Understand the differences between commercial banks and other financial institutions in the banking industry
Study and Learn the Words:
| English | English equivalents | Romanian | Russian |
| Federal Reserve System | sistemul băncilor federale de rezerve | Федеральная резервная система | |
| to render services | to offer services | ||
| financially sound (adj) | reliable from the financial point of view | ||
| input (n) | sth that you put into work to make it succeed | ||
| output (n) | the result of the performed work | ||
| to charge interest | a cere procente | назначать проценты | |
| comptroller (n) | controller | ||
| to outnumber | a depăşi numeric | превосходить численно | |
| Savings and Loan association (S&L) | asociaţia de economii şi împrumut | сберегательно-заёмная ассоциация | |
| to become effective | a intra în vigoare | вступать в силу | |
| to stand for | a însemna | означать | |
| conservative investments | investiţii moderate | умеренные инвестиции |
In the USA, in every locality no matter how small it is, there is a church and a bank. Americans who are considered to be rather religious persons go to church to maintain and accumulate their “spiritual wealth”. And they go to the bank to keep and accumulate their material wealth.
The modern banking system includes three groups of financial institutions:
· the central bank;
· commercial banks;
· other specialized financial institutions that include both banking and non-banking organizations.
The central bank, which depending on the country may be called the State Bank or the National bank (as in our country), bears the name of the Federal Reserve System in the USA. As a rule, this is a government institution and in a way it is the bank for all the other banks in a country. It controls the monetary policy of a state and it is responsible for the national currency stability.
The name „commercial” appeared in the XVIIth century when banks generally served the commerce. The first banks were founded in the Italian republics, then in Amsterdam and London. They appeared as simple merchants that traded money. Nowadays the banks have a universal character. Very often they are called financial „department stores” rendering services to the industrial, agricultural, commercial and other enterprises.
The Federal Reserve System(or simply "the Fed") is the government agency responsible for regulating the United States banking industry. It was created by Congress on December 23, 1913. Its mission is to maintain an economically healthy and financially sound business environment in which banks can operate. The Federal Reserve System is controlled by the seven members of its Board of Governors, who meet in Washington, D.C. Each governor is appointed by the president and confirmed by the Senate for a fourteen-year term. The president also selects the chairman and vice chairman of the board from among the board members for four-year terms. These terms may be renewed. .
The Federal Reserve System includes twelve Federal Reserve District Banks, which are located throughout the United States, as well as twenty-five branch-territory banks. Each Federal Reserve District Bank is actually owned—but not controlled—by the commercial banks that are members of the Federal Reserve System. All national banks must be members of the Fed. State banks may join if they choose to and if they meet membership requirements.
A commercial bankis a profit-making organization that accepts deposits, makes loans, and provides related services to its customers. Like other businesses, the bank's primary goal—its purpose—is to earn a profit. Its inputs are money in the form of deposits, for which it pays interest. Its primary output is loans, for which it charges interest. If the bank is successful, its income is greater than the sum of its expenses, and it will show a profit.
Because banks deal with money belonging to individuals and other firms, they are carefully regulated. They must also meet certain requirements before they are chartered, or granted permission to operate, by federal or state banking authorities. A national bankis a commercial bank that is chartered by the U.S. Comptroller of the Currency, There are approximately 5,500 national banks, accounting for about 53 percent of all bank deposits. These banks must conform to federal banking regulations and are subject to unannounced inspections by federal auditors.
A state bankis a commercial bank that is chartered by the banking authorities in the state in which it operates. State banks outnumber national banks by about two to one, but they tend to be smaller than national banks. They are subject to unannounced inspections by both state and federal auditors.