ELEMENTS OF BANKING

1.0 INTRODUCTION

One obtains with a small expenditure of either time or money, a general knowledge of business of banking. For this level of studies, information gotten is adequate for any further studies require larger work in the business of banking.

2.0 OBJECTIVES

At the end of this unit, you shall be able to:

1.  State the origin of Banking 
2.  Explain the meaning of Banking 
3. Define bank and Banking Business 
4. List the functions of Central Bank of Nigeria 

3.0 MAIN CONTENT

3.1 The Business of Banking

The term bank is derived from the Italian word bancho (Meaning bench) as the Jews in Italy kept benches in the market-place, where they exchanged money and bills. When a banker failed, his bench is broken by the populace; and we derive the term bankrupt from this circumstance.

3.2 The Concept of Banking

Today, the term, bank, means different things to different people in different economies. In order to reconcile the divergent views on the meaning and characteristics of banks, the banking laws in each economy provides operational definition and functional classification
which governs banking practices in the economy. In practical terms, a bank means what the operating banking law in an economy defines as a bank (Ezeuduji, 2000:8). To many people, a bank refers to an institution which accepts deposits from the public and in turn advances loans by creating credit. It is different from other financial institutions in that they cannot create credit though they may be accepting deposits and making advances. Economists on their part have defined a bank in various capacities, some emphasizing its various functions.

However, a bank has been defined broadly as any financial institution that accepts, collects, transfers, pays, exchanges, lends, invests, or safe- guard money for its customers. This broader definition includes many other financial institutions that are not usually thought of as banks but which nevertheless provide one or more of these broadly defined banking services. Summarizing these definitions a bank is simply an institution which accepts deposits from the public and in turns advances loans by creating credit.

Self assessment exercise

In your own words explain the Concept of Banking

Banks are divided into private and public. 

A private bank are few owners and they attend personally to it management. A public bank has many owners, and they elect from their selves a certain number who are entrusted to manage/administer the bank in the day-to-day activities. The business of banking is mainly to receive deposits of money, with without interest in working advances of money mainly in discounting bills and in transmission of money from one place to another Discounting of bills yields interest – wan, cash credits and overdraft accounts. Etc. The profits of a bank are the portion of its total receipts which include discount, interest dividends, and commission – which all things being equal exceeds the amount of the expenses

Self assessment exercise

The word ‘Bank’ is derived from which country?

3.2 Bank and Banking Business

Before proceeding refer to definitions of a bank and banking business according to abrogated 1969 banking Decree: which state thus: A bank is any person who carries on banking business and includes commercial bank, “Acceptance House, Discount House and Financial Institutions”

Banking business is defined by the same section of the decree as: business of receiving monies from outside services as deposits irrespective of the payment of interest of granting of money loans and
acceptance credits etc. From the stated definition, there are categories of banks and the nature of their liabilities and operation for effective and efficient banking functions in Nigeria adequate rules and regulations are to be put in place for the system to be stable.

3.3 The Central Bank of Nigeria

CBN is the apex of the Nigerian banking system – hence controlling the sector. The enforcement of the rules and regulation fall on the CBN just to sustain the stability of the banking system and to sustain meaningful relationships. The areas of regulations include: Capital base statutory reserves, bank size distribution, bank Distribution, Bank Obligations Debtor/Creditor relationship, Relationship from contract and relationship between Bank and shareholders.

Self assessment exercise

State three area of regulatory financial institution by CBN

4.0 CONCLUSION

You have learnt in this unit what bank and banking business are in a nutshell. The definition of bank and banking as it relates to a nation. The business of banking was stated to include mainly to receiving deposits of money and distributing to where money is needed.

5.0 SUMMARY

You learnt of the state of origin of Banking, explain the single meaning of Banking, define bank and Banking Business and listed the relationship between CBN and other banks

6.0 TUTOR-MARKED ASSIGNMENT

1.  Explain the origin of banking. 
2.  State the relationship between CBN and other banks 
3.  Define bank and Banking Business