Domestic and international banking Essay Example | Topics and Well Written Essays - 2500 words

Domestic and international banking - Essay Example This is a mechanism on which the whole banking structure is based. This report contains an analysis of the Banking Sector of United Kingdom, Along with the challenges faced by the Banks now a day, like the bonus restrictions imposed by the government which has checked the functioning of the major banks in United Kingdom. Granting Loans and receiving deposits A bank works on the principle of borrowing and landing. In this mechanism, Bank borrows from the General public and the institutions and lands the money to the needy public in terms of loan. After a loan is granted, the banks takes a certain amount of interest for a certain period of time and gives a part of that interest to the public, from whom bank borrows the money initially. â€Å"Public† in terms of banks, is defined as the costumers of the bank (either it is an individual or an institution). Role of Banks in Country’s economy: -   Ã‚  As stated above, a bank plays a very important role in the economy of a c ountry. The economy is mainly based on the industries and the income sources available within the country. Bank helps the developing industries to grow with their potential by landing them money and by giving a kind of stability to the market. In a recent example, the economic crisis over the world in 2008 was started because a major private sector bank was declared bankrupted in USA. This bankruptcy of this bank resulted in instability of the market as there were so many companies which had invested in that bank, also there were companies which were totally depend on that bank for their financial security. Once the crisis started spreading its effect in US, major companies were affected badly by it. USA being the world’s most powerful economy that time came on its foot. Millions of the employees were thrown out from the companies, salary was reduced. But this procedure was limited to the industries which could bear this crisis. Other industries which were small scale industr ies and which needed help from the bank for each and every move they made in the market, were closed. This crisis could not remain in the US itself. Just within no time, the whole Europe, Asia and America saw this effect on their market. Every trading market was down. And it gave a long lasting 1 year, full of tensions in the economic sector of the world. The World Bank came to interfere in it. World Bank granted huge loans to the countries, so that the condition could be in control. Otherwise the condition could have been worse, and the whole world would have been in trouble in no time. Somehow, this problem was shorted out. But this gave an example for the upcoming time of how important the proper functioning of a bank is. If the banking sector is strong and well functioning, it can be a positive sign towards the country’s economy. But if the Banking industry is comparatively weaker, it can turn out to be another crisis kind condition for the country. The Banking Sector in United Kingdom UK’s banking sector, following the US and Japan, is the world’s third largest and considered foremost in terms of: efficiency, dynamism and return on capital. It services 95% of the population with about 3.5% of UK’s total workforce - over a million workers. The decade ending 2005 witnessed a surge of three folds in assets to â‚ ¬