UA FI 301 - Commercial Bank Operations (6 pages)

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Commercial Bank Operations

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Commercial Bank Operations


Chapter 17 Commercial Bank Operations

Lecture number:
Lecture Note
University of Alabama
Fi 301 - Intro Financl Instit Mkt

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Finance 301 1st Edition Lecture 17 Outline of Last Lecture I Money Market Funds II Other Types of Funds III Performance of Mutual Funds IV Valuation of Bond Mutual Funds Outline of Current Lecture I II III IV Background on Commercial Banks Bank Sources of Funds Uses of Funds by banks Off Balance Sheet Activities Current Lecture I Background on Commercial Banks a Interstate banking regulations 1994 So the number of banks are increasing or decreasing over time i 1985 top 100 banks had 50 percent of countries money ans assets but as of mid 2000s top 100 banks had about 75 percent of our money and assets banks have been getting larger in size but smaller in number and acquisitions ii 1994 banks start buying other banks merging to become smaller number of banks decreased but sizes got bigger iii Financial conglomerates multiple businesses commercial investment and sell insurance all at the same time Commercial mainly loan money investment banks invested in peoples money They don t sell real estate yet Government is not letting them do everything yet this is good and bad good because it is convenient get everything done at one place but there is nothing specialized and there are less options for the customers the little guys have to compete with banks that are too big to fail II b Bank holding companies generally own 10 or more of the bank and provide flexibility with the following example regions bank or regions financial corp banks have to borrow money because they need to meet their obligations pay interest on different savings and checking accounts i Short term debt ii Stock issuance iii Stock repurchase iv Acquisitions c Bank Sources of Funds a Transaction Deposits i A demand deposit account first place they get their money fancy name for checking accounts ii Conventional demand deposit write unlimited checks iii Negotiable order of withdrawal NOW account they pay interest on a NOW account have to have a minimum balance They want money to loan out b Electronic

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