Faculty of Economics and Administration Science - Banking & Finance

Banking and finance are crucial components of the economy, providing essential services that facilitate economic growth and stability. Here’s a comprehensive overview of both fields:

 Banking

 Types of Banks
1.Commercial Banks:
 Provide services to individuals and businesses.
 Services include accepting deposits, providing loans, and offering checking and savings accounts.

2. Investment Banks:
Focus on helping companies raise capital.
 Engage in underwriting, mergers and acquisitions, and trading securities.

3. Central Banks:
Regulate the money supply and oversee the banking system.
 Examples include the Federal Reserve (U.S.), European Central Bank (ECB), and Bank of England.
 Implement monetary policy, manage inflation, and ensure financial stability.

4. Retail Banks:
 Serve individual customers with personal banking services.
Offer products like mortgages, personal loans, and credit cards.

5.Credit Unions:
Member-owned financial cooperatives.
 Provide similar services to commercial banks but often with lower fees and better interest rates for members.

 Banking Operations
1. Deposit Services:
Accepting deposits from customers, providing a safe place to store money.
 Interest-bearing accounts like savings accounts, fixed deposits, and certificates of deposit (CDs).

2. Loan Services:
Providing loans to individuals and businesses for various purposes (e.g., mortgages, auto loans, business loans).
 Assessing creditworthiness and managing credit risk.

3. Payment Services:
 Facilitating transactions through checking accounts, debit and credit cards, and electronic transfers.
Implementing secure and efficient payment processing systems.

4. Wealth Management:
 Offering investment advice and financial planning services.
 Managing investment portfolios and retirement accounts.

 Finance

 Branches of Finance
1. Corporate Finance:
 Deals with the financial activities related to running a corporation.
 Includes capital investment decisions, financing decisions, and dividend policy.

2. Personal Finance:
 Focuses on individual financial planning and management.
 Includes budgeting, saving, investing, insurance, and retirement planning.

3. Public Finance:
 Concerned with the financial activities of governments and public sector entities.
Involves taxation, government spending, budgeting, and debt issuance.

4. International Finance:
Deals with financial interactions between countries.
Involves exchange rates, international trade, and foreign investment.

 Financial Markets
1. Stock Markets:
Platforms for buying and selling shares of publicly traded companies.
 Major stock exchanges include the New York Stock Exchange (NYSE) and Nasdaq.

2. Bond Markets:
Platforms for buying and selling debt securities.
Governments and corporations issue bonds to raise capital.

3. Foreign Exchange Markets (Forex):
Markets where currencies are traded.
Exchange rates are determined, and currency risk is managed.

4. Derivatives Markets:
Financial instruments like futures, options, and swaps are traded.
Used for hedging risk and speculation.

5. Commodity Markets:
Trading of physical goods like gold, oil, and agricultural products.

 Financial Instruments
1. Equities:
Represent ownership in a company.
 Include common stocks and preferred stocks.

2. Bonds:
 Debt instruments where the issuer borrows funds from investors and pays interest.
 Include government bonds, corporate bonds, and municipal bonds.

3. Derivatives:
 Financial contracts whose value is derived from underlying assets.
 Include options, futures, and swaps.

4.Mutual Funds and ETFs:
Pooled investment vehicles that allow investors to diversify their portfolios.
Managed by professional fund managers.

 Financial Management
1. Risk Management:
 Identifying, analyzing, and mitigating financial risks.
 Includes credit risk, market risk, operational risk, and liquidity risk.

2. Portfolio Management:
Constructing and managing a portfolio of investments to achieve financial goals.
Balancing risk and return through asset allocation and diversification.

3. Financial Analysis:
Evaluating financial statements and performance metrics.
Using ratios, trend analysis, and benchmarking to assess financial health.

 Regulatory Environment
1. Financial Regulations:
Laws and rules governing financial institutions and markets.
 Aim to ensure stability, protect consumers, and maintain market integrity.

2. Regulatory Bodies:
Entities that enforce financial regulations.
Examples include the Securities and Exchange Commission (SEC), Financial Conduct Authority (FCA), and Basel Committee on Banking Supervision.

 Conclusion

Banking and finance are interrelated fields that play vital roles in the economy. Banks provide essential services that facilitate transactions, savings, and investments, while the broader field of finance encompasses the management of money, assets, and risks. Together, they contribute to economic growth, stability, and the efficient allocation of resources.