Banking structure—An important link in financial sector
While banks serve as financial intermediaries, thus providing a link between depositors and borrowers banking structure has great significance in ensuring their smooth working. Commercial banks and thrift institutions form the majority of depository institutions. While commercial banks take deposits from households and corporate businesses, thrift institution cater to the deposits from savings accounts. The functions of money include the store of value and using it as a medium of exchange. Credit card issued by banks, is used as a medium of exchange and a savings bank passbook can be a form for the stored value. However, there are certain conditions required for the creation of money, which include mainly the available depositors, as well as borrowers who are willing to borrow the funds. This forms the basis of any financial structure in banking industry.
Financial Services Modernization (Gramm-Leach-Bliley) Act of 1999 paved the way to allow commercial banking, investment banking and insurance underwriting, under one umbrella, thus bringing the required consolidation in financial services, where banks played the major role. The act also powered banking industry to make equity investments in non-financial firms, which has affected the banking industry as such.
However, the technological advancement as experienced in every sphere has strengthened the banking structure within the financial sector, in a positive way. With the advent of internet banking and other financial transactions over the internet, banking industry is poised to perform in the new role as an important link between depositors and borrowers. However, as privacy of consumers is of utter importance, regulation from FTC in this regard would help to solve the related problems, to a certain extent.
Nevertheless, many recent financial products, like ATM Debit and credit cards, from the banking sector, although have provided consumers with tremendous opportunities, there is a need to safe guard the interest of both the customer and the bank, in the wake of security threats to banking structure, while using internet and e-commerce applications. However, with the day-to-day evolution of this structure, banking industry is standing on sound footing.
Readers are also advised to go through “Changing Financial Industry Structure and Regulation”, by Brewer and D. Douglas, to understand the topic in detail. Also various articles over the internet on money and financial markets would further clarify the doubts, regarding the importance of banking structure.
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