Bank

Bank is a financial organization that has the prerogative to open accounts for customers and make money transfers on their request, to deposit money, and to credit people and organizations. Banks have the right to operate only if it has a license.

Banks are a tool of economy with the function of supplying financial facility to customers (people and businesses).

Banks stimulate people to not save money by withdrawing it from circulation, but to buy immediately. Due to this, the economy grows and develops. Loans are only used to maintain the money circulation rate. If the rate drops, banks stimulate it with credits. If the circulation rate grows, it cannot grow infinitely, because banks can not give loans to everyone in a row for any amount. Due to these banks also limit the circulation speed.

A banking is a business whose owners, in most cases, are its shareholders. Bank owners get a profit by demanding more interest on borrower debts, than they pay to the users of these savings mechanisms. For example, a bank pays 5% on a savings account and charges 10% on loans and debentures, making a gross profit of 5% for its owners.

Bank functions

With credit, banks have 3 key functions, which are: to stimulate the speed of money circulation, to stimulate people to not keep money under the pillow and return it to the economy, to stimulate consumption through credit, and thus stimulate the growth of business, salaries and the economy in total.

Banks are a safe way to store cash with the ability to dispose of it in checking, savings accounts, certificates of deposit (CDs) and get interest on their investments. Money in bank accounts is typically insured by the Federal Deposit Insurance Corporation (FDIC).

Banks service loans to people and companies by lending the money they hold in them to other people for paying off long-term debts (car loans, mortgages, and other).

The location of the bank and the people the bank serves determine its extent. Traditional banks offer services in physical departments and online. Since 2010, banks that operate just online have been founded. These banks often offer consumers higher interest rates and lower commissions. When choosing a bank, consumers are guided by usability, interest rates and fees.

Types of banks

Retail banks (personal, general banking institutions). They work with retail customers, offering checking and saving accounts, credit, mortgages, car financing, short-term loans (overdraft protection), credit card services and foreign currency exchange to the public.

Corporate (commercial) banks. They provide daily banking services and special services to their business clients (small business owners and big corporations). These banks also provide their clients with credit services, cash management, commercial real estate services, trade finance, employer services, and other services.

Investment banks. They focus on providing complex services to corporations and carrying out financial operations of underwriting, mergers and acquisitions (M&A). First, they are known as financial intermediaries in most of these deals. Usually, clients are big corporations, other financial institutions, pension funds, governments and hedge funds.

Central banks. They are not marketable and don't work with the public. They are responsible for currency stability, inflation control, monetary policy, the money supply of the country, regulate requirements to capital and reserves of member banks.

Regulation of banks

Bank regulation in U.S. has become much stricter after the 2008 global financial crisis. Regulation can be at the state level (by state departments) or at the national level (by the Office of the Comptroller of the Currency - OCC), in some cases at both levels. FDIC-insured banks are regulated by the FDIC additionally.

The state's financial organizations are liable for permitted practices, the interest number that a bank can charge, and bank audit and inspection. The Office of the Comptroller of the Currency (OCC) is liable for the asset quality, liquidity and bank capital condition.

Periodically, big banks conduct a stress test, which assesses the adequacy of capital to continue operating in complicated economic situations. The Dodd-Frank Wall Street Reform and consumer protection act was put in force in 2010 to reduce risks in the U.S. financial system after the financial crisis.

Myths around banks

Banks create money out of the air. Banks create credit, which is new money by accelerating its circulation in the economy. The bank's reserves are always much smaller than the amount of issued loans, but this is a standard situation, because the money is deposited not by increasing their number, but by speeding up their circulation. In addition, when the economy is developing, deposit holders do not need to withdraw money from banks, because they get interest on their deposits. In case of economic crises and other disasters, the Central Bank helps commercial banks by providing them with cash against assets so that they can pay back depositors who want to take their money back.

Credit and the modern banking system were invented in order to force the population into credit slavery. Banks give out money, but the borrower has to pay it back with interest. This interest does not exist in reality, there are no banknotes printed for it, which means that the borrower cannot pay the money back and is forever in credit bondage. In fact, the amount of money in the economy is regulated by the circulation speed. In order to pay back a loan with interest it is not necessary to increase the number of banknotes physically, it is enough to increase the circulation speed, and it is growing, just by increasing the number of loans and their availability to the population and businesses.

Credit is an absolute evil. Credits were created just to give people and businesses an opportunity to grow and develop. If you use credit not to buy the next iPhone, but for education and improvement of your own productivity, it will allow you to increase your life quality. Only a person makes credit a good or an evil. It depends on what s/he spends it on.

Bank or credit union 

There are some differences between them. A bank is a profit-oriented organization, while a credit union is a non-profit organization under volunteers and is tax-free. Credit unions have a smaller range of services, fewer offices and automated teller machines (ATMs).