1.
Central bank
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A central bank, reserve bank, or monetary authority is an institution that manages a states currency, money supply, and interest rates. Central banks also usually oversee the commercial banking system of their respective countries, Central banks in most developed nations are institutionally designed to be independent from political interference. Still, limited control by the executive and legislative bodies usually exists, prior to the 17th century most money was commodity money, typically gold or silver. However, promises to pay were widely circulated and accepted as value at least five hundred years earlier in both Europe and Asia. The Song dynasty was the first to issue generally circulating paper currency, in 1455, in an effort to control inflation, the succeeding Ming Dynasty ended the use of paper money and closed much of Chinese trade. The Bank of Amsterdam, established in the Dutch Republic in 1609, is considered to be the forerunner to modern central banks. The Wisselbanks innovations helped lay the foundations for the birth and development of the banking system that now plays a vital role in the worlds economy. Along with a number of local banks, it performed many functions of a central banking system. Lucien Gillard calls it the European guilder, and Adam Smith devotes many pages to explaining how the bank guilder works, the model of the Wisselbank as a state bank was adapted throughout Europe, including the Bank of Sweden and the Bank of England. Established by Dutch-Latvian Johan Palmstruch in 1668, Sveriges Riksbank is often considered by many as the worlds oldest central bank, the lenders would give the government cash and also issue notes against the government bonds, which could be lent again. A Royal Charter was granted on 27 July through the passage of the Tonnage Act 1694, the bank was given exclusive possession of the governments balances, and was the only limited-liability corporation allowed to issue banknotes. The £1. 2M was raised in 12 days, half of this was used to rebuild the Navy and these modern central banking functions evolved slowly through the 18th and 19th centuries. The currency crisis of 1797, caused by panicked depositors withdrawing from the Bank led to the government suspending convertibility of notes into specie payment. The bank was accused by the bullionists of causing the exchange rate to fall from over issuing banknotes. Nevertheless, it was clear that the Bank was being treated as an organ of the state, henry Thornton, a merchant banker and monetary theorist has been described as the father of the modern central bank. An opponent of the real bills doctrine, he was a defender of the bullionist position, thorntons process of monetary expansion anticipated the theories of Knut Wicksell regarding the cumulative process which restates the Quantity Theory in a theoretically coherent form. Until the mid-nineteenth century, commercial banks were able to issue their own banknotes, many consider the origins of the central bank to lie with the passage of the Bank Charter Act of 1844. Under this law, authorisation to issue new banknotes was restricted to the Bank of England, at the same time, the Bank of England was restricted to issue new banknotes only if they were 100% backed by gold or up to £14 million in government debt
2.
Cooperative banking
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Cooperative banking is retail and commercial banking organized on a cooperative basis. Cooperative banking institutions take deposits and lend money in most parts of the world, Credit unions have the purpose of promoting thrift, providing credit at reasonable rates, and providing other financial services to its members. They are typically the smaller form of cooperative banking institution, in some countries they are restricted to providing only unsecured personal loans, whereas in others, they can provide business loans to farmers, and mortgages. Larger institutions are often called cooperative banks, some are tightly integrated federations of credit unions, though those member credit unions may not subscribe to all nine of the strict principles of the World Council of Credit Unions. Like credit unions, cooperative banks are owned by their customers and follow the principle of one person. Unlike credit unions, however, cooperative banks are regulated under both banking and cooperative legislation. They provide services such as savings and loans to non-members as well as to members, many cooperative banks are traded on public stock markets, with the result that they are partly owned by non-members. Member control is diluted by these outside stakes, so they may be regarded as semi-cooperative, Cooperative banking systems are also usually more integrated than credit union systems. Local branches of cooperative banks select their own boards of directors and manage their own operations, Credit unions usually retain strategic decision-making at a local level, though they share back-office functions, such as access to the global payments system, by federating. Some cooperative banks are criticized for diluting their cooperative principles, principles 2-4 of the Statement on the Co-operative Identity can be interpreted to require that members must control both the governance systems and capital of their cooperatives. A cooperative bank that raises capital on public stock markets creates a class of shareholders who compete with the members for control. In some circumstances, the members may lose control and this effectively means that the bank ceases to be a cooperative. Accepting deposits from non-members may also lead to a dilution of member control, the special banks providing Long Term Loans are called Land Development Banks, in the short, LDB. The history of LDB is quite old, the first LDB was started at Jhang in Punjab in 1920. This bank is based on Co-operative. The main objective of the LDBs are to promote the development of land, agriculture, the LDBs provide long-term finance to members directly through their branches. Building societies exist in Britain, Ireland and several Commonwealth countries and they are similar to credit unions in organisation, though few enforce a common bond. However, rather than promoting thrift and offering unsecured and business loans, borrowers and depositors are society members, setting policy and appointing directors on a one-member, one-vote basis
3.
Credit union
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Credit unions operate alongside other mutuals and cooperatives engaging in cooperative banking, such as building societies. Natural-person credit unions serve individual people, as distinguished from corporate credit unions, Credit unions see themselves as different from mainstream banks, with a mission to be community-oriented and serve people, not profit. Normally, only a member of a union may deposit or borrow money. Surveys of customers at banks and credit unions have consistently shown a significantly higher customer satisfaction rate with the quality of service at credit unions, Credit unions have historically claimed to provide superior member service and to be committed to helping members improve their financial situation. In the context of financial inclusion credit unions claim to provide a range of loan. In the credit union context, not-for-profit is not the same as for a charity or similar organization. Credit unions are not-for-profit because their purpose is to serve their members rather than to maximize profits. But, unlike charities and the like, credit unions do not rely on donations, and are financial institutions that must perforce make what is, in economic terms, a small profit to remain in existence. According to the World Council of Credit Unions, a credit unions revenues must exceed its expenses and dividends in order to maintain capital. F. W. Raiffeisen wrote in 1870 that credit unions are, according to eleven of the German law of cooperatives. They accordingly form a sort of business enterprise of which the owners are the Credit Unions members. In the United States, credit unions incorporated and operating under a credit union law are tax-exempt under Section 501. Federal credit unions organized and operated in accordance with the Federal Credit Union Act are tax-exempt under Section 501, according to the World Council, at the end of 2014 there were 57,480 credit unions in 105 countries. Collectively they served 217.4 million members and oversaw US$1.79 trillion in assets, the European Association of Co-operative Banks reported 38 million members in those four countries at the end of 2010. The countries with the most credit union activity are highly diverse, several African and Latin American countries also had high credit union membership rates, as did Australia and South Korea. He went on to develop a successful urban credit union system. In 1864 Friedrich Wilhelm Raiffeisen founded the first rural credit union in Heddesdorf in Germany, by the time of Raiffeisens death in 1888, credit unions had spread to Italy, France, the Netherlands, England, Austria, and other nations. The first credit union in North America, the Caisse Populaire de Lévis in Quebec, Canada, drawing extensively on European precedents, Desjardins developed a unique parish-based model for Quebec, the caisse populaire
4.
Investment banking
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Unlike commercial banks and retail banks, investment banks do not take deposits. From the passage of Glass–Steagall Act in 1933 until its repeal in 1999 by the Gramm–Leach–Bliley Act, Other industrialized countries, including G7 countries, have historically not maintained such a separation. As part of the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010, the two main lines of business in investment banking are called the sell side and the buy side. The sell side involves trading securities for cash or for other securities, the buy side involves the provision of advice to institutions that buy investment services. Private equity funds, mutual funds, life insurance companies, unit trusts, an investment bank can also be split into private and public functions with a Chinese wall separating the two to prevent information from crossing. The private areas of the deal with private insider information that may not be publicly disclosed, while the public areas, such as stock analysis. The first company to publicly traded stock was the Dutch East India Company. Investment banking has changed over the years, beginning as a form focused on underwriting security issuance. In the United States, commercial banking and investment banking were separated by the Glass–Steagall Act, the repeal led to more universal banks offering an even greater range of services. Many large commercial banks have therefore developed investment banking divisions through acquisitions, notable large banks with significant investment banks include JPMorgan Chase, Bank of America, Credit Suisse, Deutsche Bank, UBS, Barclays, and Wells Fargo. The traditional service of underwriting security issues has declined as a percentage of revenue, as far back as 1960, 70% of Merrill Lynchs revenue was derived from transaction commissions while traditional investment banking services accounted for 5%. However, Merrill Lynch was a relatively retail-focused firm with a large brokerage network, investment banking is split into front office, middle office, and back office activities. Investment banks offer services to corporations issuing securities and investors buying securities. For corporations, investment bankers offer information on when and how to place their securities on the open market, therefore, investment bankers play a very important role in issuing new security offerings. Front office is described as a revenue generating role. Markets is divided into sales and trading, and research, a pitch book of financial information is generated to market the bank to a potential M&A client, if the pitch is successful, the bank arranges the deal for the client. The investment banking division is divided into industry coverage and product coverage groups. On behalf of the bank and its clients, an investment banks primary function is buying and selling products
5.
Merchant bank
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A merchant bank is a financial institution providing capital to companies in the form of share ownership instead of loans. A merchant bank also provides advisory on corporate matters to the firms in which they invest, in the United Kingdom, the historical term merchant bank refers to an investment bank. Both commercial banks and investment banks may engage in merchant banking activities, historically, merchant banks original purpose was to facilitate and/or finance production and trade of commodities, hence the name merchant. Few banks today restrict their activities to such a narrow scope, Merchant banks were in fact the first modern banks. As the Lombardy merchants and bankers grew in stature based on the strength of the Lombard plains cereal crops, the Florentine merchant banking community was exceptionally active and propagated new finance practices all over Europe. Both Jews and Florentine merchants perfected ancient practices used in the Middle East trade routes, originally intended for the finance of long trading journeys, these methods were applied to finance the medieval commercial revolution. In France during the 17th and 18th century, a merchant banker or marchand-banquier was not just considered a trader, Merchant banks in the United Kingdom came into existence in the early 19th century, the oldest being Barings Bank. The Jews could not hold land in Italy, so entered the great trading piazzas and halls of Lombardy, alongside the local traders. They had one advantage over the locals. Christians were strictly forbidden from any kind of lending at interest, in this way they could secure the grain-sale rights against the eventual harvest. They then began to advance payment against the delivery of grain shipped to distant ports. In both cases they made their profit from the present discount against the future price and this two-handed trade was time-consuming and soon there arose a class of merchants who were trading grain debt instead of grain. The buying of future crop and the trading of debt is analogous to the future contract market in modern finance. The Court Jew performed both financing and underwriting functions, financing took the form of a crop loan at the beginning of the growing season, which allowed a farmer to develop and manufacture his annual crop. Underwriting in the form of a crop, or commodity, insurance guaranteed the delivery of the crop to its buyer, typically a merchant wholesaler. He could also keep the farmer in business during a drought or other crop failure, and so the merchants benches in the great grain markets became centers for holding money against a bill. These deposited funds were intended to be held for the settlement of grain trades, the term bankrupt is a corruption of the Italian banca rotta, or broken bench, which is what happened when someone lost his traders deposits. Being broke has the same connotation, once again this merely developed what was an ancient method of financing long-distance transport of goods
6.
Mutual savings bank
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A mutual savings bank is a financial institution chartered by a central or regional government, without capital stock, that is owned by its members who subscribe to a common fund. From this fund claims, loans, etc. are paid, profits after deductions are shared among the members. The institution most frequently identified as the first modern savings bank was the Savings and Friendly Society organized by the Reverend Henry Duncan in 1810, in Ruthwell, rev. Duncan established the small bank in order to encourage his working class congregation to develop thrift. Another precursor of modern savings banks were the ideas Friedrich Wilhelm Raiffeisen that led to credit unions. European voluntary organizations and friendly societies provided the inspiration for their state incorporated American counterparts and these first savings banks were envisioned as philanthropic endeavors, designed to uplift the poor and working classes. The first incorporated US mutual savings bank was the Provident Institution for Savings and its 1816 charter was the first government legislation in the world to safeguard savings banks. In 2015, the oldest mutual bank in the U. S. is Eastern Bank of Boston and it was chartered in 1818 in Salem, Massachusetts as the Salem Savings Bank. Since the 1970s, when the industry was deregulated, thousands of mutual savings banks have been converted into stock ownership companies, in 2010, only about 600 remained. These conversions have often resulted in financial rewards for top bank executives. Current mutual saving banks include Eastern Bank, Dollar Bank, Ridgewood Savings Bank, Middlesex Savings Bank, beginning in the 1980s, several building societies in Australia converted to banks but were required to demutualise when doing so. These included Advance Bank, St. George, Suncorp, Metway Bank, Challenge Bank, Bank of Melbourne, unlike commercial banks, savings banks have no stockholders, the entirety of profits beyond the upkeep of the bank belongs to the depositors of the mutual savings bank. Mutual savings banks prioritize security, and as a result, have historically been conservative in their investments. Building Society Cooperative banking Credit union Mutual organization http, //www. fdic. gov/bank/historical/history/index. html http, //www. census. gov/hhes/www/rfs/glossary. html
7.
Postal savings system
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Postal savings systems provide depositors who do not have access to banks a safe and convenient method to save money. Many nations have operated banking systems involving post offices to promote saving money among the poor, in 1861, Great Britain became the first nation to offer such an arrangement. It was supported by Sir Rowland Hill, who advocated the penny post, and William Ewart Gladstone, then Chancellor of the Exchequer. At the time, banks were mainly in the cities and largely catered to wealthy customers, rural citizens and the poor had no choice but to keep their funds at home or on their persons. The original Post Office Savings Bank was limited to deposits of £30 per year with a balance of £150. Interest was paid at the rate of 2.5 percent per annum on whole pounds in the account, later, the limits were raised to a maximum of £500 per year in deposits with no limit on the total amount. Within five years of the establishment, there were over 600,000 accounts. By 1927, there were twelve million accounts—one in four Britons—with £283 million on deposit, the British system first offered only savings accounts. In 1880, it became a retail outlet for government bonds, and in 1916 introduced war savings certificates. In 1956, it launched a bond, the Premium Bond. Post Office Savings Bank became National Savings Bank in 1969, later renamed National Savings and Investments, while continuing to offer National Savings services, the General Post Office, created the National Giro in 1968. More recently, the Post Office Ltd. offers savings accounts based on its brand, and is operated by the Bank of Ireland, a bank and Family Investments. The Post Office branded services are similar to some of NS&Is services, Post Office Ltd also provides a Post Office card account that accepts only direct deposits of certain state pension and welfare payments, permitting cash withdrawals over the counter. This last account is offered in partnership with the Department for Work and Pensions until 2010, through investment banking, many other countries adopted such systems. Many were later abolished or privatized, though some countries offer postal savings, Brazil instituted a postal banking system in 2002, where the national postal service formed a partnership with the largest private bank in the country to provide financial services at post offices. The current partnership is with Bank of Brazil, in the Peoples Republic of China, the Postal Savings Bank of China was split from China Post in 2007 and established as a state-owned limited company. It continues to provide banking services at post offices, frances La Poste, similar to the UKs Post Office, offer banking services called La banque Postale. Deutsche Postbank, Germany has a banking system, Deutsche Postbank was a subsidiary of Deutsche Post until 2008
8.
Retail banking
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Retail banking, also known as consumer banking, is the provision of services by a bank to individual consumers, rather than to companies, corporations or other banks. Services offered include savings and transactional accounts, mortgages, personal loans, debit cards, the term is generally used to distinguish these banking services from investment banking, commercial banking or wholesale banking. It may also be used to refer to a division or department of a bank dealing with retail customers, in the U. S. the term commercial bank is used for a normal bank to distinguish it from an investment bank. This separation was repealed in the 1990s, commercial bank can also refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses, as opposed to individual members of the public. S. Private banks manage the assets of high-net-worth individuals, offshore banks are banks located in jurisdictions with low taxation and regulation. Many offshore banks are essentially private banks, postal savings banks are savings banks associated with national postal systems
9.
Savings account
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A savings account is a deposit account held at a retail bank that pays interest but cannot be used directly as money in the narrow sense of a medium of exchange. These accounts let customers set aside a portion of their liquid assets while earning a monetary return, in some jurisdictions, deposits in savings accounts do not incur reserve requirements. The other major types of accounts are the transactional account, money market account. In the United States, the term savings deposit includes a deposit or an account that meets the requirements of Sec.204.2 of Regulation D. The depositor is permitted to make up to 6 pre-authorized transfers or withdrawals per month or a statement cycle of at least four weeks, there is no regulation limiting number of deposits into the account. Violations of Regulation D often involve a charge, usually $10 per transaction. A savings account linked to an account at the same financial institution can help prevent fees due to overdrafts. Savings Account Definition | Investopedia What is a Savings Account - NerdWallet
10.
Transaction account
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A transaction account, checking account, current account or demand deposit account is a deposit account held at a bank or other financial institution. It is available to the account owner on demand and is available for frequent, access may be in a variety of ways, such as cash withdrawals, use of cheques and debit by electronic transfer. In economic terms, the funds held in an account are regarded as liquid funds. Transaction accounts are operated by businesses and personal users. Depending on the country and local demand economics they may not earn any or they can earn very high interest rates, in the United Kingdom, Hong Kong, India and a number of other countries, they are commonly called current or cheque accounts. Because money is available on demand they are sometimes known as a demand accounts or demand deposit accounts. In the United States, NOW accounts operate as transaction accounts, most current accounts come with a cheque book and offer the facility to arrange standing orders, direct debits and payment via a debit card. Current accounts may also allow borrowing via an overdraft facility, in Holland in the early 1500s, Amsterdam was a major trading and shipping city. People who had acquired large accumulations of cash began to deposit their money with cashiers to protect their wealth and these cashiers held the money for a fee. Competition drove cashiers to offer services, including paying out money to any person bearing a written order from a depositor to do so. They kept the note as proof of payment, in the 18th century in England, preprinted checks, serial numbers, and the word cheque appeared. By the late 18th century, the difficulty of clearing checks gave rise to the development of clearing houses, all transaction accounts offer itemized lists of all financial transactions, either through a bank statement or a passbook. Canada has an Email Money Transfer service In India, NEFT, customers may need to attend a bank branch for a wide range of banking transactions including cash withdrawals and financial advice. There may be restrictions on withdrawals, even at a branch. For example, withdrawals of cash above a threshold figure may require notice, many transactions that previously could only be performed at a branch can now be done in others ways, such as use of ATMs, online, mobile and telephone banking. Cheques were the method of making withdrawals from a transaction account. Automated teller machines enable customers of an institution to perform financial transactions without attending a branch. This enables, for example, cash to be withdrawn from an account outside normal trading hours
11.
ATM card
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ATM cards are known by a variety of names such as bank card, MAC, client card, key card or cash card, among others. Most payment cards, such as debit and credit cards can also function as ATM cards, charge and proprietary cards cannot be used as ATM cards. The use of a card to withdraw cash at an ATM is treated differently to a POS transaction. Interbank networks allow the use of ATM cards at ATMs of private operators, ATM cards can also be used on improvised ATMs such as mini ATMs, merchants card terminals that deliver ATM features without any cash drawer. These terminals can also be used as cashless scrip ATMs by cashing the receipts they issue at the point of sale. The first ATM cards were issued in 1967 by Barclays in London and they also have an embossed bank card number conforming with the ISO/IEC7812 numbering standard. All ATM machines, at a minimum, will permit cash withdrawals of customers of the machines owner and they will report the amount of the withdrawal and any fees charged by the machine on the receipt. Some may provide services, such as selling postage stamps. Banks have long argued with merchants over the fees that can be charged by the bank for such transactions, despite the fact that ATM cards require a PIN for use, banks have decided to permit the use of a non-PIN based card for all merchant transactions. For other types of transactions through telephone or online banking, this may be performed with an ATM card without in-person authentication, the SEPA for Cards has completely removed the magnetic stripe requirement from the former Maestro debit cards. Payment card Credit card Debit card
12.
Credit card
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The card issuer creates a revolving account and grants a line of credit to the cardholder, from which the cardholder can borrow money for payment to a merchant or as a cash advance. A credit card is different from a card, where it requires the balance to be repaid in full each month. In contrast, credit cards allow the consumers a continuing balance of debt, a credit card also differs from a cash card, which can be used like currency by the owner of the card. Credit cards have a printed or embossed bank card number complying with the ISO/IEC7812 numbering standard, the card numbers prefix, called the Bank Identification Number, is the sequence of digits at the beginning of the number that determine the bank to which a credit card number belongs. This is the first six digits for MasterCard and Visa cards, the next nine digits are the individual account number, and the final digit is a validity check code. Both of these standards are maintained and further developed by ISO/IEC JTC 1/SC 17/WG1, Credit cards have a magnetic stripe conforming to the ISO/IEC7813. Many modern credit cards have a chip embedded in them as a security feature. In addition to the credit card number, credit cards also carry issue and expiration dates, as well as extra codes such as issue numbers. Not all credit cards have the sets of extra codes nor do they use the same number of digits. The concept of using a card for purchases was described in 1887 by Edward Bellamy in his utopian novel Looking Backward. Bellamy used the credit card eleven times in this novel, although this referred to a card for spending a citizens dividend from the government. Charge coins and other items were used from the late 19th century to the 1930s. They came in various shapes and sizes, with materials made out of celluloid, copper, aluminum, steel, each charge coin usually had a little hole, enabling it to be put in a key ring, like a key. These charge coins were given to customers who had charge accounts in department stores, hotels. A charge coin usually had the account number along with the merchants name. The charge coin offered a simple and fast way to copy a charge account number to the sales slip and this sped the process of copying, previously done by handwriting. It also reduced the number of errors, by having a form of numbers on the sales slip. Because the customers name was not on the coin, almost anyone could use it
13.
Debit card
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A debit card is a plastic payment card that can be used instead of cash when making purchases. It is similar to a card, but unlike a credit card. Some cards may bear a stored value with which a payment is made, in some cases, the primary account number is assigned exclusively for use on the Internet and there is no physical card. In many countries, the use of cards has become so widespread that their volume has overtaken or entirely replaced cheques and, in some instances. The development of debit cards, unlike credit cards and charge cards, has generally been country specific resulting in a number of different systems around the world, which were often incompatible. Since the mid-2000s, a number of initiatives have allowed debit cards issued in one country to be used in countries and allowed their use for internet. Unlike credit and charge cards, payments using a card are immediately transferred from the cardholders designated bank account. Debit cards usually also allow for instant withdrawal of cash, acting as the ATM card for withdrawing cash, merchants may also offer cashback facilities to customers, where a customer can withdraw cash along with their purchase. There are currently three ways that debit card transactions are processed, EFTPOS, offline debit and the Electronic Purse Card System, One physical card can include the functions of all three types, so that it can be used in a number of different circumstances. Some debit cards are branded with the logo of the national card as well as Maestro. The use of a card system allows operators to package their product more effectively while monitoring customer spending. Online debit cards require electronic authorization of every transaction and the debits are reflected in the user’s account immediately, some on-line debit systems are using the normal authentication processes of Internet banking to provide real-time on-line debit transactions. Offline debit cards have the logos of major credit cards or major debit cards and are used at the point of sale like a credit card. This type of debit card may be subject to a daily limit, transactions conducted with offline debit cards require 2–3 days to be reflected on users’ account balances. Smart-card-based electronic purse systems are in use throughout Europe since the mid-1990s, most notably in Germany, Austria, in Austria and Germany, almost all current bank cards now include electronic purses, whereas the electronic purse has been recently phased out in the Netherlands. Those prepaid debit cards that can be reloaded are also called reloadable debit cards, the primary market for prepaid debit cards has traditionally been unbanked people, that is, people who do not use banks or credit unions for their financial transactions. But prepaid cards also appeal to other users attracted by their advantages, and if a user has doubts about online security, using a prepaid debit card for online purchases protects their normal credit card from risk. If the card provider offers a website for letting you check the cards balance
14.
Cheque
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A cheque or check is a document that orders a bank to pay a specific amount of money from a persons account to the person in whose name the cheque has been issued. The person writing the cheque, the drawer, has a banking account where their money is held. Cheques are a type of bill of exchange and were developed as a way to make payments without the need to carry large amounts of money, both the drawer and payee may be natural persons or legal entities. Cheques are order instruments, and are not in general payable simply to the bearer as bearer instruments are, in some countries, such as the US, the payee may endorse the cheque, allowing them to specify a third party to whom it should be paid. By the second half of the 20th century, as cheque processing became automated, billions of cheques were issued annually, since then cheque usage has fallen, being partly replaced by electronic payment systems. In an increasing number of countries cheques have either become a marginal payment system or have been phased out. The spellings check, checque, and cheque were used interchangeably from the 17th century until the 20th century, in American English, the usual spelling for both is check. The cheque had its origins in the ancient banking system, in which bankers would issue orders at the request of their customers, such an order was referred to as a bill of exchange. The use of bills of exchange facilitated trade by eliminating the need for merchants to carry large quantities of currency to purchase goods, the ancient Romans are believed to have used an early form of cheque known as praescriptiones in the 1st century BC. Muslim traders are known to have used the cheque or ṣakk system since the time of Harun al-Rashid of the Abbasid Caliphate, transporting a paper saqq was more secure than transporting money. In the 9th century, a merchant in country A could cash a saqq drawn on his bank in country B. In the 13th century in Venice the bill of exchange was developed as a device to allow international trade without the need to carry large amounts of gold. Their use subsequently spread to other European countries, in the early 1500s in the Dutch Republic, to protect large accumulations of cash, people began depositing their money with cashiers. These cashiers held the money for a fee, competition drove cashiers to offer additional services including paying money to any person bearing a written order from a depositor to do so. They kept the note as proof of payment and this concept went on to spread to England and elsewhere. By the 17th century, bills of exchange were being used for payments in England. Cheques, a type of bill of exchange, then began to evolve, initially they were called drawn notes, because they enabled a customer to draw on the funds that he or she had in the account with a bank and required immediate payment. These were handwritten, and one of the earliest known still to be in existence was drawn on Messrs Morris and Clayton, scriveners and bankers based in the City of London, in 1717, the Bank of England pioneered the first use of a pre-printed form
15.
Automated teller machine
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According to the ATM Industry Association, there are now close to 3 million ATMs installed worldwide. Authentication is provided by the customer entering a personal identification number which must match the PIN stored in the chip on the card or in the financial institutions database. Using an ATM, customers can access their deposit or credit accounts in order to make a variety of transactions such as cash withdrawals, check balances. If the currency being withdrawn from the ATM is different from that in which the account is denominated the money will be converted at an official exchange rate. Thus, ATMs often provide the best possible exchange rates for foreign travellers, the idea of out-of-hours cash distribution developed from bankers needs in Asia, Europe and North America. Little is known of the Japanese device other than it was called Computer Loan Machine, the device was operational in 1966. In the US patent record, Luther George Simjian has been credited with developing a prior art device, specifically his 132nd patent, which was first filed on 30 June 1960. The roll-out of this machine, called Bankograph, was delayed by a couple of years, an experimental Bankograph was installed in New York City in 1961 by the City Bank of New York, but removed after six months due to the lack of customer acceptance. The Bankograph was an automated envelope deposit machine and did not have cash dispensing features and it is widely accepted that the first ATM was put into use by Barclays Bank in its Enfield Town branch in north London, United Kingdom, on 27 June 1967. This machine was inaugurated by English comedy actor Reg Varney and this instance of the invention is credited to the engineering team led by John Shepherd-Barron of printing firm De La Rue, who was awarded an OBE in the 2005 New Year Honours. Shepherd-Barron stated, It struck me there must be a way I could get my own money, I hit upon the idea of a chocolate bar dispenser, but replacing chocolate with cash. The Barclays-De La Rue machine beat the Swedish saving banks and a company called Metiors machine by a nine days. The online version of the Swedish machine is listed to have been operational on 6 May 1968, the collaboration of a small start-up called Speytec and Midland Bank developed a fourth machine which was marketed after 1969 in Europe and the US by the Burroughs Corporation. The patent for this device was filed on September 1969 by John David Edwards, Leonard Perkins, John Henry Donald, Peter Lee Chappell, Sean Benjamin Newcombe & Malcom David Roe. Both the DACS and MD2 accepted only a token or voucher which was retained by the machine while the Speytec worked with a card with a magnetic stripe at the back. They used principles including Carbon-14 and low-coercivity magnetism in order to make more difficult. The idea of a PIN stored on the card was developed by a British engineer working on the MD2 named James Goodfellow in 1965, the essence of this system was that it enabled the verification of the customer with the debited account without human intervention. This patent is also the earliest instance of a complete currency dispenser system in the patent record and this patent was filed on 5 March 1968 in the US and granted on 1 December 1970
16.
Loan
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In finance, a loan is the lending of money from one individual, organization or entity to another individual, organization or entity. A loan entails the reallocation of the asset for a period of time. The loan is provided at a cost, referred to as interest on the debt. In a legal loan, each of these obligations and restrictions is enforced by contract, although this article focuses on monetary loans, in practice any material object might be lent. Acting as a provider of loans is one of the tasks for financial institutions such as banks. For other institutions, issuing of debt such as bonds is a typical source of funding. A secured loan is a loan in which the borrower pledges some asset as collateral, a mortgage loan is a very common type of loan, used by many individuals to purchase things. In this arrangement, the money is used to purchase the property, the financial institution, however, is given security – a lien on the title to the house – until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the right to repossess the house and sell it. In some instances, a loan out to purchase a new or used car may be secured by the car. The duration of the period is considerably shorter – often corresponding to the useful life of the car. There are two types of loans, direct and indirect. A direct auto loan is where a bank gives the loan directly to a consumer, an indirect auto loan is where a car dealership acts as an intermediary between the bank or financial institution and the consumer. Unsecured loans are loans that are not secured against the borrowers assets. These may or may not be regulated by law, in the United Kingdom, when applied to individuals, these may come under the Consumer Credit Act 1974. Interest rates on unsecured loans are nearly always higher than for secured loans, an unsecured lender must sue the borrower, obtain a money judgment for breach of contract, and then pursue execution of the judgment against the borrowers unencumbered assets. In insolvency proceedings, secured lenders traditionally have priority over unsecured lenders when a court divides up the borrowers assets, thus, a higher interest rate reflects the additional risk that in the event of insolvency, the debt may be uncollectible. Demand loans are short term loans that are typically in that they do not have fixed dates for repayment and they can be called for repayment by the lending institution at any time
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Money creation
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Money creation is the process by which the money supply of a country or a monetary region is increased. A central bank may introduce new money into the economy by purchasing financial assets or lending money to financial institutions. However, in most countries today, most of the supply is in the form of bank deposits. Bank lending increases the amount of broad money beyond the amount of money originally created by the central bank. Reserve requirements, capital adequacy ratios, and other policies of the central bank influence this process, Central banks monitor the amount of money in the economy by measuring monetary aggregates such as M2. The effect of policy on the money supply is indicated by comparing these measurements on various dates. For example, in the United States, money supply measured as M2 grew from $6.407 trillion in January 2005, Monetary policy regulates a countrys money supply, the amount of broad currency in circulation. Almost all modern nations have central banks such as the United States Federal Reserve System, the European Central Bank, charged with the smooth functioning of the money supply and financial markets, these institutions are generally independent of the government executive. The primary tool of policy is open market operations, the central bank buys and sells financial assets such as treasury bills, government bonds. Purchases of these result in currency entering market circulation, while sales of these assets remove currency. Usually, open market operations are designed to target a specific short-term interest rate, for example, the U. S. Federal Reserve may target the federal funds rate, the rate at which member banks lend to one another overnight. In other instances, they instead target a specific exchange rate relative to some foreign currency. Other monetary policy tools to expand the money supply include decreasing interest rates by fiat, increasing the monetary base, some other means are, discount window lending, moral suasion, and open mouth operations. The conduct and effects of policy and the regulation of the banking system are of central concern to monetary economics. In modern economies, relatively little of the supply of money is in physical currency. For example, in December 2010 in the United States, of the $8.853 trillion in broad money supply, only about 10% consisted of physical coins, the manufacturing of new physical money is usually the responsibility of the central bank, or sometimes, the governments treasury. Contrary to popular belief, money creation in a modern economy does not directly involve the manufacturing of new physical money, such as paper currency or metal coins. Instead, when the central bank expands the money supply through open market operations, governments or commercial banks may draw on these accounts to withdraw physical money from the central bank
