Kinds of banks

Commercial banks. Banks differ in the services they provide and in how they are owned. Many financial experts use the word bank to refer only to a commercial bank. These experts believe that savings banks, savings and loan associa­tions, and credit unions are not true banks because they; do not perform all the functions of commercial banks. S

Savings banks, savings and loan associations, and credit unions are often called thrift institutions, or simply thrifts, because their chief purpose is to encourage sav­ing. Many countries also have institutions called central banks, and some have investment banks. Although such institutions are called banks, they do not accept depos­its or lend money to the public.

Commercial banks are the most numerous banks in the United States. The nation has about 11,900 such banks, and their assets total about $3| trillion.

Commercial banks offer a full range of services, in­cluding checking and savings accounts, loans, and trust services. They primarily serve the needs of businesses but also offer their services to individuals.

A commercial bank is owned by stockholders who buy shares in it In return for investing in the bank's stock, the stockholders expect the bank to pay them cash dividends from its profits.

Savings and loan associations. Savings and loan associations are the second larg­est group of deposit institutions in the United States. There are about 2,000 savings and loans, as they are known. They have total assets of about $800 billion.

Savings and loans were established to help people to purchase homes. Through the years they have been the chief source of home mortgages. Traditionally, they loaned money to businesses only for real estate con­struction. But today, savings and loan associations offer a variety of services for individuals and businesses, in­cluding NOW accounts, checking accounts, money mar­ket accounts, IRA's, and business loans.

In the past, almost all savings and loans were owned and operated by their depositors. But today, almost half are owned and operated by stockholders.

Savings banks are most commonly found in the Northeast. The United States has about 450 savings banks, with assets of about $240 billion.

Savings banks. Savings banks were created in the early 180CS as charitable institutions to provide a safe place for poor working people to save for retirement Originally, al­most all savings banks were mutual savings banks, which are run by a board of trustees who elect their own successors. Mutual savings banks pass on any prof­its to their depositors as interest. But since the mid-1980's, many savings banks have become stock savings banks. These banks are run by a board of directors who are elected by shareholders.

Savings banks offer savings and checking accounts and IRA's and make personal and business loans. Fed­eral and state laws ensure the safety of depositors' money by limiting the investments such banks can make and by insuring the deposits. Savings banks invest chiefly in mortgages and government bonds.

Credit unions are an important type of savings insti­tution in the United States. There are about 14,300 credit unions, and their assets total about $230 billion. Most credit unions are formed by people with a common bond. For example, they may work for the same com­pany or belong to the same church. The members pool their savings. When one of them needs money, he or she may borrow from the credit union, often at a lower rate of interest than from another financial institution.

A credit union distributes its earnings to the mem­bers as dividends. Federal and state laws limit credit un­ions to meeting the needs of individual members, and these institutions cannot lend to businesses.

Central banks. Central banks, which in most countries are govern­ment agencies, perform many financial services for the national government. Their chief responsibilities are to regulate banking and to control the nation's money sup­ply. The money supply is the total quantity of money in the country, including cash and bank deposits.

Central banks also perform a variety of services for other banks. For example, they serve as a lender of last resort— that is, they make emergency loans to banks that are short of cash. Central banks also handle the clearing of checks, the process by which banks settle claims against one another resulting from checks.

In the United States, the Federal Reserve System serves as a central bank. Most large U.S. commercial banks belong to it. Central banks in other nations in­clude the Bank of Canada and the Bank of England.

Investment banks. Investment banks purchase newly issued stocks and bonds from corporations and governments. These banks then resell the securities to individual investors in smaller quantities. An investment bank makes a profit by selling securities at a higher price than it paid for them. Most banks in the United States once did such buying and selling, but now only specialized investment banks and a few large commercial banks do so. An investment bank may overestimate the demand for the securities that it buys and may have to sell them at a loss. Congress believed this risk helped cause many bank failures dur­ing the early years of the Great Depression. As a result, Congress passed the Glass-Steagall Banking Act of 1933. One provision of the act prohibited an institution that accepted deposits and made loans from doing invest­ment banking.

Words and word combinations you may need:

refer -направлять elect-избирать

union-союз mortgage-ипотека

accept-принимать lender-кредитор

stockholder-акционер overestimate-переоценивать

purchase -покупка price-цена

chief- главный stocks-акции

source -источник at a loss-в затруднении

create-создавать emergency –крайне необходимый

responsibility-ответственность resort-обращение

Дата добавления: 2014-10-22