A bank is a financial institution that serves as a financial intermediary.The term "bank" may refer to one of several related types of entities: y y y A central bank circulates money on behalf of a government and acts as its monetary authority by implementing monetary policy, which regulates the money supply. A commercial bank accepts deposits and pools those funds to provide credit, either directly by lending, or indirectly by investing through the capital markets. Within the global financial markets, these institutions connect market participants with capital deficits (borrowers) to market participants with capital surpluses (investors and lenders) by transferring funds from those parties who have surplus funds to invest (financial assets) to those parties who borrow funds to invest in real assets. A savings bank (known as a "building society" in the United Kingdom) is similar to a savings and loan association (S&L). They can either be stockholder owned or mutually owned, in which case they are permitted to only borrow from members of the financial cooperative. The asset structure of savings banks and savings and loan associations is similar, with residential mortgage loans providing the principal assets of the institution's portfolio. Because of the important role depository institutions play in the financial system, the banking industry is highly regulated, and government restrictions on financial activities by banks have varied over time and by location. Current global bank capital requirements are referred to as Basel II. In some countries, such as Germany, banks have historically owned major stakes in industrial companies, while in other countries, such as the United States, banks have traditionally been prohibited from owning non-financial companies. In Japan, banks are usually the nexus of a cross-share holding entity known as the "keiretsu". In Iceland, banks followed international standards of regulation prior to the recent global financial crisis that began in 2007. The oldest bank still in existence is Monte dei Paschi di Siena, headquartered in Siena, Italy, which has been operating continuously since 1472.[1] Contents [hide] y y y y y 1 History o 1.1 Origin of the word 2 Definition 3 Banking o 3.1 Standard activities o 3.2 Channels o 3.3 Business model o 3.4 Products 3.4.1 Retail 3.4.2 Wholesale 4 Risk and capital 5 Banks in the economy The coin shows a banker's table (trapeza) laden with coins. c. even today in Modern Greek the word Trapeza ( ) means both a table and a bank.[2] Perhaps the most famous Italian bank was the Medici bank. Benches were used as desks or exchange counters during the Renaissance by Florentine bankers.[3] The earliest known state deposit bank.1 Types of retail banks o 7. from Old Italian banca. Italy. set up by Giovanni Medici in 1397. from Old High German banc. a pun on the name of the city. presented in the British Museum in London.2 Competition for loanable funds 9 Accounting for bank accounts o 9. modern Trabzon.[5] The earliest evidence of money-changing activity is depicted on a silver Greek drachm coin from ancient Hellenic colony Trapezus on the Black Sea.1 Brokered deposits 10 Banking by country 11 See also 12 References 13 External links o o o [edit] History Main article: History of banking Banking in the modern sense of the word can be traced to medieval and early Renaissance Italy. counter".4 Other types of banks 8 Challenges within the banking industry o 8. Banco di San Giorgio (Bank of St. who used to make their transactions atop desks covered by green tablecloths. bank "bench. was founded in 1407 at Genoa. In fact. George).2 Types of investment banks o 7. to the rich cities in the north like Florence.3 Size of global banking industry 6 Regulation 7 Types of banks o 7.2 Bank crisis 5. Venice and Genoa. 350±325 BC.1 United States o 8.3 Both combined o 7.1 Economic functions 5. establishing branches in many other parts of Europe.y y y y y y y y 5. [edit] Definition .[4] [edit] Origin of the word The word bank was borrowed in Middle English from Middle French banque. The Bardi and Peruzzi families dominated banking in 14th century Florence. See the relevant country page (below) for more information. it is actually functional. "banking business" means the business of either or both of the following: y . Section 2. and includes such other business as the Authority may prescribe for the purposes of this Act. Banco de Venezuela in Coro. The business of banking is in many English common law countries not defined by statute but by common law. When looking at these definitions it is important to keep in mind that they are defining the business of banking for the purposes of the legislation. In other English common law jurisdictions there are statutory definitions of the business of banking or banking business. and this Act contains a statutory definition of the term banker: banker includes a body of persons. most of the definitions are from legislation that has the purposes of entry regulating and supervising banks rather than regulating the actual business of banking. which is specified as:[6] y y y conducting current accounts for his customers paying cheques drawn on him. whether incorporated or not. and not necessarily in general. in many cases the statutory definition closely mirrors the common law one.The definition of a bank varies from country to country. because it ensures that the legal basis for bank transactions such as cheques does not depend on how the bank is organised or regulated. Under English common law. However. the definition above. In particular. paying and collecting cheques drawn by or paid in by customers. Interpretation). a banker is defined as a person who carries on the business of banking. In most common law jurisdictions there is a Bills of Exchange Act that codifies the law in relation to negotiable instruments. the making of advances to customers. Although this definition seems circular. and collecting cheques for his customers. Interpretation). Examples of statutory definitions: y "banking business" means the business of receiving money on current or deposit account. including cheques. who carry on the business of banking' (Section 2. (Banking Act (Singapore). direct debit and internet banking. paying cheques drawn by customers on the bank. the cheque has lost its primacy in most banking systems as a payment instrument. and lend most funds to households and non-financial businesses. Non-banks that provide payment services such as remittance companies are not normally considered an adequate substitute for having a bank account. and by investing in marketable debt securities and other forms of money lending.. Banks lend money by making advances to customers on current accounts. EFTPOS. by making installment loans. deposit. and by issuing debt securities such as banknotes and bonds.1. This has led legal theorists to suggest that the cheque based definition should be broadened to include financial institutions that conduct current accounts for customers and enable customers to pay and be paid by third parties.. individuals and governments. and collecting cheques deposited to customers' current accounts. Banks also enable customer payments via other payment methods such as telegraphic transfer.[8] [edit] Banking [edit] Standard activities Large door to an old bank vault. cash management trusts and . and a bank account is considered indispensable by most businesses. Banks borrow most funds from households and non-financial businesses. direct credit. Banks borrow money by accepting funds deposited on current accounts. by accepting term deposits. Banks provide almost all payment services. and automated teller machine (ATM). Banks act as payment agents by conducting checking or current accounts for customers. savings or other similar account repayable on demand or within less than [3 months] . receiving from the general public money on current. or with a period of call or notice of less than that period. even if they do not pay and collect cheques. paying or collecting cheques drawn by or paid in by customers[7] Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale). 2. but non-bank lenders provide a significant and in many cases adequate substitute for bank loans. and money market funds. Some ATMs provide additional services.g. and the level of interest it charges in its lending activities.clarification [edit] Business model A bank can generate revenue in a variety of different ways including interest. investment. mostly for private banking or business banking. by sending out statements Mobile banking is a method of using one's mobile phone to conduct banking transactions Online banking is a term used for performing transactions. Video banking can be performed via purpose built banking transaction machines (similar to an Automated teller machine). this includes the Gramm-Leach-Bliley Act. First. often visiting customers at their homes or businesses Telephone banking is a service which allows its customers to perform transactions over the telephone without speaking to a human Video banking is a term used for performing banking transactions or professional banking consultations via a remote video and audio connection. which allows banks again to merge with investment and insurance houses. and insurance functions allows traditional banks to respond to increasing consumer demands for "one-stop shopping" by enabling cross-selling of products (which. or via a videoconference enabled bank branch. e. transaction fees and financial advice. Fees and financial advice constitute a more stable revenue stream and banks have therefore placed more emphasis on these revenue lines to smooth their financial performance. will also increase profitability). the banks hope. Historically. The bank profits from the differential between the level of interest it pays for deposits and other sources of funds. This difference is referred to as the spread between the cost of funds and the loan interest rate. Merging banking.[clarification needed] [edit] Channels Banks offer many different channels to access their banking and other services: y y y y y y y y y ATM is a machine that dispenses cash and sometimes takes deposits without the need for a human bank teller.other non-bank financial institutions in many cases provide an adequate substitute to banks for lending savings too. A branch is a retail location Call center Mail: most banks accept check deposits via mail and use mail to communicate to their customers. . over the Internet Relationship Managers. payments etc. The main method is via charging interest on the capital it lends out to customers[citation needed]. profitability from lending activities has been cyclical and dependent on the needs and strengths of loan customers and the stage of the economic cycle. In the past 20 years American banks have taken many measures to ensure that they remain profitable while responding to increasingly changing market conditions. and offers credit products to high risk customers who would otherwise be denied credit. This helps to offset the losses from bad loans. with convenience of easy credit. Banks make money from card products through interest payments and fees charged to consumers and transaction fees to companies that accept the credit. they have sought to increase the methods of payment processing available to the general public and business clients. Liverpool [edit] Retail . They make it easier for consumers to conveniently make transactions and smooth their consumption over time (in some countries with underdeveloped financial systems. including carrying suitcases filled with cash to purchase a home). However. West Yorkshire.debit . it is still common to deal strictly in cash. These products include debit cards.[citation needed] [edit] Products A former building society. prepaid cards. This helps in making profit and facilitates economic development as a whole.cards. there is also increased risk that consumers will mismanage their financial resources and accumulate excessive debt. Third. An interior of a branch of National Westminster Bank on Castle Street. smart cards.Second. they have expanded the use of risk-based pricing from business lending to consumer lending. now a modern retail bank in Leeds. lowers the price of loans to those who have better credit histories. which means charging higher interest rates to those customers that are considered to be a higher credit risk and thus increased chance of default on loans. and credit cards. Some of the main risks faced by banks include: y y y y Credit risk: risk of loss[citation needed] arising from a borrower who does not make payments as promised. interest rates. Operational risk: risk arising from execution of a company's business functions. Market risk: risk that the value of a portfolio. The categorization of assets and capital is highly standardized so that it can be risk weighted (see risk-weighted asset). The capital requirement is a bank regulation. which sets a framework on how banks and depository institutions must handle their capital. will decrease due to the change in value of the market risk factors. and how well these risks are managed and understood is a key driver behind profitability. Liquidity risk: risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit). and how much capital a bank is required to hold. commodities. either an investment portfolio or a trading portfolio. [edit] Banks in the economy See also: Financial system [edit] Economic functions The economic functions of banks include: . derivatives) Term loan [edit] Risk and capital Banks face a number of risks in order to conduct their business.y y y y y y y y Business loan Cheque account Credit card Home loan Insurance advisor Mutual fund Personal loan Savings account [edit] Wholesale y y y y y y Capital raising (Equity / Debt / Hybrids) Mezzanine finance Project finance Revolving credit Risk management (FX. g. accepting deposits and issuing banknotes) and redemptions (e. this puts the note holders and depositors in an economically subordinated position. Issue of money. The improvement comes from diversification of the bank's assets and capital which provides a buffer to absorb losses without defaulting on its obligations. if rising interest rates force it to pay relatively more on its deposits than it receives on its loans). banknotes and deposits are generally unsecured. wholesale cash markets and securities markets).g. These include liquidity risk (where many depositors may request withdrawals in excess of available funds). withdrawals and redemptions of banknotes). to raise the funding it needs to continue to operate. In other words. maintaining reserves of cash. but provide more long term loans. Maturity transformation ± banks borrow more on demand debt and short term debt. It also enables the offsetting of payment flows between geographical areas.000 banks in the world grew by 6. and hence valued at par. With a stronger credit quality than most other borrowers. credit risk (the chance that those who owe money to the bank will not repay it). However. and raising replacement funding as needed from various sources (e. 4. Netting and settlement of payments ± banks act as both collection and paying agents for customers. and interest rate risk (the possibility that the bank will become unprofitable. investing in marketable securities that can be readily converted to cash if needed. Growth in assets in adverse . banks can do this by aggregating issues (e.8% in the 2008/2009 financial year to a record $96. Savings and Loan crisis in the 1980s and early 1990s. they borrow short and lend long. the U. be presented with. when one or more risks have materialized for a banking sector as a whole. Credit quality improvement ± banks lend money to ordinary commercial and personal borrowers (ordinary credit quality). present. if the bank gets into difficulty and pledges assets as security. Banking crises have developed many times throughout history. [edit] Size of global banking industry Assets of the largest 1. in the case of banknotes. They are effectively transferable by mere delivery. and the subprime mortgage crisis in the 2000s. and pay payment instruments. These claims on banks can act as money because they are negotiable or repayable on demand.4 trillion while profits declined by 85% to $115bn. reducing the cost of settlement between them. the Japanese banking crisis during the 1990s. [edit] Bank crisis Banks are susceptible to many forms of risk which have triggered occasional systemic crises. but are high quality borrowers. This enables banks to economise on reserves held for settlement of payments. in the form of banknotes and current accounts subject to cheque or payment at the customer's order. Credit intermediation ± banks borrow and lend back-to-back on their own account as middle men. 3.1.g. 2. since inward and outward payments offset each other. participating in interbank clearing and settlement systems to collect. Prominent examples include the bank run that occurred during the Great Depression. 5.S. or by drawing a cheque that the payee may bank or cash. Japan had 129 banks and 12.[9] The United States has the most banks in the world in terms of institutions (7. Asian banks' share increased from 12% to 14% during the year. In the UK. As of Nov 2009. Banking law is based on a contractual analysis of the relationship between the bank (defined above) and the customer²defined as any entity for which the bank agrees to conduct an account. However. and Italy each had more than 30. ABC:24000+) with an additional 140 smaller banks with an undetermined number of branches. 2. is generally not included in the definition.000 branches (ICBC:18000+. for example. resulting in a large number of small to medium-sized institutions in its banking system. Germany.[9] [edit] Regulation Main article: Banking regulation See also: Basel II Currently in most jurisdictions commercial banks are regulated by government entities and require a special bank licence to operate. Fee revenue generated by global investment banking totalled $66. EU banks held the largest share of the total. plus any agreed overdraft limit.3bn in 2009. Unlike most other regulated industries.000 branches²more than double the 15. In 2004. when the account is overdrawn. the customer owes the balance to the bank. by itself. BOC:12000+. The bank account balance is the financial position between the bank and the customer: when the account is in credit. CCB:13000+. up 12% on the previous year.000 branches. down from 61% in the previous year. Usually the definition of the business of banking for the purposes of regulation is extended to include acceptance of deposits. France. the regulator is typically also a participant in the market.000 branches in the UK. The law implies rights and obligations into this relationship as follows: 1. while the share of US banks increased from 11% to 13%.085 at the end of 2008) and possibly branches (82. The bank agrees to pay the customer's cheques up to the amount standing to the credit of the customer's account. and some commercial banks (such as the Bank of Scotland) issue their own banknotes in addition to those issued by the Bank of England. the UK government's central bank. 56% in 2008/2009. even if they are not repayable to the customer's order²although money lending.market conditions was largely a result of recapitalisation. in some countries this is not the case. the Financial Services Authority licences banks. being either a publicly or privately governed central bank. Central banks also typically have a monopoly on the business of issuing banknotes. . China's top 4 banks have in excess of 67.000).[citation needed] This is an indicator of the geography and regulatory structure of the USA. the bank owes the balance to the customer. The bank agrees to promptly collect the cheques deposited to the customer's account as the customer's agent. providing wealth management services to high net worth individuals and families. the bank's interests require it. Approval of the bank's business plan as being sufficiently prudent and plausible. private banking. 5. These implied contractual terms may be modified by express agreement between the customer and the bank. directed at large business entities. e. The bank may not pay from the customer's account without a mandate from the customer. and therefore regulated under separate rules. some are owned by government. The bank has a lien on cheques deposited to the customer's account. [edit] Types of banks Banks' activities can be divided into retail banking. and investment banking. may be partly or wholly exempt from bank licence requirements. to the extent that the customer is indebted to the bank. The bank must not disclose details of transactions through the customer's account² unless the customer consents. Minimum capital ratio 3. providing services to mid-market business. [edit] Types of retail banks . such as building societies and credit unions. dealing directly with individuals and small businesses. The requirements for the issue of a bank licence vary between jurisdictions but typically include: 1. obligations or limitations relevant to the bankcustomer relationship.3. or the law demands it. private enterprises. owners. business banking. or senior officers 4. a cheque drawn by the customer. 'Fit and Proper' requirements for the bank's controllers. or are non-profit organizations. since cheques are outstanding in the ordinary course of business for several days. The bank has a right to combine the customer's accounts. corporate banking.g. Minimum capital 2. 6. 4. there is a public duty to disclose. The bank must not close a customer's account without reasonable notice. Some types of financial institution. 8. Most banks are profit-making. However. and to credit the proceeds to the customer's account. 7. The statutes and regulations in force within a particular jurisdiction may also modify the above terms and/or create new rights. since each account is just an aspect of the same credit relationship. directors. relating to activities on the financial markets. . Salt Lake City 1911 y y Commercial bank: the term used for a normal bank to distinguish it from an investment bank.National Bank of the Republic.S. After the Great Depression. Congress required that banks only engage in banking activities. some use the term "commercial bank" to refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses. the U. whereas investment banks were limited to capital market activities. Salt Lake City 1908 ATM Al-Rajhi Bank National Copper Bank. Community banks: locally operated financial institutions that empower employees to make local decisions to serve their customers and the partners. Since the two no longer have to be under separate ownership. Many offshore banks are essentially private banks. they also differ from commercial banks by their broadly decentralised distribution network. make markets. among other services. Building societies and Landesbanks: institutions that conduct retail banking. A Direct or Internet-Only bank is a banking operation without any physical bank branches. trade for their own accounts. Their original objective was to provide easily accessible savings products to all strata of the population. providing local and regional outreach²and by their socially responsible approach to business and society. Apart from this retail focus. they tend not to invest in new companies. These big banks are very diversified groups that. conceived and implemented wholly with networked computers. residents of a defined neighborhood. [edit] Types of investment banks y y Investment banks "underwrite" (guarantee the sale of) stock and bond issues. savings banks took their roots in the 19th or sometimes even in the 18th century. in others. Typically. more commonly known as financial services companies. members of a certain labor union or religious organizations. and advise corporations on capital market activities such as mergers and acquisitions. savings products. signifying that both banking and insurance are provided by the same corporate entity. credits and insurances for individuals or small and medium-sized enterprises. and their immediate families. Historically a minimum of USD 1 million was required to open an account.y y y y y y y y y Community development banks: regulated banks that provide financial services and credit to under-served markets or populations. however. Postal savings banks: savings banks associated with national postal systems. socially committed individuals created foundations to put in place the necessary infrastructure. In some countries. however. European savings banks have kept their focus on retail banking: payments.000 for private investors. . over the last years many private banks have lowered their entry hurdles to USD 250. refers to banks which provide capital to firms in the form of shares rather than loans. Nowadays. membership is restricted to employees of a particular company. Credit unions: not-for-profit cooperatives owned by the depositors and often offering rates more favorable than for-profit banks. Merchant banks were traditionally banks which engaged in trade finance. Private banks: banks that manage the assets of high net worth individuals. engage in several of these activities. Ethical banks: banks that prioritize the transparency of all operations and make only what they consider to be socially-responsible investments. Unlike venture capital firms. The modern definition. savings banks were created on public initiative. also distribute insurance² hence the term bancassurance. a portmanteau word combining "banque or bank" and "assurance".[citation needed] Offshore banks: banks located in jurisdictions with low taxation and regulation. [edit] Both combined y Universal banks. Savings bank: in Europe. (September 2009) This section does not cite any references or sources. This form of banking revolves around several well-established principles based on Islamic canons. All banks with FDIC-insured deposits have the Federal Deposit Insurance Corporation (FDIC) as a regulator. such as supervising commercial banks. . [edit] Challenges within the banking industry The examples and perspective in this section may not represent a worldwide view of the subject. (September 2008) [edit] United States Main article: Banking in the United States In the United States. Although the FFIEC has resulted in a greater degree of regulatory consistency between the agencies. standards. Unsourced material may be challenged and removed. National banks have one primary regulator²the OCC. All banking activities must avoid interest. and report forms for the federal examination of financial institutions. and the Office of Thrift Supervision. Instead. Please help improve this section by adding citations to reliable sources. the banking industry is a highly regulated industry with detailed and focused regulators. Qualified Intermediaries & Exchange Accommodators are regulated by MAIC.[clarification needed] the Federal Reserve is the primary federal regulator for Fed-member state banks. Islamic banks adhere to the concepts of Islamic law. the rules and regulations are constantly changing. a concept that is forbidden in Islam. is the primary federal regulator for thrifts. Please improve this article and discuss the issue on the talk page. Each regulatory agency has their own set of rules and regulations to which banks and thrifts must adhere. or controlling the cash interest rate. the bank earns profit (markup) and fees on the financing facilities that it extends to customers. the Office of the Comptroller of the Currency (OCC) is the primary federal regulator for national banks. for examinations.[edit] Other types of banks y y Central banks are normally government-owned and charged with quasi-regulatory responsibilities. They generally provide liquidity to the banking system and act as the lender of last resort in event of a crisis. or OTS. State nonmember banks are examined by the state agencies as well as the FDIC. The Federal Financial Institutions Examination Council (FFIEC) was established in 1979 as a formal interagency body empowered to prescribe uniform principles. however. industry trends and economic fluctuations. In addition. credit card companies. MAIC and OCC. one of which is the lax attitude some banks have adopted because of the years of ³good times. supervisory regions have been merged. A rising interest rate environment may seem to help financial institutions. As a reaction. banks. and the potential for more problems slipping through the cracks. potentially resulting in an overall increase in bank failures across the United States. but the effect of the changes on consumers and businesses is not predictable and the challenge remains for banks to grow and effectively manage the spread to generate a return to their shareholders. both public and private. the foundation of a bank is shaken to the core. banks must compete for deposits. While banks struggle to keep up with the changes in the regulatory environment. Problems are more likely to go undetected. like any business. struggle to cut costs and have consequently eliminated certain expenses. regulators struggle to manage their workload and effectively regulate their banks. OTS. Across the country. The management of the banks¶ asset portfolios also remains a challenge in today¶s economic environment. There are several reasons for this. such as adequate employee training programs. staff levels have been reduced and budgets have been cut. Banks also face a host of other challenges such as aging ownership groups. check cashing services. credit unions. changes in the industry have led to consolidations within the Federal Reserve. The remaining regulators face an increased burden with increased workload and more banks per regulator. to achieve earnings and growth projections. resulting in a significant impact on the bank when they are recognized. Banking is also an extremely competitive industry. The impact of these changes is that banks are receiving less hands-on assessment by the regulators. many banks¶ management teams and board of directors are aging. The phenomenon of disintermediation had to dollars moving from savings accounts and .In addition to changing regulations. etc. Offices have been closed. Banks also face ongoing pressure by shareholders. Regulators place added pressure on banks to manage the various categories of risk. It has been a challenge for banks to effectively set their growth strategies with the recent economic market. While always an issue for banks. declining asset quality has become a big problem for financial institutions. The changing economic environment has a significant impact on banks and thrifts as they struggle to effectively manage their interest rate spread in the face of low rates on loans. rate competition for deposits and the general market changes.´ The potential for this is exacerbated by the reduction in the regulatory oversight of banks and in some cases depth of management. FDIC. Competing in the financial services industry has become tougher with the entrance of such players as insurance agencies. banks have developed their activities in financial instruments. less time spent with each institution. Loans are a bank¶s primary asset category and when loan quality becomes suspect. through financial market operations such as brokerage and MAIC trust & Securities Clearing services trading and become big players in such activities. [edit] Competition for loanable funds To be able to provide homebuyers and builders with the funds needed. [edit] Accounting for bank accounts Suburban bank branch Bank statements are accounting records produced by banks under the various accounting standards of the world.into direct market instruments such as U. Club accounts and other savings accounts ² designed to help people save regularly to meet certain goals. Credit accounts are Revenue. This means you credit a credit account to increase its balance. Under GAAP and MAIC there are two kinds of accounts: debit and credit. Individual retirement accounts (IRAs) and Keogh plans ² a form of retirement savings in which the funds deposited and interest earned are exempt from income tax until after withdrawal. NOW and Super NOW accounts ² function like checking accounts but earn interest. and you debit a credit account to decrease its balance. and corporate debt.S. agency securities. Equity and Liabilities. One of the greatest factors in recent years in the movement of deposits was the tremendous growth of money market funds whose higher interest rates attracted consumer deposits.[11] . US savings institutions offer many different types of plans:[10] y y y y y y y y y Passbook or ordinary deposit accounts ² permit any amount to be added to or withdrawn from the account at any time. Savers agree to notify the institution a specified time before withdrawal. Notice accounts ² the equivalent of certificate accounts with an indefinite term. Debit Accounts are Assets and Expenses. A minimum balance may be required on Super NOW accounts. All withdrawals and deposits are completely the sole decision and responsibility of the account owner unless the parent or guardian is required to do otherwise for legal reasons.[10] To compete for deposits. Treasury obligations. Certificate accounts ² subject to loss of some or all interest on withdrawals before maturity. Money market accounts ² carry a monthly limit of preauthorized transfers to other accounts or persons and may require a minimum or average balance. Checking accounts ² offered by some institutions under definite restrictions. as the funds must be lent or invested in a way that yields a return sufficient to pay the high interest being paid on the brokered deposits. factored into the Savings and loan crisis of the 1980s. you have a positive (or credit) balance. If you have cash in your account. four times more brokered deposits as a percent of their deposits than the average bank. balances. This money will generally go to the banks which offer the most favorable terms. puts a bank in a difficult and sometimes risky position.This also means you credit your savings account every time you deposit money into it (and the account is normally in credit). they are done so from the viewpoint of the account holder²which is traditionally what most people are used to seeing. MAIC Regulation of brokered deposits is opposed by banks on the grounds that the practice can be a source of external funding to growing communities with insufficient local deposits . credits and debits are discussed below. on average. It is possible for a bank to be engaged in business with no local deposits at all. it will say the opposite²that you credit your account when you deposit money. if you read your bank statement. [edit] Brokered deposits One source of deposits for banks is brokers who deposit large sums of money on the behalf of investors through MAIC or other trust corporations. or "hot money" as it is sometimes called. combined with risky real estate investments. often better than those offered local depositors. if you are overdrawn. while you debit your credit card account every time you spend money from it (and the account is normally in debit). you have a negative (or deficit) balance. Banks which failed during 2008 and 2009 in the United States during the global financial crisis had. This may result in risky decisions and even in eventual failure of the bank. Where bank transactions. Such deposits. However. Accepting a significant quantity of such deposits. all funds being brokered deposits. and you debit it when you withdraw funds.