Commercial Banks, Credit Unions, and Monetary Policy

Financial services are economic services provided by the finance industry, which includes credit unions, banks, credit-card companies, insurance companies, accountancy firms, consumer-finance firms, investment funds, stock brokerages, individual asset managers, and some government-sponsored enterprises. A commercial bank refers to a type of bank that is often referred to as a bank. The name “commercial” is used to distinguish it from an investment bank, which, rather than lending money directly to a company, assists it in raising funds from other companies in the form of bonds (debt) or share capital (equity).

Commercial Bank Services

Commercial banks’ main activities are as follows:

• Safeguarding funds while enabling withdrawals when necessary

• Issuance of cheque books to allow for the payment of bills and other types of payments to be sent through the mail.

• Personal, commercial, and mortgage loans are all available (typically loans to purchase a home, property or business)

• Issuing credit cards, as well as processing and invoicing credit card transactions

• Debit cards are issued to be used as a substitute for checks.

• Allow financial transactions to take place at branches or through automated teller machines (ATMs) 

• Interbank wire transfers and electronic fund transfers are available.

• Standing orders and direct debits are made easier, allowing bill payments to be made automatically.

• Provide overdraft agreements, which allow the bank to advance its own money temporarily to satisfy a customer’s monthly spending commitments in their current account.

• Provide an internet banking system that allows consumers to monitor and manage their accounts via the internet.

• Provide charge card advances using the bank’s own funds for customers who want to pay off their credit cards on a monthly basis.

• Provide a check, including a cashier’s check or a certified check, that is guaranteed by the bank and prepaid by the customer.

• For financial and other papers, a notary service is available.

Credit Union

A credit union is a non profit financial cooperative owned by its members that operates similarly to a commercial bank. Credit unions and banks are required to maintain a reserve ratio of assets to liabilities in most countries. When a credit union or traditional bank is unable to maintain positive cash flow and/or must file for bankruptcy, its assets are split among creditors (particularly depositors) in order of seniority under bankruptcy law. If total deposits exceed assets after more senior creditors are paid, all depositors will lose some or all of their initial deposits.

Monetary Policy

Monetary policy refers to a set of tools that a country’s central bank can use to encourage long-term economic growth by limiting the amount of money accessible to the country’s banks, consumers, and enterprises.

Although the United States Treasury Department has the capacity to produce money, the Federal Reserve has a significant influence on the amount of money available in the economy, mostly through open market operations (OMO). Essentially, when monetary policy is eased, financial securities are purchased, and when monetary policy is tightened, financial securities are sold. Treasury bills and agency mortgage-backed securities are the Fed’s favoured securities for OMO.

The goal is to maintain a stable economic growth rate that is neither too rapid nor too sluggish. The central bank may raise borrowing interest rates to discourage expenditure or lower borrowing interest rates to encourage greater borrowing and spending. The nation’s money is its most powerful weapon. The central bank determines the interest rate at which it lends money to the country’s banks. All financial institutions adjust the rates they charge all of their customers when they raise or drop their rates, from large enterprises borrowing for major projects to home buyers seeking for mortgages.

Ownership Structure

The internal organisation of a corporate entity, as well as the rights and responsibilities of the individuals who have a legal or equitable interest in that business, are discussed in the ownership structure. As the owner of a business entity, it is critical to understand how that entity’s ownership structure is formed and what it means for the owner’s rights.

As an example, as the owner of a corporation, a shareholder has specific rights. These rights differ from those of limited liability company members. Furthermore, a holder of preferred stock may have different rights than a holder of common stock within the organisation.

Financial Services

In a financial system, financial services refer to the services offered by banks and financial organisations. Financial services can encompass a wide range of activities that have a financial component. The phrase “financial services” refers to the mobilisation and allocation of savings in a broad sense. As a result, it encompasses all operations related to the conversion of savings into investment. The finance industry encompasses a wide range of businesses that deal with the inflow and outflow of funds in a given economy. Asset Management Companies, such as leasing companies and merchant bankers, and Liability Management Companies, such as discounting houses and acceptance houses, are among these organisations, as are general financial institutions such as banks, credit card companies, stock exchanges, insurance companies, consumer finance companies, and government-sponsored enterprises.

Conclusion

Customers are frequently at the centre of financial services. Financial services are provided based on the needs of the customer. For example, an industrial customer may require leasing finance, whereas a company issuing new equity shares in the market may require merchant banker’s services. Financial services organisations, like other service firms, keep in touch with their consumers on a regular basis so that they may build products that meet their individual needs.

The nature of financial services is intangible. The importance of brand image in today’s highly competitive global economy cannot be overstated. Financial institutions that provide financial products and services may not be successful unless they have a positive image and their clients’ trust. The production and supply of financial services must be done at the same time. Both of these duties, namely the creation of new and innovative financial services and the provision of these services, must be carried out at the same time.