Banks and Banking

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categorie: Engleza

nota: 9.51

nivel: Facultate

Banks and Banking
Banking is known about it prior to the 13th century.
Early “banks” dealt primarily in coin and bullion, their business being money changing and the supplying of foreign and domestic coin. Another group of banking institutions was the merchant bankers, who dealt in goods and in bills of exchange, providing for the remittance of money at distance through o[...]
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Banks and Banking
Banking is known about it prior to the 13th century.
Early “banks” dealt primarily in coin and bullion, their business being money changing and the supplying of foreign and domestic coin. Another group of banking institutions was the merchant bankers, who dealt in goods and in bills of exchange, providing for the remittance of money at distance through one of its agents elsewhere.
Another form of early banking activity was the acceptance of deposits based on oral agreement between the parties whereby the customer would be allowed to overdraw his account.

Banks and Banking
In the 17th century, English bankers begun to develop a deposit banking business. They dealt in bullion and foreign exchange, acquiring and sorting coin for profit. As a means of attracting coin for sorting, they were prepared to pay a rate of interest.

Banks and Banking
About the same time, a practice grew up, whereby a customer could arrange for the transfer of part of his credit balance to another party by addressing an order to the banker. This was the origin of modern check. It was only a short step from making a loan in specie or coin, to allowing customers to borrow by check. The customer could overdraw his account at once or up to a specified limit. In the first case, interest was charged on the full amount of the debit, and in the second, the customer paid interest only on the amount actually borrowed.

Banks and Banking
Another way in which a bank could create claims against itself was by issuing bank notes. The amount depended on the banker’s judgement of the possible demand for specie. The first bank notes issued in Europe were by the Bank of Stockholm in 1661. Nowadays, in most countries the issue of bank-notes has become a prerogative of the Central Bank.

Banks and Banking
When the check proved to be a convenient mean of payment and the public begun to use check for the larger part of their monetary transactions, banks begun to grant the drawing of checks much in excess of the amount of cash hold, in this way “creating money”, claims that were generally accepted as means of payment. Such money come to be known as “bank money” or “credit”. When a check is drawn, a loan is created but usually every loan so made tends to return to the banking system as a deposit, and so deposits tend to increase for the system as a whole to about the same extent as loans.

The check was defined as a bill of exchange and the early legal recognition of the negotiability of credit instruments. Bill of exchange was one of the most important factors in the development of banking in England.

On the other hand, in continental Europe, limitations on the negotiability of an order of payment presented the extention of deposit banking based on check. Continental countries developed their own system, known as giro payments, whereby transfers were effected on the basis of written instructions to debit the account of the payer and to credit that of the payee.
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