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What is a bank?
A
bank is a financial intermediary that accepts
deposits and channels those deposits into
lending activities, either directly or
through capital markets. A bank connects customers
with
capital deficits to customers with
capital surpluses.
The
definition of a bank varies
from
country to
country.
Under English
common law, a
banker is defined as a person who
carries on the business of banking, which is
specified as
:
?
conducting
current accounts for his customers
?
paying cheques
drawn on him, and
?
collecting
cheques for his customers.
Banks act as payment agents by
conducting checking or current accounts for
customers,
paying
cheques
drawn
by
customers
on
the
bank,
and
collecting
cheques
deposited
to
customers' current accounts. Banks also
enable customer payments via other payment methods
such as telegraphic transfer, EFTPOS,
and ATM.
Banks borrow money
by accepting funds deposited on current accounts,
by accepting term
deposits,
and by issuing
debt
securities such
as
banknotes and bonds. Banks lend money
by
making
advances
to
customers
on
current
accounts,
by
making
installment
loans,
and
by
investing
in marketable debt securities and other forms of
money lending.
Banks
provide
almost
all
payment
services,
and
a
bank
account
is
considered
indispensable
by
most
businesses,
individuals
and
governments.
Non-banks
that
provide
payment
services
such
as
remittance
companies
are
not
normally
considered
an
adequate
substitute for
having a bank account.
Banks
borrow
most
funds
from
households
and
non-financial
businesses,
and
lend
most
funds to households and non-financial
businesses, but non-bank lenders provide a
significant
and
in
many
cases
adequate
substitute
for
bank
loans,
and
money
market
funds,
cash
management trusts and other non-bank
financial institutions in many cases provide an
adequate
substitute to banks for
lending savings to.
The economic functions of banks
include: