FINANCIAL SERVICES

Commercial Banks and the Modern Economy

Commercial Banks and the Modern Economy

Introduction

Commercial Banks are those institutions that offer a deposit, transfer, and loan service to companies and private individuals. In the UK, the commercial banks (or high-street banks) are public limited companies (joint-stock banks), most of which amalgamated during the 19th century to emerge from World War I as the big five: Barclays Bank, Lloyds Bank (now Lloyds TSB), Midland Bank (now HSBC), National Provincial Bank, and Westminster Bank (in 1968 the last two merged to form the National Westminster Bank, now called NatWest and owned by the Royal Bank of Scotland). The commercial banks make a profit by lending at a higher rate of interest than their borrowing rate. The Bank of England controls the amount that they lend through open-market operations. Many commercial banks own financial subsidiaries, including merchant banks and life assurance companies.

Discussion

Commercial banks are the most important element of market economy. In the course of their activity is mediated by most of the money circulation in the state, is the formation of sources of capital for extended reproduction by reallocating funds to temporarily exempt all participants in the reproductive process - government / business entities. At the same time, commercial banks contribute to the transfer of capital from the least efficient sectors of the national economy more competitive. They provide a temporary accumulation of free cash flow businesses, organizations, communities, states, and transmit to the terms of repayment of the areas of money-capital accumulation in the areas of use. Thanks to the commercial banks to the mechanism of distribution and flow of capital to areas and sectors of production, through the banks can be mobilized large amounts of capital needed for investment, the introduction of innovation, expansion and restructuring of enterprises, housing, etc.

Commercial banks ...