An Overview of the World’s Largest Banks, By Hugh Thomas
Banks provides the world with liquidity – the ability to exchange ownership claims with minimal cost. When we lend money to non-financial corporations, we are conscious of lending. But when depositors lend money to banks, they believe that they have “money in the bank”. Banks debts are defined as society’s money – the most liquid asset most members of society can hold. To make payments using bank deposits, customers must access the payments system through banks.
Banking is defined in law and regulated by the national governments of the world. Most jurisdictions define banks as those institutions that take deposits and make payments on behalf of customers through payments systems. In some jurisdictions, banks are also defined by their lending power.
In addition to providing legally defined banking services, banks lend, manage financial assets, and make and service markets. They provide trust and investment banking services – underwriting, issuing, and making markets in securities and advising companies as to how they should tap and invest in the money and capital markets. Some banks also underwrite and distribute life and general risk insurance. In playing these diverse roles, banks are regulated by banking, securities markets, insurance and pension fund regulators. The critical nature of banking services and the high degree of government regulation leads customers to believe that the obligations of banks – especially the largest banks – are implicitly (if not explicitly) guaranteed by governments. This assumption, in turn, feeds the need for regulation.
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An Overview of the World’s Largest Banks, By Hugh Thomas