Week: 2 (Two)
Topic: Banking Services
Meaning of a Bank
A bank is a financial institution that specializes in providing services such as acceptance of deposits, safe keeping of valuables and loan advancement to the general public in exchange for fees and charges. They are institutions or businesses owned by both private individuals and government that deals with money and wealth creation ideas, projects and asset development.
There are different types of banks which are commercial banks, development banks, merchant banks and central banks.
Meaning of Commercial Bank
A commercial bank is a financial institution that accepts deposits from individuals and businesses, provides loans and accepts valuables for safe keeping for profit. The commercial bank is a regular bank which does what they do as a business with the intention of making profit.
Services Provided by Commercial Banks
- Acceptance of deposits: Commercial banks allow individuals and organizations to deposit sums of money with them for safe keeping. Usually, an account is opened for each customer which is used to record the different amounts of money deposited and withdrawn at different times.
There are three types of account operated by a commercial bank; savings account for individuals, current account for both individuals and companies and fixed deposit account for both individuals and businesses.
- Giving loans and advances: Commercial banks lend money to their clients and charge interest on a periodic basis. The amount of interest to be paid is calculated yearly and shared into the number of days the loan is kept or unpaid.
- Money transfer: Commercial banks help their clients transfer money to other people and businesses both locally and internationally.
- Foreign exchange services: Most people and businesses involved in foreign trade have issues of currency conversion because of the difference in currency of the two countries involved in the business. Commercial banks help their clients solve this problem by being a middleman that converts one currency into another for the business partners.
- Safe deposit lockers: Some commercial banks have safes where they keep clients’ valuables such as financial instruments, wills, gold, diamond, etc, and charge a fee for the service.
- Standing orders: A standing order is an instruction from a bank customer that authorizes the bank to make certain periodic payments on the customer’s behalf.
Ethical Issues in Banking
Ethics refer to the basic right and wrong practices in a particular profession. When the action or practice is right, we say it is ethical. When the action or practice is wrong, we say it is unethical. Some of these issues in banking include;
- Fraud and corruption: Dishonest practices by staff and management of a bank is unethical. The bank’s customers bring their monies to them for safe keeping out of trust, therefore taking advantage of that trust and stealing such money is wrong.
- Money laundering: Helping customers to make money gotten through illegal means look good or right is a bad practice in banking. The bank is under obligation to make sure that they do not knowingly support any illegal activity in any way.
- Unfair lending practices: Lending money to people at unnecessarily high interest rate is bad. It means the bank is taking advantage of the customers.
- Customer privacy breaches: A bank is under obligation to always keep a customer’s banking information private. Except under special circumstances, a bank is not supposed to let another person know any information about its client.
- Discrimination: Unequal treatment of customers based on race, gender, tribe, social class, etc, is bad banking practice.
Homework
Considering the recent very high scarcity of cash in Nigeria when people had to buy cash from POS agents at high prices because banks could not give cash to their customers, do you think it is still advisable to use banking services?
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