opening

y Privileged at Call centre


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Eligibility Criteria (Individual)

Minimum Average Quarterly Balance in Savings Rs. 2 lakhs

Client with Term deposit Relationship Rs. 10 lakhs &

above

Client with Weighted deposits (Savings Account,Current Account,Term

Deposit) (AND/OR)

Investment in Mutal Fund & Life Insurance (with minimum Rs.50,000 in

Savings)

Rs. 5 lakhs &

above

Eligibility Criteria (Family)

Family of 4 with Total Weighted Deposits (Savings Account,Current

Account,Term Deposit)

Investment in Mutal Fund & Life Insurance (with minimum Rs. 1 lakh inSavings)

Rs.10 lakhs & above

Special Benefits to Privileged Salary Customers

Unlimited Chequebook facility

Unlimited DD/POComplete Waiver on annual charges for Privileged Platinum Debit Card

Complete Waiver on 1st year Annual Maintenance Charges on a Demat A/c and

50% off on Annual Maintenance Charges from 2nd Year onwards


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Definition

Another tier of banking services provided to customers who have been with the

institution for a long period of time or who conduct transactions that provide this type

of benefit. Privileged banking can include a number of various services, but some of

the popular ones include free checking, online bill pay, financial consultation and

information. Privileged banking may also be offered as a promotional offer for new

customers.

Definition

The providing of banking services to very wealthy individuals and families. Many

financial services firms require a person or family to have a certain minimum net worth

to qualify for private banking services.

Private Banking: Is It Worthwhile?September 25, 2006

If you have a large amount of money and feel that your current bank is not

looking after your needs, then perhaps it is time to look at the option of private

banking. If you are wealthy and unsure about what private banking involves,

then this guide can help you to understand more about the world of private

banking and whether or not it is worthwhile for you.

What is private banking?

Although private banking used to refer to an extremely personalised, almost

family like relationship with a bank, this is becoming rarer and rarer and is usually reserved for the super wealthy.

Private banking these days is more along the lines of investment management, and offers you expert advice and

services that your regular high street bank could not.

Who is eligible for private banking?

Although there is no set limit for the amount of money you need to use private banking, it really isnt worthwhile for

the everyday customer. Unless you have at least 50,000 in disposable money for spending and investment then

private banking is probably not for you. However, the actual amount you need to be eligible for private banking really

depends on the services you want and the company you want to use.


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What services are offered?

As well as the financial products that you can get from your normal bank, private banking can offer you expert advice

on investments and financial products. They can also help you to set up offshore accounts or easily transfer money

internationally. The benefits of private banking are that you usually have a bank manager assigned to you that you

can take to and get advise from when needed. Most transactions can be done over the phone, and there is no need

to queue in a branch in order to transfer money or pay bills.

Cost of private banking

Obviously, private banking is not something you can get for free. If you are using the banking company for a variety of

financial products or for investing large amounts of money, then the costs of the advice and assistance they give you

might be lower. However, if you use private banking as simply a means for advice and basic banking, then the fees

are likely to be a lot more. Basically, the more money you deposit and the more products you buy from the bank, the

cheaper the private banking services will be.

Is it really private?

Perhaps the biggest advantage of private banking is that all of your affairs remain private between you and your

designated bank manager. Other members of staff usually have to sign a non-disclosure agreement in order to work

for the company. Although private banks are sometimes criticised for their lack of transparency, there are many

genuine reasons why you might want your financial affairs kept private, not least for security reasons. Although

private banking is generally for those with a lot of money, if you think you need a higher level of service than your

current bank you should look at private banking options.

Advantages of Private Banking

With Private Banking, you'll develop a strong working relationship with your

Private Banker. Our Private Bankers draw upon a wealth of experience and

expertise in areas such as commercial lending, retail banking, mortgageconsulting and retirement plan administration, to name a few. So together, we

can help you define the services that fit your particular needs. Your Private

Banker will arrange timely, confidential and convenient access to a full range of

personal and commercial financial services to help you achieve your current and

long-term goals.

TD Banknorth's Private Banking will provide you with:

y === Banking simplicity. Your Private Banker is the one person who will serve as your point of

access to the wide spectrum of premier products and services we offer throughout the TDBanknorth financial services network. ===

y === Time savings. Your Private Banker will come to you. Whether your signature is required, or

you request an analysis of products and services, we will do whatever it takes to ensure your

convenience. In short, we'll make the bank operate on your schedule.===


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y === A powerful partnership. We'll work closely with you and your staff. We'll also work with

your attorney, accountant, insurance specialist and investment advisor to coordinate services.

We have an extensive array of in-house business partners at your disposal to provide their

expertise in these areas as necessary. ===

y === Access to special benefits. As a Private Banking client, you will also enjoy special benefits

such as exclusive rights to purchase tickets to events at the TD Banknorth Garden in Boston.===

Make a partnership with Private Banking part of your overall financial strategy.

Your priorities are our priorities

DISADVANTAGE OF PRIVATIZATION OF BANKS.

1.Surplus employees: The defect of the system is that some of the workers are

declared surplus. There is an increase in the rate of unemployment. The

unemployed workers commit crimes in this society.

2. No of branches in rural areas: The private bank owners do not like to setup

there branches in rural areas. The banking facilities remain confined to cities

where sufficient deposits are available. A large part of population will be

deprived of banking facilities.

3. Unbalanced growth: The management of privatized banks provides credit in

specific areas and people. As a result, there is unbalanced growth in the country;

especially rural areas may remains under developed where credit facilities do not

exist.

4. Jobs for relatives: The management of privatized banks may provide jobs to

their friends and relatives. The deserving persons are ignored.

5. Loans for few persons: The management of privatized bank can extend loans

of their favored persons. In this way only few persons are benefited.

6. Owners association: The aim of privatized banks is to earn profit. For these

purpose owners associations are made which enter into agreement of earning

high profit. The bank can increase the rate of service charges. Such associations

may not care for customer's welfare.


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Privileged banking Benefits

Privileged Pricing

As your financial partner, we offer you the best value on your banking requirements tailored by your Relationship

Manager.

Some of your pricing privileges include:

Special fee waivers and/or discounts on your routine banking transactions

Special pricing for your deposits and loans

Free international funds transfers between your accounts

Charge free overseas ATM cash withdrawals

Household Recognition

We know your family is your greatest asset, so we have made them our privileged . Its our way of ensuring a total

banking relationship for you.

Your household benefits include:

Complimentary Privileged banking membership for your spouse and children

Family access to Privileged banking Centers, teller counters and hotlines

Privileged pricing on routine banking transactions and services

Invitations to specially designed lifestyle events

Total Relationship Rewards

It is not only about making the right choice of your financial partner but also enjoying the fruits of a total bankingrelationship with us

Our exclusive and unique total banking rewards scheme allows you to earn points on:

Your card spends

Your bank deposits


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Your investments and

Your home loans with us

Your reward points can be accessed through the prestigious

Privileged banking Visa Infinite Card, which is key to unlocking these exclusive benefits from your relationship

with us

Exclusive Lifestyle Privileges

You are interested in more than just a financial relationship. So we have made it our privileged to extend special

privileges that match your status and lifestyle.

Your exclusive lifestyle privileges include:

Special premium offers from our carefully chosen partners

Invitations to previews and special lifestyle events

Please be advised that

- Eligibility criteria apply for membership to the Privileged banking program. Your admission to Privileged banking is

at our discretion.

- Not all products, benefits and services under Privileged banking may be available in all countries and are subject to

local regulations. We may vary or withdraw these services at any time.

- You can find out the current services available to you by contacting your Relationship Manager.

Privileged Debit CardThe Privileged banking Debit Card is an International Visa Debit card meant exclusively for Privileged

banking customers. It comes with a host of enhanced benefits, which include:

Free usage at all Visa ATMsThe Privileged banking debit card gives you free usage at all Visa ATMs in India, even at ATMs of

other banks.

Zero Fuel SurchargeOn using your Gold Debit Card for fuel purchases, you get a full waiver of fuel surcharge that would

be normally applicable otherwise.

Note :- Starting October 1, 2009, no reward points will be awarded on fuel purchases.


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Instant IdentificationThe aesthetically designed photo-signature debit card with the Privileged banking logo would identify

you as our Privileged banking customer at any of our branches across India where the service is

being offered. It would also help you avail of the various lifestyle privileges we offer from time to

time.

Higher Transaction LimitsEspecially for Privileged banking Debit cardholders, the daily ATM Cash Withdrawal Limit has been

enhanced to Rs 50,000 per day at all Axis Bank ATMs. The daily POS limit is Rs 1,75,000 at Merchant

Establishments, subject to the balances held in the account.

No Issuance ChargesNo issuance or annual charges for the primary holder of the Debit Card.

Free Add-on CardThe joint holder of the Privileged banking Debit Card also gets a free Privileged banking Debit Card.

For more than one card, there would be a nominal fee charged (as per tariff rates).

Enhanced Insurance Coverage*The Axis Bank Privileged Debit Card comes with special insurance features that protect you and your

loved ones.

Zero Lost Card Liability: As an Axis Bank Debit Card customer, you will be insured for risk of lossdue to fraudulent use of a lost or stolen or missing debit card. All you need to do is communicate theloss of your card by calling our 24-hour customer service number.

Purchase Protection:All consumer durable goods purchased using the debit card are insuredagainst fire, natural calamity, burglary and housebreaking upto 90 days from the date of purchase.You will be eligible for a combined lost card liability and purchase protection of upto Rs 2 lakh.

Personal Accident Cover of up to Rs 5,00,000: In the unfortunate event of loss of life in amishap, the customer's beneficiaries will receive the benefit of accident insurance of up to Rs 5 lakh.

[To keep your personal accident insurance cover activated, you should have made a purchasetransaction in 365 days prior to the day of the unfortunate incident and maintained an average

quarterly balance of Rs 5,000 (urban & metropolitan branches) or Rs 2,500 (rural & semi-urban

branches) as the case may be in the two quarters before the date of the incident. A report would also

have to be made to Axis Bank within 60 days of a personal accident or 30 days of loss of card]*

Exclusive OffersWe regularly tie up with leading restaurants, shopping establishments, hotels, resorts etc, to bring

you exclusive discounts and offers from time to time. These offers would be valid only when you

utilize your Privileged banking Debit Card to make the payments.

Rewards ProgramThe Privileged banking Debit Card Rewards Program will allow you to earn reward points on your total

POS spend at merchant outlets. The accumulated reward points can be redeemed for a selected gift

like gift coupons from leading retailers, restaurants, international brands, leather products, cosmetics

etc. You will earn 1 reward point for every Rs 100 of POS Usage on your Privileged banking Debit

Card. You can start redeeming after you have accumulated 200 reward points.


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Click here to view the Reward Points Catalogue.

24-Hour Emergency HelplineYou can call our Emergency Helpline for Card Blocking 91-22- 67987700. Our Customer Service

Executives will assist you.

Customer Service ContactTo access the Customer Services from anywhere in India, from a Landline or Cell phone please dial

any of our following 3 Toll Free Phone Banking Numbers:

1800 233 5577

1800 209 5577

1800 103 5577Note : It is mandatory to get the Axis Bank Debit Card registered to Verified by Visa /

MasterCard SecureCode in order to transact online. For more information on Verified by

Visa / MasterCard SecureCode Click here.

Urgent &Important - Starting February 1, 2010, a new set of charges will be applicable on the

usage of various Axis Bank Debit Card variants for domestic non-Axis Bank ATM cash withdrawal

transactions. For more information, click here.

Private BankingBankingservices offered to high net-worth individuals. Private banking services are largely related to

asset management; that is, a private banking institution assists the high net-worth individual in investing

his/hermoney in exchange forcommissions and fees. Private banking combines some of the services of

a brokerage with normal banking services. Importantly, high net-worth individuals have some investment

vehicles open to them that are prohibitively expensive for other investors, notably hedge funds. Some

private banks allow clients who invest $50,000 or more, but others require a minimum investment of$500,000.


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A bankis a financial intermediary and appears in several related basic forms:

y a central bank issues money on behalf of a government, and regulates the money supply

y a commercial bank accepts deposits and channels those deposits into lending activities, either

directly or through capital markets. A bank connects customers with capital deficits to

customers with capital surpluses on the world's open financial markets.

y a savings bank, also known as a building society in Britain is only allowed to borrow and save

from members of a financial cooperative

Banking is generally a highly regulated industry, and government restrictions on financialactivities by banks have varied over time and location. The current set of global bank capitalstandards are called Basel II. In some countries such as Germany, banks have historically ownedmajor stakes in industrial corporations while in other countries such as the United States banksare prohibited from owning non-financial companies. In Japan, banks are usually the nexus of across-share holding entity known as the keiretsu. In Iceland banks followed internationalstandards of regulation prior to the 2008 collapse.

The oldest bank still in existence is Monte dei Paschi di Siena, headquartered in Siena, Italy, andhas been operating continuously since 1472.[1]

History

Main article: History of banking

Banking in the modern sense of the word can be traced to medieval and early RenaissanceItaly,to the rich cities in the north like Florence, Venice and Genoa. The Bardi and Peruzzi familiesdominated banking in 14th century Florence, establishing branches in many other parts ofEurope.[2] Perhaps the most famous Italian bank was the Medici bank, set up by Giovanni Mediciin 1397.[3] The earliest known state deposit bank,Banco di San Giorgio (Bank of St. George),was founded in 1407 at Genoa, Italy.[4]

[edit] Origin of the word

The word bankwas borrowed in Middle English from Middle Frenchbanque, from Old Italian

banca, from Old High Germanbanc, bank"bench, counter". Benches were used as desks orexchange counters during the Renaissance by Florentine bankers, who used to make theirtransactions atop desks covered by green tablecloths.[5]

The earliest evidence of money-changing activity is depicted on a silver Greek drachm coin fromancient Hellenic colony Trapezus on the Black Sea, modern Trabzon, c. 350325 BC, presentedin the British Museum in London. The coin shows a banker's table (trapeza) laden with coins, apun on the name of the city. In fact, even today in Modern Greekthe word Trapeza ()


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means both a table and a bank.

[edit] Definition

The definition of a bank varies from country to country. See the relevant country page (below)for more information.

UnderEnglish common law, a banker is defined as a person who carries on the business ofbanking, which is specified as:

[6]

y conducting current accounts for his customers

y paying cheques drawn on him, and

y collecting cheques for his customers.

Banco de Venezuela in Coro.

In most common law jurisdictions there is a Bills of Exchange Act that codifies the law inrelation to negotiable instruments, including cheques, and this Act contains a statutory definitionof the term banker: bankerincludes a body of persons, whether incorporated or not, who carryon the business of banking' (Section 2, Interpretation). Although this definition seems circular, itis actually functional, because it ensures that the legal basis for bank transactions such ascheques does not depend on how the bank is organised or regulated.

The business of banking is in many English common law countries not defined by statute but bycommon law, the definition above. In other English common law jurisdictions there are statutory

definitions of thebusiness of

bankingor

banking

business. When looking at these definitions it isimportant to keep in mind that they are defining the business of banking for the purposes of the

legislation, and not necessarily in general. In particular, most of the definitions are fromlegislation that has the purposes of entry regulating and supervising banks rather than regulatingthe actual business of banking. However, in many cases the statutory definition closely mirrorsthe common law one. Examples of statutory definitions:

y "banking business" means the business of receiving money on current or deposit account,


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paying and collecting cheques drawn by or paid in by customers, the making of advances to

customers, and includes such other business as the Authority may prescribe for the purposes of

this Act; (Banking Act (Singapore), Section 2, Interpretation).

y "banking business" means the business of either or both of the following:

1. receiving from the general public money on current, deposit, savings or other similar accountrepayable on demand or within less than [3 months] ... or with a period of call or notice of less

than that period;

2. paying or collecting cheques drawn by or paid in by customers[7]

Since the advent ofEFTPOS (Electronic Funds Transfer at Point Of Sale), direct credit, directdebit and internet banking, the cheque has lost its primacy in most banking systems as a paymentinstrument. This has led legal theorists to suggest that the cheque based definition should bebroadened to include financial institutions that conduct current accounts for customers and

enable customers to pay and be paid by third parties, even if they do not pay and collectcheques.[8]

[edit] Banking

[edit] Standard activities

Large door to an old bank vault.

Banks act as payment agents by conducting checking or current accounts for customers, paying

cheques drawn by customers on the bank, and collecting cheques deposited to customers' currentaccounts. Banks also enable customer payments via other payment methods such as telegraphictransfer, EFTPOS, and automated teller machine (ATM).

Banks borrow money by accepting funds deposited on current accounts, by accepting termdeposits, and by issuing debt securities such asbanknotes andbonds. Banks lend money bymaking advances to customers on current accounts, by making installment loans, and by


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investing in marketable debt securities and other forms of money lending.

Banks provide almost all payment services, and a bank account is considered indispensable bymost businesses, individuals and governments. Non-banks that provide payment services such as

remittance companies are not normally considered an adequate substitute for having a bankaccount.

Banks borrow most funds from households and non-financial businesses, and lend most funds tohouseholds and non-financial businesses, but non-bank lenders provide a significant and in manycases adequate substitute for bank loans, and money market funds, cash management trusts andother non-bank financial institutions in many cases provide an adequate substitute to banks forlending savings too.[clarification needed]

[edit] Channels

Banks offer many different channels to access their banking and other services:

y ATM is a machine that dispenses cash and sometimes takes deposits without the need for a

human bank teller. Some ATMs provide additional services.

y A branch is a retail location

y Call center

y Mail: most banks accept check deposits via mail and use mail to communicate to their

customers, e.g. by sending out statements

y Mobile banking is a method of using one's mobile phone to conduct banking transactions

y Online banking is a term used for performing transactions, payments etc. over the Internet

y Relationship Managers, mostly for private banking or business banking, often visiting customers

at their homes or businessesy Telephone banking is a service which allows its customers to perform transactions over the

telephone without speaking to a human

y Video banking is a term used for performing banking transactions or professional banking

consultations via a remote video and audio connection. Video banking can be performed via

purpose built banking transaction machines (similar to an Automated teller machine), or via a

videoconference enabled bank branch.clarification

[edit] Business model

A bank can generate revenue in a variety of different ways including interest, transaction fees

and financial advice. The main method is via charging interest on the capital it lends out tocustomers[citation needed]. The bank profits from the differential between the level of interest it paysfor deposits and other sources of funds, and the level of interest it charges in its lendingactivities.

This difference is referred to as thespreadbetween the cost of funds and the loan interest rate.Historically, profitability from lending activities has been cyclical and dependent on the needsand strengths of loan customers and the stage of the economic cycle. Fees and financial advice


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constitute a more stable revenue stream and banks have therefore placed more emphasis on theserevenue lines to smooth their financial performance.

In the past 20 years American banks have taken many measures to ensure that they remain

profitable while responding to increasingly changing market conditions. First, this includes theGramm-Leach-Bliley Act, which allows banks again to merge with investment and insurancehouses. Merging banking, investment, and insurance functions allows traditional banks torespond to increasing consumer demands for "one-stop shopping" by enabling cross-selling ofproducts (which, the banks hope, will also increase profitability).

Second, they have expanded the use ofrisk-based pricing from business lending to consumerlending, which means charging higher interest rates to those customers that are considered to bea higher credit risk and thus increased chance ofdefault on loans. This helps to offset the lossesfrom bad loans, lowers the price of loans to those who have better credit histories, and offerscredit products to high risk customers who would otherwise be denied credit.

Third, they have sought to increase the methods of payment processing available to the generalpublic and business clients. These products include debit cards, prepaid cards, smart cards, andcredit cards. They make it easier for consumers to conveniently make transactions and smooththeir consumption over time (in some countries with underdeveloped financial systems, it is stillcommon to deal strictly in cash, including carrying suitcases filled with cash to purchase ahome).

However, with convenience of easy credit, there is also increased risk that consumers willmismanage their financial resources and accumulate excessive debt. Banks make money fromcard products through interest payments and fees charged to consumers and transaction fees to

companies that accept the credit- debit - cards. This helps in making profit and facilitateseconomic development as a whole{{Citation needed|date=January 2011.

[edit] Products

A former building society, now a modern retail bank in Leeds, West Yorkshire.


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An interior of a branch ofNational Westminster Bank on Castle Street, Liverpool

[edit] Retail

y Business loan

y Cheque account

y Credit card

y Home loan

y Insurance advisor

y Mutual fund

y Personal loan

y Savings account

[edit] Wholesale

y Capital raising (Equity / Debt / Hybrids)

y Mezzanine finance

y Project finance

y Revolving credit

y Risk management (FX, interest rates, commodities, derivatives)

y Term loan

[edit] Risk and capital

Banks face a number ofrisks in order to conduct their business, and how well these risks are

managed and understood is a key driver behind profitability, and how much capital a bank isrequired to hold. Some of the main risks faced by banks include:

y Credit risk: risk of loss[citation needed] arising from a borrower who does not make payments as

promised.

y Liquidity risk: risk that a given security or asset cannot be traded quickly enough in the market

to prevent a loss (or make the required profit).

y Market risk: risk that the value of a portfolio, either an investment portfolio or a trading


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portfolio, will decrease due to the change in value of the market risk factors.

y Operational risk: risk arising from execution of a company's business functions.

The capital requirement is abank regulation, which sets a framework on how banks and

depository institutions must handle their capital. The categorization of assets and capital is highlystandardized so that it can be risk weighted (see risk-weighted asset).

[edit] Banks in the economy

See also: Financial system

[edit] Economic functions

The economic functions of banks include:

1. Issue of money, in the form ofbanknotes and current accounts subject to cheque or payment atthe customer's order. These claims on banks can act as money because they are negotiable or

repayable on demand, and hence valued at par. They are effectively transferable by mere

delivery, in the case of banknotes, or by drawing a cheque that the payee may bank or cash.

2. Netting and settlement of payments banks act as both collection and paying agents forcustomers, participating in interbank clearing and settlement systems to collect, present, be

presented with, and pay payment instruments. This enables banks to economise on reserves

held for settlement of payments, since inward and outward payments offset each other. It also

enables the offsetting of payment flows between geographical areas, reducing the cost of

settlement between them.

3. Credit intermediation banks borrow and lend back-to-back on their own account as middlemen.

4. Credit quality improvement banks lend money to ordinary commercial and personalborrowers (ordinary credit quality), but are high quality borrowers. The improvement comes

from diversification of the bank's assets and capital which provides a buffer to absorb losses

without defaulting on its obligations. However, banknotes and deposits are generally unsecured;

if the bank gets into difficulty and pledges assets as security, to raise the funding it needs to

continue to operate, this puts the note holders and depositors in an economically subordinated

position.

5. Maturity transformation banks borrow more on demand debt and short term debt, butprovide more long term loans. In other words, they borrow short and lend long. With a stronger

credit quality than most other borrowers, banks can do this by aggregating issues (e.g. accepting

deposits and issuing banknotes) and redemptions (e.g. withdrawals and redemptions ofbanknotes), maintaining reserves of cash, investing in marketable securities that can be readily

converted to cash if needed, and raising replacement funding as needed from various sources

(e.g. wholesale cash markets and securities markets).

[edit] Bank crisis

Banks are susceptible to many forms of risk which have triggered occasional systemic crises.


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These include liquidity risk(where many depositors may request withdrawals in excess ofavailable funds), credit risk(the chance that those who owe money to the bank will not repay it),and interest rate risk(the possibility that the bank will become unprofitable, if rising interestrates force it to pay relatively more on its deposits than it receives on its loans).

Banking crises have developed many times throughout history, when one or more risks havematerialized for a banking sector as a whole. Prominent examples include thebank run thatoccurred during the Great Depression, the U.S. Savings and Loan crisis in the 1980s and early1990s, the Japanese banking crisis during the 1990s, and the subprime mortgage crisis in the2000s.

Regulation

Main article: Banking regulation

See also: Basel II

Currently in most jurisdictions commercial banks are regulated by government entities andrequire a special bank licence to operate.

Usually the definition of the business of banking for the purposes of regulation is extended toinclude acceptance of deposits, even if they are not repayable to the customer's orderalthoughmoney lending, by itself, is generally not included in the definition.

Unlike most other regulated industries, the regulator is typically also a participant in the market,being either a publicly or privately governed central bank. Central banks also typically have amonopoly on the business of issuing banknotes. However, in some countries this is not the case.In the UK, for example, the Financial Services Authority licences banks, and some commercialbanks (such as the Bank of Scotland) issue their own banknotes in addition to those issued by theBank of England, the UK government's central bank.

Banking law is based on a contractual analysis of the relationship between the bank(definedabove) and the customerdefined as any entity for which the bank agrees to conduct an account.

The law implies rights and obligations into this relationship as follows:

1. The bank account balance is the financial position between the bank and the customer: whenthe account is in credit, the bank owes the balance to the customer; when the account is

overdrawn, the customer owes the balance to the bank.

2. The bank agrees to pay the customer's cheques up to the amount standing to the credit of thecustomer's account, plus any agreed overdraft limit.

3. The bank may not pay from the customer's account without a mandate from the customer, e.g.a cheque drawn by the customer.

4. The bank agrees to promptly collect the cheques deposited to the customer's account as thecustomer's agent, and to credit the proceeds to the customer's account.


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5. The bank has a right to combine the customer's accounts, since each account is just an aspect ofthe same credit relationship.

6. The bank has a lien on cheques deposited to the customer's account, to the extent that thecustomer is indebted to the bank.

7. The bank must not disclose details of transactions through the customer's accountunless thecustomer consents, there is a public duty to disclose, the bank's interests require it, or the law

demands it.

8. The bank must not close a customer's account without reasonable notice, since cheques areoutstanding in the ordinary course of business for several days.

These implied contractual terms may be modified by express agreement between the customerand the bank. The statutes and regulations in force within a particular jurisdiction may alsomodify the above terms and/or create new rights, obligations or limitations relevant to the bank-customer relationship.

Some types of financial institution, such asbuilding societies and credit unions, may be partly orwholly exempt from bank licence requirements, and therefore regulated under separate rules.

The requirements for the issue of a bank licence vary between jurisdictions but typically include:

1. Minimum capital2. Minimum capital ratio3. 'Fit and Proper' requirements for the bank's controllers, owners, directors, or senior officers4. Approval of the bank's business plan as being sufficiently prudent and plausible.

[edit] Types of banks

Banks' activities can be divided into retail banking, dealing directly with individuals and smallbusinesses;business banking, providing services to mid-market business; corporate banking,directed at large business entities;private banking, providing wealth management services tohigh net worth individuals and families; and investment banking, relating to activities on thefinancial markets. Most banks are profit-making, private enterprises. However, some are ownedby government, or are non-profit organizations.

[edit] Types of retail banks


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National Bank of the Republic, Salt Lake City 1908

ATMAl-Rajhi Bank

National Copper Bank, Salt Lake City 1911


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y Commercial bank: the term used for a normal bank to distinguish it from an investment bank.

After the Great Depression, the U.S. Congress required that banks only engage in banking

activities, whereas investment banks were limited to capital market activities. Since the two no

longer have to be under separate ownership, some use the term "commercial bank" to refer to

a bank or a division of a bank that mostly deals with deposits and loans from corporations orlarge businesses.

y Community banks: locally operated financial institutions that empower employees to make local

decisions to serve their customers and the partners.

y Community development banks: regulated banks that provide financial services and credit to

under-served markets or populations.

y Credit unions: not-for-profit cooperatives owned by the depositors and often offering rates

more favorable than for-profit banks. Typically, membership is restricted to employees of a

particular company, residents of a defined neighborhood, members of a certain labor union or

religious organizations, and their immediate families.

y Postal savings banks: savings banks associated with national postal systems.

y Private banks: banks that manage the assets of high net worth individuals. Historically aminimum of USD 1 million was required to open an account, however, over the last years many

private banks have lowered their entry hurdles to USD 250,000 for private investors.[citation needed]

y Offshore banks: banks located in jurisdictions with low taxation and regulation. Many offshore

banks are essentially private banks.

y Savings bank: in Europe, savings banks took their roots in the 19th or sometimes even in the

18th century. Their original objective was to provide easily accessible savings products to all

strata of the population. In some countries, savings banks were created on public initiative; in

others, socially committed individuals created foundations to put in place the necessary

infrastructure. Nowadays, European savings banks have kept their focus on retail banking:

payments, savings products, credits and insurances for individuals or small and medium-sized

enterprises. Apart from this retail focus, they also differ from commercial banks by their broadly

decentralised distribution network, providing local and regional outreachand by their socially

responsible approach to business and society.

y Building societies and Landesbanks: institutions that conduct retail banking.

y Ethical banks: banks that prioritize the transparency of all operations and make only what they

consider to be socially-responsible investments.

y A Direct or Internet-Only bank is a banking operation without any physical bank branches,

conceived and implemented wholly with networked computers.

Types of investment banks

y Investment banks"underwrite" (guarantee the sale of) stock and bond issues, trade for their

own accounts, make markets, and advise corporations on capital market activities such as

mergers and acquisitions.

y Merchant banks were traditionally banks which engaged in trade finance. The modern

definition, however, refers to banks which provide capital to firms in the form of shares rather

than loans. Unlike venture capital firms, they tend not to invest in new companies.


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Both combined

y Universal banks, more commonly known as financial services companies, engage in several of

these activities. These big banks are very diversified groups that, among other services, also

distribute insurance hence the term bancassurance, a portmanteau word combining "banqueor bank" and "assurance", signifying that both banking and insurance are provided by the same

corporate entity.

[edit] Other types of banks

y Central banks are normally government-owned and charged with quasi-regulatory

responsibilities, such as supervising commercial banks, or controlling the cash interest rate. They

generally provide liquidity to the banking system and act as the lender of last resort in event of a

crisis.

y Islamic banks adhere to the concepts ofIslamic law. This form of banking revolves around

several well-established principles based on Islamic canons. All banking activities must avoidinterest, a concept that is forbidden in Islam. Instead, the bank earns profit (markup) and fees

on the financing facilities that it extends to customers.

Banking in India

Structure of the organised banking sector in India. Number of banks are in brackets.

Banking in India originated in the last decades of the 18th century. The first banks were TheGeneral Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790;both are now defunct. The oldest bank in existence in India is the State Bank of India, whichoriginated in the Bank of Calcutta in June 1806, which almost immediately became the Bank ofBengal. This was one of the three presidency banks, the other two being the Bank of Bombayand the Bank of Madras, all three of which were established under charters from the British EastIndia Company. For many years the Presidency banks acted as quasi-central banks, as did theirsuccessors. The three banks merged in 1921 to form the Imperial Bank of India, which, uponIndia's independence, became the State Bank of India.

Private banking is a term forbanking, investment and otherfinancial services provided bybanks to private individuals investing sizable assets. The term "private" refers to the customerservice being rendered on a more personal basis than in mass-market retail banking, usually viadedicated bank advisers. It should not be confused with aprivate bank, which is simply a non-incorporated banking institution.


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Historically private banking has been viewed as very exclusive, only catering forhigh net worthindividuals with liquidity over $2 million, although it is now possible to open some private bankaccounts with as little as $250,000 for private investors.

[citation needed] An institution's privatebanking division will provide various services such as wealth management, savings, inheritanceand tax planning for their clients. A high-level form of private banking (for the especially

affluent) is often referred to as wealth management. For private banking services clients payeither based on the number of transactions, the annual portfolio performance or a "flat-fee",usually calculated as a yearly percentage of the total investment amount.[1]

The word "private" also alludes tobank secrecy and minimizing taxes through careful allocationof assets or by hiding assets from the taxing authorities. Swiss and certain offshore banks havebeen criticized for such cooperation with individuals practicing tax evasion. Although tax fraudis a criminal offense in Switzerland, tax evasion is only a civil offence, not requiring banks tonotify taxing authorities.[2]

Documents

Priority Banking