Download Introduction, how to understand the role of the bank within the

Lesson 1
Winter 2013
1. Introduction, how to understand the role of the
bank within the financial system
2.
3.
4.
5.
6.
Banking terminology – key definitions, wording
Financial system – what does it mean, components, tasks, aspects
Bank – structure, key areas of the activities, assets, liabilities
Czech financial system – components, tasks, legislation
Central bank – main goals, relation to EU legislation, impacts to the
market
7. International monetary system, floating and fixed rates
8. European Union – currency – EUR, impacts to CZK
9. Banks and the Foreign Exchange Market
i. Historical review
ii. The European monetary system
iii. Exchange rate – what does it mean and why
10. Basic terminology for Foreign and Money Market
11. Foreign Exchange and Money Market Operations in Practise
i. Foreign exchange market
ii. Money Market
12. Summing up the semester
Summer 2014
1. Wrap up of the winter course
i. Key products of the financial system for non-financial
customers
2. Deep dive into Foreign exchange market and Money Market
i. Spot, Forward, Futures, Options
ii. Deposits, corporate desk
3. Methods of the international settlement through banks I.
i. Nostro, vostro accounts
ii. SWIFT
4. Methods of international settlement through banks II.
i. Value dating
ii. Back office – tasks, activities
5. Transport documents used in international trade I.
i. The meaning of open account payment term
ii. Specimen bill of lading
6. Transport documents used in international trade II
i. The function of a bill of lading
ii. The different types of bill of lading
7. Incoterms
i. The purpose of Incoterms
ii. The 14 Incoterms
8. Short-term finance for exports
i. The definition
ii. An overview of the short-term facilities available for
exporters
9. Medium and Long-term finance for exports
i. Introduction
ii. The type of products – forfaiting, leasing
10. Documentary credits for imports
i. The risk, which a bank runs when it issues a documentary
credit
ii. How to reduce and issuing risk
11. Actual development on the financial market
i. Euro countries
ii. CZK market
12. Summing up the semester
Introduction, how to understand the role of the
bank within the financial system
Financial system - definition
The financial system is the system that allows the
transfer of money between savers (and investors) and
borrowers.
A financial system can operate on a global, regional or firm specific level.
A set of complex and closely interconnected financial institutions, markets,
instruments, services, practices, and transactions."
According to Franklin Allen and Douglas Gale in Comparing Financial Systems:
"Financial systems are crucial to the allocation of resources in a modern
economy. They channel household savings to the corporate sector and allocate
investment funds among firms; they allow intertemporal smoothing of
consumption by households and expenditures by firms; and they enable
households and firms to share risks. These functions are common to the financial
systems of most developed economies. Yet the form of these financial systems
varies widely."
Function
- collection of money
- distribution of money
By other words:
The bank is the financial institution accepting your deposits, and allowing
you to make withdrawls from your banking account. It is because of this
important role, that banks are heavily regulated within most countries,
and operated within a specific system known as fractional reserve
banking;
“Where they hold only a small reserve of the remaining funds, and lend
out the rest for profits”.
The common roles of a bank, is to act as a payment agent through paying
or collecting cheques depositied into a customer's account. Banks also
allow you to perform and accept a variety of other forms of payment
methods, such as a wire transfer, or an automated teller machine (ATM).
GLOBAL FINANCIAL SYSTEM
The global financial system is the worldwide
framework of legal agreements, institutions, and
both formal and informal economic actors that
together facilitate international flows of financial
capital for purposes of investment and trade
financing.
The system has evolved substantially since its emergence in the late 19th
century during the first modern wave of economic globalization, marked
by the establishment of central banks, multilateral treaties, and
intergovernmental organizations aimed at improving the transparency,
regulation, and effectiveness of international markets
FINANCIAL SYSTEM COMPONENTS
A financial system consists of systemically
important financial institutions, their customers
and other stakeholders, and financial regulators.
Contemporary globalization and economic integration have increased the
interdependence of financial systems around the world and the
importance of financial institutions that operate by design at an
international or multinational level.
The World Health Organization (WHO) defines "global financial system"
as "...various official and legal arrangements that govern international
financial flows in the form of loan investment, payments for goods and
services, interest and profit remittances. The main elements are the
surveillance and monitoring of economic and financial stability, and
provision of multilateral finance to countries with balance of payments
difficulties. The organization at the centre of the system is the
International Monetary Fund (IMF), which has the mandate to ensure its
effective running."
The Financial Times lexicon defines it as an "..interplay of financial
companies, regulators and institutions operating on a supranational level.
The global financial system can be divided into regulated entities
(international banks and insurance companies), regulators, supervisors
and institutions like the European Central Bank or the International
Monetary Fund. The system also includes the lightly regulated or nonregulated bodies - this is known as the 'shadow banking system'. Mainly,
this covers hedge funds, private equity and bank sponsored entities such
as off-balance-sheet vehicles that banks use to invest in the financial
markets."
A BANK WITHIN THE FINANCIAL SYSTEM
A bank is a financial institution and a financial intermediary that accepts
deposits and channels those deposits into lending activities, either
directly by loaning or indirectly through capital markets.
A bank is the connection between customers that
have capital deficits and customers with capital
surpluses.
Due to their influence within a financial system and the economy, banks
are highly regulated in most countries. Most banks operate under a
system known as fractional reserve banking where they hold only a small
reserve of the funds deposited and lend out the rest for profit. They are
generally subject to minimum capital requirements which are based on
an international set of capital standards, known as the Basel Accords.
Banking in its modern sense evolved in the 14th century in the rich cities of
Renaissance Italy but in many ways was a continuation of ideas and
concepts of credit and lending that had its roots in the ancient world. In the
history of banking, a number of banking dynasties have played a central
role over many centuries. The oldest existing bank was founded in 1472
History
Banking is a modern sense of the word can be traced to medieval and
early Renaissance Italy, to the rich cities in the north like Florence, Lucca,
Siena, Venice and Genoa.
The Bardi and Peruzzi families dominated banking in 14th century
Florence, establishing branches in many other parts of Europe. One of the
most famous Italian banks was the Medici Bank, set up by Giovanni di
Bicci de' Medici in 1397. The earliest known state deposit bank, Banco di
San Giorgio (Bank of St. George), was founded in 1407 at Genoa, Italy. The
oldest bank still in existence is Monte dei Paschi di Siena, headquartered
in Siena, Italy, which has been operating continuously since 1472. It is
followed by Berenberg Bank of Hamburg (1590)[6] and Sveriges
Riksbank of Sweden (1668).
The word bank was borrowed in Middle English from Middle French
banque, from Old Italian banca, from Old High German banc, bank "bench,
counter". Benches were used as desks or exchange counters during the
Renaissance by Florentine bankers, who used to make their transactions
atop desks covered by green tablecloths.
One of the oldest items found showing money-changing activity is a silver
Greek drachm coin from ancient Hellenic colony Trapezus on the Black
Sea, modern Trabzon, c. 350–325 BC, presented in the British Museum in
London. The coin shows a banker's table (trapeza) laden with coins, a pun
on the name of the city. In fact, even today in Modern Greek the word
Trapeza (Τράπεζα) means both a table and a bank.