Elements of Banking: Made Simple discusses the fundamental concepts of banking. The book covers the various banking services, such as saving, lending, and investment. In the first two chapters, the text reviews the history of banking and money system. The succeeding four chapters deal with customers. These chapters cover types of customers and the accounts available to them. Next, the legal bases of banking are discussed, while the British banking systems are primarily concerned in Chapters 8 to 11. The next four chapters cover the banking services, which include lending, savings, and investment. Chapters 16 to 18 discuss banking and international trade. The next chapter deals with promoting banking services, and the last chapter tackles the Institute of Bankers. The book will be of great interest to the undergraduate students of accountancy, business administration, and management.

Foreword

Acknowledgments

1 The Origin and Development of Banking

1.1 The Origin of Banking

1.2 Safe Deposits and Royal Power

1.3 Goldsmiths and the Banking System

1.4 The Bank of England

1.5 Country Banking In the Eighteenth Century

1.6 The Move to Joint Stock Banking

1.7 The Bank of England Since 1815

1.8 The Development of Merchant Banking

1.9 Rapid Revision: The History of Banking

1.10 Exercise: The Origin and Development of Banking

2 The Development of the Money System

2.1 What is Money?

2.2 Giving Validity to Coins and Banknotes

2.3 The Functions of Money

2.4 The Qualities of Money

2.5 The Wider Meaning of Money Today: The Money Stock

2.6 How the Banks Create Money: The Creation of Credit

2.7 The Effect of Credit-Creation by the Banks

2.8 Keeping in Step When Creating Credit

2.9 The Credit-Creation Multiplier

2.10 Conclusions about the Money System

2.11 Rapid Revision: The Money System

2.12 Exercises: The Money System

3 The Types of Accounts Available to Customers

3.1 Meeting the Needs of Customers

3.2 Current Account on Sight Deposits

3.3 Deposit Account or Time Deposits

3.4 Investment Accounts

3.5 Savings Accounts

3.6 Budget Accounts

3.7 Revolving Credit Accounts

3.8 Loan Accounts

3.9 Bank Reconciliation Statements

3.10 Rapid Revision: Types of Account

3.11 Exercises: Customers’ Accounts

4 Types of Customers

4.1 The Range of Banking Customers

4.2 The Legal Relationships between Bankers and Their Customers

4.3 Personal Customers

4.4 Sole Traders

4.5 Partnerships

4.6 The Accounts of Limited Companies

4.7 Clubs and Other Non-Profit-Making Societies

4.8 Other Specialized Account Holders

4.9 Conclusions about the Accounts of Customers

4.10 Rapid Revision: Accounts for Different Types of Customers

4.11 Exercises: Types of Customers

5 Customer Services 1: Money Transfer and Finance

5.1 The Changing Pattern of Banking Services

5.2 Money Transfer

5.3 Credit Card Services

5.4 Overdrafts and Loans

5.5 Sophisticated Financial Services

5.6 Rapid Revision: Personal and Business Customer Services

5.7 Exercises: Money Transfer and Financial Services

6 Customer Services 2: Other Services

6.1 Insurance Services

6.2 Investment and Pension Services

6.3 Foreign Exchange and Overseas Trade Services

6.4 Risk Management Services

6.5 Advisory Services

6.6 Rapid Revision: Other Customer Services

6.7 Exercises: Other Customer Services

7 The Legal Bases of Banking

7.1 The Banker-Customer Relationship

7.2 Terms Implied in the Banker-Customer Relationship

7.3 Deposits and the Debtor-Creditor Relationship

7.4 The Banker’s Charges

7.5 The Banker’s Duty of Secrecy

7.6 Wrongful Dishonor of Cheques

7.7 Rapid Revision: The Legal Bases of Banking

7.8 Exercises: The Legal Bases of Banking

8 The British Banking System 1: The Bank of England

8.1 The General Framework of Banking

8.2 The Organization and Functions of the Bank of England

8.3 Advising the Government on Financial Matters

8.4 Supervision of the Banking System

8.5 The Note Issue

8.6 The Bank of England as the Government Bank

8.7 The Bank as Manager of the Gilt-Edged Market

8.8 Discount Houses and the Lender of Last Resort

8.9 The Bank and the Foreign Exchange Market

8.10 The Bank of England as a Central Bank

8.11 Rapid Revision: The Bank of England

8.12 Exercises: The Bank of England

9 The British Banking System 2: The Main Institutions

9.1 Introduction

9.2 The Merchant Banks

9.3 The Discount Houses

9.4 The Clearing Banks

9.5 The Bankers’ Clearing House

9.6 Authorized Deposit-Takers

9.7 The Foreign Banks

9.8 The European Investment Bank

9.9 The World Bank

9.10 National Girobank

9.11 Finance Houses

9.12 The National Savings Bank

9.13 The Department for National Savings

9.14 The Building Societies

9.15 Rapid Revision: The Main Institutions of Banking

9.16 Exercises: The Main Institutions of Banking

10 The London Money Market

10.1 Introduction

10.2 The Two Money Markets

10.3 The Discount or Primary Market

10.4 The Secondary Money Markets

10.5 The Local Authority Market

10.6 The London Interbank Market

10.7 The Finance House Market

10.8 The Building Societies Market

10.9 The Intercompany Market

10.10 The Certificate of Deposit Market

10.11 The Eurocurrency Market

10.12 The Sterling Commercial Paper Market

10.13 Rapid Revision: The London Money Market

10.14 Exercises: The London Money Market

11 The Consumer Credit Act 1974 and Other Legislation

11.1 Nature of the Consumer Credit Act 1974

11.2 Regulated Agreements

11.3 The Form and Content of Regulated Agreements

11.4 Canvassing off Trade Premises

11.5 Annual Percentage Rate (APR)

11.6 The Banking Acts 1979 and 1987

11.7 The Financial Services Act 1986

11.8 Rapid Revision: The Consumer Credit Act 1974 and Other Legislation

11.9 Exercises: The Consumer Credit Act 1974 and Other Legislation

12 Bank Lending

12.1 The Aim of Bank Lending

12.2 The Eligibility of Borrowers

12.3 Credit Scoring

12.4 Procedures with Security for Loans

12.5 Other Advances

12.6 Rapid Revision: Bank Lending

12.7 Exercises: Bank Lending

13 Savings and Investment

13.1 What are Savings?

13.2 The Avenues of Savings

13.3 The Clearing Banks and Investment

13.4 Authorized Deposit-Takers

13.5 Finance Houses

13.6 Investment Trusts

13.7 Investment in Building Societies

13.8 National Savings

13.9 Local Authorities

13.10 Life Assurance

13.11 Annuities

13.12 Rapid Revision: Savings and Investment

13.13 Exercises: Savings and Investment

14 Assessing the Accounts of Business Customers

14.1 The Importance of Accounts

14.2 Double-Entry Book-Keeping

14.3 Evaluating a Customer’s Accounts

14.4 Appraising the Trading Account

14.5 Appraising the Profit and Loss Account

14.6 Appraising the Balance Sheet of a Business

14.7 The Balance Sheet of a Failed Business

14.8 Rapid Revision: Assessing the Accounts of Business Customers

14.9 Exercises: Evaluating a Customer’s Business

15 The Accounts of an Imaginary Clearing Bank

15.1 The Accounts of a Public Limited Company

15.2 The Profit and Loss Account of a Bank

15.3 The Balance Sheet of a Bank

15.4 Liquidity versus Profitability

15.5 Other Points about the Bank’s Published Accounts

15.6 Rapid Revision: The Accounts of Banks

15.7 Exercises: The Final Accounts of a Bank

16 Foreign Dealings 1: Foreign Exchange and Travel Facilities

16.1 The Need for Foreign Dealings

16.2 Foreign Currencies

16.3 Foreign Currency Accounts

16.4 Travel Services

16.5 Business Travelers

16.6 The Foreign Exchange Clerk

16.7 Rapid Revision: Foreign Exchange and Travel Facilities

16.8 Exercises: Foreign Exchange and Travel Facilities

17 Foreign Dealings 2: Payments in International Trade

17.1 The Nature of International Trade

17.2 Methods of Payment in International Trade

17.3 Incoterms: The Terms Used in Overseas Trade

17.4 Documentation of Overseas Trade

17.5 Cash with Order Transactions

17.6 Letter of Credit Transactions

17.7 Documents against Payment (D/P) Transactions

17.8 Documents against Acceptance (D/A) Transactions

17.9 Open Account Transactions

17.10 Goods on Consignment

17.11 Rapid Revision: Payments in International Trade

17.12 Exercises: Payments in International Trade

18 Other Schemes to Help Exporters

18.1 Introduction

18.2 Small Exporter Schemes

18.3 Full Post-Shipment Non-Recourse Finance

18.4 Lines of Credit

18.5 Buyer Credit Finance

18.6 Overseas Disbursement Services

18.7 Forfeiting

18.8 Countertrade Facilities

18.9 Guarantees, Tender Bonds and Performance Bonds

18.10 Economic Reports and Information

18.11 Rapid Revision: Other Schemes to Help Exporters

18.12 Exercises: Other Schemes to Help Exporters

19 Marketing Customer Services

19.1 Attitudes to Marketing

19.2 A Definition of Marketing

19.3 The Marketing of Services

19.4 Marketing Methods

19.5 Conclusions about the Marketing Function

19.6 Rapid Revision: Marketing Customer Services

19.7 Exercises: Marketing Customer Services

20 The Institute of Bankers

20.1 Professional Qualifications and Banking

20.2 The Chartered Institute of Bankers

20.3 Membership of the Institute

20.4 The Institute’s Educational Policy

Rapid Revision

1 The History of Banking 1: The Origin and Development of Banking to 1760

2 The History of Banking 2: The Country Banks 1760-1914

3 The History of Banking 3: The Bank of England Since 1844

4 The Development of the Money System

5 The Supply of Money

6 Banking and the Creation of Credit

7 The Types of Accounts Available to Customers

8 More Detailed Points about the Operation of Customers Accounts

9 Some Special Types of Customers 1

10 Some Special Types of Customers 2

11 Personal Customer Services

12 The Legal Bases of Banking 1: The Banker-Customer Relationship

13 The Legal Bases of Banking 2: More about the Contract between Banker and Customer

14 The Structure of Banking 1: The Bank of England

15 The Structure of Banking 2: The Chief Financial Institutions

16 The Structure of Banking 3: The London Money Market

17 Assessing the Accounts of an Ordinary Business Customer 1: The Trading Account

18 Assessing the Accounts of an Ordinary Business Customer 2: The Profit and Loss Account

19 Assessing the Accounts of an Ordinary Business Customer 3: The Balance Sheet

20 The Accounts of a Commercial Bank

21 Bank Lending

22 Savings and Investment

23 Services to Business Customers

24 Foreign Dealings 1: Principles of Foreign Exchange

25 Foreign Dealings 2: Negotiable Instruments

26 Payments in International Trade 1: Cash with Order and Open Account Terms

27 Payments in International Trade 2: Letters of Credit

28 Payments in International Trade 3: Documentary Collections

29 Other Schemes to Help Exporters

30 Consumer Credit and Banking

31 Marketing Customer Services

Glossary

Index