THE BANKING INDUSTRY

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PRESENTATION:

PRESENTATION GROUP 7:

Slide 2:

You have an amount of idle money but you don’t know what to do with it yet

You want to invest in your business plan or project but you don’t have enough money:

You want to invest in your business plan or project but you don’t have enough money

Slide 4:

You want to pay the online shopping bill

You want to have foreign currencies to travel abroad:

You want to have foreign currencies to travel abroad

What would you do?:

What would you do?

THE BANKING INDUSTRY:

THE BANKING INDUSTRY

Content:

Investment bank Foreign currency 4 Commercial bank 1 2 Central bank 3 Content

I. COMMERCIAL BANK:

I. COMMERCIAL BANK Từ Thị Thu Hương

DEPOSIT:

DEPOSIT A sum of money that is paid into a bank account

Depositor:

Depositor A person who puts money in a bank account

Foreign currency : money in or from other countries, not your country:

Foreign currency : money in or from other countries, not your country The USA CHINA

Exchange foreign currency : the process of changing an amount of one currency for an equal value of another:

Exchange foreign currency : the process of changing an amount of one currency for an equal value of another

Interest rate :   A percentage the borrower must pay in addition to the amount borrowed. :

Interest rate : A percentage the borrower must pay in addition to the amount borrowed .

EX : if the bank receives $100 from the depositor, the bank may need to pay the depositor $110 over the course of a year, meaning the interest rate is 10%:

EX : if the bank receives $100 from the depositor, the bank may need to pay the depositor $110 over the course of a year, meaning the interest rate is 10% One year $1oo $1oo 10%

WHAT IS COMMERCIAL BANK?:

1 Commercial bank is a type of financial intermediaries and a type of banks. WHAT IS COMMERCIAL BANK?

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Receive and hold deposits Pay money according to customers’ instruction Lend money Offer investment advice Exchange foreign currencies Commercial bank

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2 Commercial bank can also refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses, as opposed to normal individual members of the public (retail banking). It is the most successful department of banking .

The commercial banks make profit from the difference between the interest rates they pay to lenders or depositors and those they charge to borrowers. :

The commercial banks make profit from the difference between the interest rates they pay to lenders or depositors and those they charge to borrowers .

Credit:

Credit the provision of resources by one party to another party where that second party does not reimburse the first party immediately, thereby generating a debt , and instead arranges either to repay or return those resources (or material(s) of equal value) at a later date. The first party is called a creditor , also known as a lender, while the second party is called a debtor , also known as a borrower.

Slide 23:

Pay online shopping bill Pay the bills for goods or services in 230 countries on over the world Check and control your credit transaction easily Transfer bank account

In finance, the term “yield” describes the amount in cash that returns to the owners of a security:

In finance, the term “yield” describes the amount in cash that returns to the owners of a security

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Risk : the possibility of sth bad happening at some time in the future

Liquidity : the state of owning things of value that can be easily exchanged for cash.:

Liquidity : the state of owning things of value that can be easily exchanged for cash.

Maturity:

Maturity

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risk Bankers yield balance

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Liquidity Bankers maturities balance ThemeGallery is a Design Digital Content & Contents mall developed by Guild Design Inc.

Investing stock:

Investing stock

INVESTMENT BANK:

INVESTMENT BANK Presenter: Le My Hanh

What is investment bank?:

What is investment bank? A special type of financial institution that work primarily in higher finance by helping company access the capital markets to raise money for expansion or other needs. Investment banks engage primarily in long-term financing.

High net-worth individuals:

High net-worth individuals

Slide 34:

I want to sell $10 million worth by bond to build new bottling plants Asia Ok. I’ll help you

Main activities:

Main activities Investment bank Raise fund for industry on various capital markets Finance international trade Issue government bond Offer stock-broking &portfolio management Act as intermediaries offering advisory services Issue and underwrite securities Deal with takeover and mergers

Raise funds for industry on the various capital markets:

Raise funds for industry on the various capital markets Raise fund: organized activity of soliciting and collecting money for investing or expanding or other needs. capital market

Slide 37:

Capital: amount of money to start or expand any business Capital market: the market where the share of companies are being traded .

Finance international trade:

Finance international trade International trade is the exchange of goods and services between nations.

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Finished products

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Intermediate goods used in producing other goods

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Agricultural products

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Foodstuffs

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International trade enables a nation: To specialize in those goods which can product most cheaply and efficiently To consume more than it would be able to produce To enlarge the potential market for the goods of particular economy

Issue and underwrite securities:

Issue and underwrite securities Corporation need issue Investment bank Investors/ public buy Resell underwriting

Deal with takeover and merger:

Deal with takeover and merger Takeover: is assumption of control of another (usually smaller) firm through purchase of 51% or more its voting shares or stock

Slide 47:

A very large investment bank buy all Bear Stearns with $30 billion

Deal with takeover and merger:

Deal with takeover and merger Merger: is the combining of two or more companies into a single corporation.

Slide 49:

Daimler-Benz Daimler- chrysler

Issue government bond:

Issue government bond A certificate issued by government or company promising to pay back borrowed money at a fixed rate of interest on a specific date Government bond is a bond issued by national government

Offer stock-broking and portfolio management:

Offer stock-broking and portfolio management Stock-broking: buying and selling stocks, shares and other securities Portfolio management: the process of management the assets of mutual fund including choosing and monitoring appropriate investments and distributing funds accordingly

Act as intermediaries offering advisory services:

Act as intermediaries offering advisory services Investment bank advice on insurance, purchase and sale of securities or on the other financial market.

How do investment banks make profit?:

How do investment banks make profit? Investment banks makes profit from fee and commission they charge for their services

Glass- Steagall Act:

Glass- Steagall Act Preventing commercial banks from carrying out investment banking Commercial banks were accused of being too speculative in the pre-Depression this caused the credit crisis and massive bank failure In Nov. 1999, to the delight of many in banking, this law was repealed universal banks were born Glass- steagall Act rule reason repealing

Slide 55:

CENTRAL BANK

Slide 56:

Content Monetary policy Lender of last resort Foreign exchange

Slide 57:

A central bank ( reserve bank or monetary authority ) is a banking institution granted the exclusive privilege to a government its currency Its primary function is to provide the nation's money supply , a ‘ lender of last resort to the banking sector during times of financial crisis

Slide 58:

Implement Monetary Policy

Slide 59:

Monetary policy is one of the tools that a national government uses to influence its economy. The central bank varies the quantity of money in circulation, the cost and availability of credit, and the composition of a country’s debt. 4 instruments: Open market Reserve require- ment Discount rate Implement monetary policy Currency issuance

Slide 60:

I.Open market operations Buying or selling of Government bonds in the open market

Slide 61:

II.Reserve requirements Reserve requirement ratio of cash and at least% of the total amount of cash in by people sent to that member banks must keep in store cash deposited in banks or signed central bank , not loan out When the reserve requirement ratio increases, the supply of bank system of commercial banks and financial institutions also reduce the immediate and vice versa. Defined by the ratio of compulsory reserve central banks manage closely the speed and supply of bank intermediary banking system.

Slide 62:

III.Discount rate Where the commercial banks borrow reserve from the central bank at a discount rate, Thus when the central bank increased the discount rate will reduce the money supply of the intermediate banking system, reducing money supply in the entire economy and vice versa.

Slide 63:

central bank regulations is that the interest rate of the bank is 10%, but if the commercial bank lending rate below the reserve requirement and must borrow to central banks, central banks will loans with interest rates 12%. At the commercial bank would consider, if it is to borrow the reserve requirement ratio to 10% interest rate, then when payment is not re-lending of central bank interest rates higher. The holes in the loan of the central bank will force central banks to reduce the amount of time to lend, or otherwise reduce the supply of bank reserves and increase to solve a problem when people withdraw money .

Slide 64:

IV.Currency issuance Only central bank has the authority to issue notes and coins Central bank can directly manage the cash supply. This is the first tool that helps central banks regulate the money supply general. With the exclusive release of the money, the government can adjust the amount of money in circulation to control inflation and thereby reduce the interest rate may rise to increased demand or reduced demand for each point of the economy.

Slide 65:

Money supply

Slide 66:

Foreign exchange Foreign exchange, or Forex , is the conversion of one country's currency into that of another In a free economy, a country's currency is valued according to factors of supply and demand.  In other words, a currency's value can be pegged to another country's currency, such as the U.S . The value of any particular currency is determined by market forces based on trade, investment, tourism

Slide 67:

Lender of last resort The lender of last resort functions both to protect individuals who have deposited funds, and to prevent panic withdrawing from banks who have temporary limited liquidity. Commercial banks usually resort to lender’s help only in times of crisis because such actions indicate financial difficulties. Loans may be granted not only to commercial banks but also to any other eligible financial institution, even private companies, which is considered highly risky.

Eurocurrency:

Eurocurrency Any currency held outside its country of origin. Ex: Eurodollar,euroyen,… Key points are the location of the bank and the denomination of currency

Slide 70:

The Eurocurrency market is active,as they avoid domestic interest rate regulations, reserve requirements and other barriers to the free flow of capital The " euro " prefix can be used to indicate any currency held in a country where it is not the official currency Ex: euroyen or even euroeuro

Eurodollar:

Eurodollar The first significant Eurocurrency market was for US dollar in Europe: US$ is the world’s most important trading currency The US had a huge deficit for many years

Petrol dollar:

Petrol dollar Is the US dollar earned by a country through the sale of petroleum The term should not be confused with petrocurrency which refers to the currencies of petroleum exporting nations.

Dollarization :

Dollarization Occurs when the inhabitants of a country use foreign currency in parallel to or instead of the domestic currency. The term is not only applied to usage of the United States dollar, but generally to the use of any foreign currency as the national currency

Slide 74:

Dollarization can occur: Unofficially Semiofficially (or officially bimonetary systems) Officially

References:

References http://en.mimi.hu/ http://www.financesglossary.com/ http://finance.yahoo.com/ http://www.yourdictionary.com/

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