Banking and Development Essay

2171 WordsJul 28, 20149 Pages
INTRODUCTION Bank are financial establishments whose the main function is to receive deposits and make money through lendings. (Aven,2014). In the past, regulations of banking operations were purely restraint and controlled; that’s why banks could only borrow funds from public and make money through lending to the investors. Over time, banks started seeking for more profit that lead them to develop new technology bases on electronic banking... (SUBRAMANYAM. M.J , XCHANGING, BANGALORE) Thus, traditional banking is deliberation whereas modern banking is more flexible and has become liberal in terms of credit and asset valuation. 1.0 BANK ACTIVE FINANCIAL INSTITUTIONS WITH COMPLEX RISK A banking institute is a financial establishment that provides monetary services to its customers. A bank governed by central bank, central bank have super power which can make interest rate, setting the reserve requirement, and also the central bank will give the last resort to the bank which bank will happen the bankruptcy. Liberalization which meaning the government remove control from banks, so banks have more freedom to do different action which add more risk. Compare to tradition banks, now banks becomes a diversified financial institutions which provide different services, such as trusts/mutual funds, stockbroking, insurance, pension fund or asset management, and real estate service. Off-balance-sheet (OBS) mentioned to items that are assets or liabilities of a firm, however, did not appear on the firm's balance sheet. Off-balance-sheet financing aims at compiling with financial covenants, however, companies use off-balance-sheet financing as well to forecast borrowing capacity, decrease their borrowing rates, or manage risk. Banks have offered some OBS products for many years. They include, among others, credit cards, letters of credit, the issue of

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