Posts Tagged ‘bank’

The World’s Economies Try To Prevent Another Crisis

Monday, June 28th, 2010

Banks might have to operate under tighter rules in order to avoid another global financial slump.

  • Some of the world’s largest economies are designing major regulations for banks that would ensure they are prepared to absorb large financial losses and avoid another financial meltdown.
  • The negotiations, called Basel III, require banks to have secure and defined assets that they can hold against short- and long-term financial losses. But after a meeting on Sunday it seems that it could be years before these regulations are put into place.
  • Banks are reluctant to adopt these regulations. They argue that they could slow the global recovery from the recent economic crises.

Facts & Figures

  • If Basel III is put into place, the economic growth of the United States and Japan could fall 3% by 2015

Best Quote

“The quality and amount of capital in the banking system must be significantly higher to improve loss absorbency and resiliency.”  - Mr. Draghi, Governor, Bank of Italy.

An Investment Bank is…

Thursday, October 8th, 2009

An investment bank is an institution that serves as an agent for corporations that are issuing securities. Investment banks do not accept deposits or offer loans like regular banks. Instead, they tend to help with mergers and acquisitions, corporate restructuring or companies that are going public.

Financial Crisis? Banks Say “Play Ball!”

Friday, September 25th, 2009

Financial institutions are forming increasingly tight and profitable relationships with athletic organizations like sports teams – melding finance and sports and showing how finance intersects with many different aspects of modern life.

  • Banks’ investment in sports has increased with its ‘gentrification’ – stadiums are newer, seats are more comfortable, and tickets are more expensive.
  • An exclusive deal with a team can be a source of great revenue by bringing in retail customers (through affiliated debit and credit cards), managing the wealth of a team’s players and owners, or arranging the financing for a new stadium.
  • There are indirect benefits as well – Swiss bank UBS uses its sponsorship of Alinghi, a sailing team, to enthuse its employees.

Facts & Figures

  • In North America, sponsorship of sports by all companies grew by 11.2% in 2007 and 14.8% in 2008, but is expected to grow by only 1.8% in 2009.
  • In 2007, Lloyds TSB (now Lloyd Banking Group) pledged to support the 2012 Olympic games with $124 million.
  • Bank of America claims to make a $3 profit for every $1 spent on sports marketing.

Best Quote

“What people don’t see is how we’re using the Olympic access for our training and development. This is timely. If ever Lloyds needed Olympians, it is now.” — Sally Hancock, Director of Group Sponsorship at Lloyd Banking Group

Interest is…

Wednesday, September 23rd, 2009

Interest is the cost of borrowing money (or a benefit of lending money). When you deposit your money in the bank, the bank is essentially borrowing that money and paying you interest for it. Interest is usually expressed as a percentage per year.

How does a bank make money?

Friday, June 12th, 2009

Once you deposit your money in a bank, it doesn’t just sit in a big vault until you decide to hit the ATM. Your bank uses those funds to offer financial products (such as loans and mortgages) to their customers, for a profit to the bank. Although banks often pay you interest for depositing your money with them, they find ways to earn more with your money than they are paying you. An example of this would be mortgages, where they lend money to a consumer for a relatively higher interest rate.

Banks also make a lot of money on the fees they charge their customers. Examples of these would be: late fees, overdraft fees, ATM fees, interest rates on credit cards, or checking account fees.

The combination of interest rates and fees allows a bank to run profitable businesses while also offering services to its clients.

Why is a bank better than your mattress?

Wednesday, June 10th, 2009

Carving out a secret hole in the side of your mattress may seem pretty cool, but it’s really not a practical place to store your money (it doesn’t sound too comfortable either).

Mattresses, along with stuffed animals and shoeboxes, all seem like safe places to store your money (supposing no one else knows where it is), but you’re actually putting yourself in a financially bad position. By storing your money in places like these and not a bank, you are slowly losing money and risking all of it too. How does that happen?

Banks are not just money storage facilities; they use your money to offer financial services (at a cost) to other customers and in turn pay you interest on a regular basis. By keeping your money in a bank, you are actually earning money as opposed to just hiding it away. Banks also keep your money safe; your money is guaranteed up to $250,000 by the Federal Deposit Insurance Corporation (FDIC), a government organization, in case something happens to the bank. No one has ever lost a penny of covered funds from a bank failure since the FDIC was created in 1933. Compare that to losing your wallet or your sister raiding your mattress – you are not getting that money back.

What does this mean for you? Well, you can either be sure about the safety of your money (while earning a little extra at the same time) or you can hide it away under a mattress and hope no one ever peeks under the sheet.