You are on page 1of 19

Bank

The term bank is either derived from old Italian word


banca or from a French word banque both mean a
Bench or money exchange table. In olden days,
European money lenders or money changers used to
display (show) coins of different countries in big heaps
(quantity) on benches or tables for the purpose of
lending or exchanging
A bank is a financial institution which deals with
deposits and advances and other related services.
It receives money from those who want to save in
the form of deposits and it lends money to those
who need it. Bank define as "an establishment for
custody of money, which it pays out on
customer's order."
Characteristics/ Features of a
Bank
1. Dealing in Money

Bank is a financial institution which deals with other people's


money i.e. money given by depositors.

2. Individual / Firm / Company

A bank may be a person, firm or a company. A banking company


means a company which is in the business of banking.
3. Acceptance of Deposit

A bank accepts money from the people in the form of deposits which
are usually repayable on demand or after the expiry of a fixed period.
It gives safety to the deposits of its customers. It also acts as a
custodian of funds of its customers.

4. Giving Advances

A bank lends out money in the form of loans to those who require it
for different purposes.

5. Payment and Withdrawal

A bank provides easy payment and withdrawal facility to its customers


in the form of cheques and drafts, It also brings bank money in
circulation. This money is in the form of cheques, drafts, etc.
6. Agency and Utility Services

A bank provides various banking facilities to its customers. They


include general utility services and agency services.

7. Profit and Service Orientation

A bank is a profit seeking institution having service oriented


approach.

8. Ever increasing Functions

Banking is an evolutionary concept. There is continuous


expansion and diversification as regards the functions, services
and activities of a bank.
9. Connecting Link

A bank acts as a connecting link between borrowers and lenders


of money. Banks collect money from those who have surplus
money and give the same to those who are in need of money.

10. Banking Business

A bank's main activity should be to do business of banking which


should not be subsidiary to any other business.

11. Name Identity

A bank should always add the word "bank" to its name to enable
people to know that it is a bank and that it is dealing in money.
Different types of business banking services include:
Business loans.
Checking accounts.
Savings accounts.
Debit and credit cards.
Merchant services (credit card processing, reconciliation and
reporting, check collection)
Cash management (payroll services, deposit services, etc.
Retirement Accounts
Mortgages
Alternative Investments – such as mutual funds and other securities
Financial Management
Safe Deposit (a box inside a vault in a bank to keep important
papers or valuables) services
Various types of consumer loans
LandBank Products and Services
Bagong Bayani ATM Account
Card-based type of Savings Account intended primarily for Overseas
Filipinos. Opening amount is only Php 100.00 with zero maintaining
balance.

Issued in two forms: generic and personal. The generic card is issued by
LBP Overseas Officers and other ORG designated personnel upon
application while the personal cards are issued by LANDBANK branches
with the account holder’s name embossed in the card.

OFW Passbook Account


Passbook-based Savings Account available at LBP Branches. It can be
opened by the Overseas Filipino or his/her designated beneficiary.
Opening amount is Php 100.00 but Average Daily Balance (ADB) required
is Php 5,000.00.
US Dollar Passbook Account
Passbook-based USD Savings Account available at LBP
Branches. It can be opened by the Overseas Filipino or his/her
designated beneficiary.

Opening amount is USD 10.00 but Average Daily Balance (ADB)


required is USD 500.00. Deposit to this account is represented
in US Dollars but Peso or other Foreign Currencies may still be
deposited to this account, as they are automatically converted to
the US Dollar equivalent based on the prevailing foreign
exchange rate on transaction .
PNB Products and Services
Regular Time Deposit
PNBIG Savings Account
Wealth Multiplier
PNB Treasury Nego
Green Market
Euro Time Deposit
PNB Dollar Mint
Dollar Treasury Nego
PNB Dollar Wealth Multiplier
Top Dollar
Principal – This is basically the amount of money that you put on for time deposit –
the amount that will earn interest.
Term – The time (in days) that you let your money (principal) be locked-up – be it in
35, 63, 91, 182 or 364 days. Note that you cannot “touch” the principal amount
during the term that you have committed. So if you are thinking that you might
need the money in the coming months but you just cannot specifically tell when,
then, just take the shorter terms, 35 or 63 days for instance.
Interest rate – This is the percentage that your principal deposit will grow (minus
tax) if you let it stay in a time deposit for 1 year. Note that this is an annual interest
rate so don’t expect to get the full weight for a less-than-a-year term. The rate also
depends on the principal amount and the duration of time deposit (term). You can
find out more about how this interest rate works for the committed period in the
computations below.
Earned Interest (net) – The amount that you will get after completing the term of
your time deposit.
The formula to compute the net interest earned is something like this:

Earned Interest (net) = Principal x Interest Rate x (Term/360) x (100% – Tax Rate)
Sample Time Deposit Interest Rates

“Interest Rate x (Term/360)” is used to compute the effective interest rate as the
deposit term days is proportioned to 360 days or 1 bank year. “(100% – Tax Rate)” is
the tax deducted from the gross interest amount earned. At present, the tax rate
stands at 20%.

To understand how the formula works, consider an example in which you opened a time
deposit with principal amount of, say, Php 100,000 and with maturity date (term) after
35 days. Using the interest rate as shown in the corresponding table, the net interest
earned is computed as,

Earned Interest (net) = 100,000 x 1.625% x (35/360) x (100% – 20%) = Php 126.39

Your money is now Php 126.39 more for just letting it stay in a time deposit for 35 days.