Investopedia explains “The Banking System”

Accounting for trillions in assets worldwide, the banking system is a crucial component of the global economy. While money-changing and money-lending may be as old as money, banking dates back to 15th century medieval Italy, and played a major role in the rise of the Italian city-states as world economic powers. Ever since, the health of an economy and the health of its banks have been interrelated; the global credit crisis, precipitated by the collapse of the subprime-fueled U.S. housing bubble, is only the most recent example.

Banks are just one part of the world of financial institutions, standing alongside investment banks, insurance companies, finance companies, investment managers and other companies that profit from the creation and flow of money. As financial intermediaries, banks stand between depositors who supply capital and borrowers who demand capital. Given how much commerce and individual wealth rests on healthy banks, banks are also among the most heavily regulated businesses in the world.

The Banking System: Introduction


Hoover’s “Banks & Credit Unions Industry” overview

Excerpt from Banks & Credit Unions Report
Companies in this industry accept deposits and make commercial, industrial, and consumer loans. Major companies include Bank of America, Citibank, JPMorgan Chase, Wells Fargo, and Navy Federal Credit Union (all based in the US), as well as Banco Santander (Spain), BNP Paribas (France), Industrial and Commercial Bank of China, and ING Groep (The Netherlands).

Competitive Landscape
Demand for banking services is closely tied to economic activity and the level of interest rates. The profitability of individual banks depends on marketing skills, efficient operations, and good risk management. Large economies of scale exist in some segments of the industry, which has encouraged industry consolidation. Smaller banks can compete successfully in segments where customer service or knowledge of the local market is more important.

Products, Operations & Technology
Major products are bank loans, account services, brokerage services, credit card and leasing services, trust management, and investment services. Bank loans provide about 55 percent of commercial banking revenue, securities financing provide 16 percent, the other major services each provide less than 5 percent. After adoption of the Gramm-Leach-Bliley Act of 1999, some banks have used the financial services company structure to acquire large insurance or retail securities brokerage operations. Commercial banks, savings institutions, and credit unions provide many of the same products. However, commercial banks get a large percent of their revenue from services, while savings banks and credit unions get a majority of their revenue from loans.

Banks & Credit Unions

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