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❶How much do banks earn per customer?

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Effectively even if all a person has is one transaction, it does not disqualify the person from being a customer of the bank in the case of. Makes the point of explaining who a customer of a bank is and it is also relevant to the question of the responsibility a banker assumes when it advises customers. The other point made by this case is that it is not a matter of law but a question of fact as to whether any class of business amounts to banking business.

It is not a matter of pure law to determine whether a firm at common law is a bank doing banking business it is a matter of interpretation. It is a matter of interpretation to see whether a person is a customer and who is not a customer.

The nature of the bank customer relationship under Kenya law is contractual. It is a relationship based on contract and if you were to apply contract law to this question. Hill Vol H. There is an argument that the relationship of a banker and customer consists of a general contract which is basic to all transactions together with special contracts which arise in relation to the specific transactions or services that the Bank offers.

The nature of the contract is described in a leading case of. Lord Atkin in this case described that contract at page in the following terms. The terms of that contract involve obligations on both sides and require statements. They appear upon consideration to include the following provisions. The bank undertakes to receive money and to collect bills for its customers account.

The proceeds so received are not to be held in trust for the customer but the bank borrows the proceeds and undertakes to repay them. It includes a promise to repay any part of the amount due against the written order of the customer addressed to the bank, at the branch.

It is a term of the contract that the bank will not cease to do business with a customer except upon reasonable notice. The customer on his part undertakes to exercise reasonable care in executing his written orders so as not to mislead the bank or to facilitate forgery.

I think it is necessarily a term of such contract that the bank is not liable to pay the customer the full amount of his balance until he demands payments from the bank at the branch at which a current account is kept. The debtor creditor relationship emerges in this quote. The Rothschilds pioneered international finance on a large scale, financing the purchase of the Suez canal for the British government.

Benches were used as makeshift desks or exchange counters during the Renaissance by Jewish [10] Florentine bankers, who used to make their transactions atop desks covered by green tablecloths.

The definition of a bank varies from country to country. See the relevant country pages under for more information. In most common law jurisdictions there is a Bills of Exchange Act that codifies the law in relation to negotiable instruments , including cheques , and this Act contains a statutory definition of the term banker: Although this definition seems circular, it is actually functional, because it ensures that the legal basis for bank transactions such as cheques does not depend on how the bank is structured or regulated.

The business of banking is in many English common law countries not defined by statute but by common law, the definition above. In other English common law jurisdictions there are statutory definitions of the business of banking or banking business.

When looking at these definitions it is important to keep in mind that they are defining the business of banking for the purposes of the legislation, and not necessarily in general. In particular, most of the definitions are from legislation that has the purpose of regulating and supervising banks rather than regulating the actual business of banking.

However, in many cases the statutory definition closely mirrors the common law one. Examples of statutory definitions:. This has led legal theorists to suggest that the cheque based definition should be broadened to include financial institutions that conduct current accounts for customers and enable customers to pay and be paid by third parties, even if they do not pay and collect cheques. Banks act as payment agents by conducting checking or current accounts for customers, paying cheques drawn by customers in the bank, and collecting cheques deposited to customers' current accounts.

Banks borrow money by accepting funds deposited on current accounts, by accepting term deposits , and by issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current accounts, by making installment loans , and by investing in marketable debt securities and other forms of money lending.

Banks provide different payment services, and a bank account is considered indispensable by most businesses and individuals. Non-banks that provide payment services such as remittance companies are normally not considered as an adequate substitute for a bank account. Banks can create new money when they make a loan. New loans throughout the banking system generate new deposits elsewhere in the system. The money supply is usually increased by the act of lending, and reduced when loans are repaid faster than new ones are generated.

In the United Kingdom between and , there was an increase in the money supply, largely caused by much more bank lending, which served to push up property prices and increase private debt. Excessive or risky lending can cause borrowers to default, the banks then become more cautious, so there is less lending and therefore less money so that the economy can go from boom to bust as happened in the UK and many other Western economies after Activities undertaken by banks include personal banking , corporate banking , investment banking , private banking , transaction banking , insurance , consumer finance , foreign exchange trading , commodity trading , trading in equities , futures and options trading and money market trading.

A bank can generate revenue in a variety of different ways including interest, transaction fees and financial advice. Traditionally, the most significant method is via charging interest on the capital it lends out to customers. This difference is referred to as the spread between the cost of funds and the loan interest rate.

Historically, profitability from lending activities has been cyclical and dependent on the needs and strengths of loan customers and the stage of the economic cycle. Fees and financial advice constitute a more stable revenue stream and banks have therefore placed more emphasis on these revenue lines to smooth their financial performance. In the past 20 years, American banks have taken many measures to ensure that they remain profitable while responding to increasingly changing market conditions.

This helps in making a profit and facilitates economic development as a whole. Banks face a number of risks in order to conduct their business, and how well these risks are managed and understood is a key driver behind profitability, and how much capital a bank is required to hold.

Bank capital consists principally of equity , retained earnings and subordinated debt. After the financial crisis, regulators force banks to issue Contingent convertible bonds CoCos. These are hybrid capital securities that absorb losses in accordance with their contractual terms when the capital of the issuing bank falls below a certain level. Then debt is reduced and bank capitalization gets a boost. Owing to their capacity to absorb losses, CoCos have the potential to satisfy regulatory capital requirement.

The capital requirement is a bank regulation , which sets a framework within which a bank or depository institution must manage its balance sheet.

The categorization of assets and capital is highly standardized so that it can be risk weighted. Banks are susceptible to many forms of risk which have triggered occasional systemic crises. Banking crises have developed many times throughout history when one or more risks have emerged for a banking sector as a whole. Prominent examples include the bank run that occurred during the Great Depression , the U.

Savings and Loan crisis in the s and early s, the Japanese banking crisis during the s, and the sub-prime mortgage crisis in the s. Assets of the largest 1, banks in the world grew by 6.

Growth in assets in adverse market conditions was largely a result of recapitalization. The United States has the most banks in the world in terms of institutions 5, as of and possibly branches 81, as of Japan had banks and 12, branches.

Between and banks engaged in around 28, mergers or acquisitions, either as the aqcuirer or the target company. The overall known value of these deals cumulates to around 5, bil.

Here is a list of the largest deals in history in terms of value with participation from at least one bank:. Currently, commercial banks are regulated in most jurisdictions by government entities and require a special bank license to operate.

Unlike most other regulated industries, the regulator is typically also a participant in the market, being either a publicly or privately governed central bank. Central banks also typically have a monopoly on the business of issuing banknotes. However, in some countries this is not the case. In the UK, for example, the Financial Services Authority licenses banks, and some commercial banks such as the Bank of Scotland issue their own banknotes in addition to those issued by the Bank of England , the UK government's central bank.

These implied contractual terms may be modified by express agreement between the customer and the bank. Some types of financial institution, such as building societies and credit unions , may be partly or wholly exempt from bank license requirements, and therefore regulated under separate rules.

The requirements for the issue of a bank license vary between jurisdictions but typically include:. Most banks are profit-making, private enterprises. However, some are owned by government, or are non-profit organizations. The United States banking industry is one of the most heavily regulated and guarded in the world, [28] with multiple specialized and focused regulators.

However, for soundness examinations i. State non-member banks are examined by the state agencies as well as the FDIC. Each regulatory agency has their own set of rules and regulations to which banks and thrifts must adhere. The Federal Financial Institutions Examination Council FFIEC was established in as a formal inter-agency body empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions.

Although the FFIEC has resulted in a greater degree of regulatory consistency between the agencies, the rules and regulations are constantly changing. Offices have been closed, supervisory regions have been merged, staff levels have been reduced and budgets have been cut. The remaining regulators face an increased burden with increased workload and more banks per regulator.

While banks struggle to keep up with the changes in the regulatory environment, regulators struggle to manage their workload and effectively regulate their banks.

The impact of these changes is that banks are receiving less hands-on assessment by the regulators, less time spent with each institution, and the potential for more problems slipping through the cracks, potentially resulting in an overall increase in bank failures across the United States.

The changing economic environment has a significant impact on banks and thrifts as they struggle to effectively manage their interest rate spread in the face of low rates on loans, rate competition for deposits and the general market changes, industry trends and economic fluctuations.

It has been a challenge for banks to effectively set their growth strategies with the recent economic market. A rising interest rate environment may seem to help financial institutions, but the effect of the changes on consumers and businesses is not predictable and the challenge remains for banks to grow and effectively manage the spread to generate a return to their shareholders.

While always an issue for banks, declining asset quality has become a big problem for financial institutions. Problems are more likely to go undetected, resulting in a significant impact on the bank when they are discovered.

In addition, banks, like any business, struggle to cut costs and have consequently eliminated certain expenses, such as adequate employee training programs. Banks also face a host of other challenges such as ageing ownership groups. Banks also face ongoing pressure by shareholders, both public and private, to achieve earnings and growth projections. Regulators place added pressure on banks to manage the various categories of risk.

Banking is also an extremely competitive industry. Competing in the financial services industry has become tougher with the entrance of such players as insurance agencies, credit unions, cheque cashing services, credit card companies, etc. As a reaction, banks have developed their activities in financial instruments , through financial market operations such as brokerage and have become big players in such activities.

To be able to provide home buyers and builders with the funds needed, banks must compete for deposits. The phenomenon of disintermediation had to dollars moving from savings accounts and into direct market instruments such as U. Department of Treasury obligations, agency securities, and corporate debt.

One of the greatest factors in recent years in the movement of deposits was the tremendous growth of money market funds whose higher interest rates attracted consumer deposits. To compete for deposits, US savings institutions offer many different types of plans: Bank statements are accounting records produced by banks under the various accounting standards of the world.

Under GAAP there are two kinds of accounts: Credit accounts are Revenue, Equity and Liabilities. Debit Accounts are Assets and Expenses.

The bank credits a credit account to increase its balance, and debits a credit account to decrease its balance. When the customer reads his bank statement, the statement will show a credit to the account for deposits, and debits for withdrawals of funds.

The customer with a positive balance will see this balance reflected as a credit balance on the bank statement. If the customer is overdrawn, he will have a negative balance, reflected as a debit balance on the bank statement.

One source of deposits for banks is brokers who deposit large sums of money on behalf of investors through trust corporations.


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For a bank, a customer is a person who is utilizing one or more of the services provided by the bank. A customer is a person through whom the bank gets an opportunity to make an earning in return to the service they can provide the customer with.

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Any person or business wishing to deposit money, or borrow money, or to convert money into a different form of currency, is potentially a customer for a bank.. A Customer for a bank is a person who does some business with . Who Are The Best Customers At Your Bank? Unfortunately, most banks have no idea the answer to the title question. It is actually worse than that - most bankers THINK they know who their best customers are. The worst of all is most bankers can’t even agree on what a “good” customer looks like. That green line above represents an ideal.

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