BANKING & INVESTMENT ANALYSIS

OVERVIEW OF BANKING
 • Meaning of a Bank and
Banking Business
• Types of Banks
Lesson • The Banking structure in
Ghana
objective • Banks and the Principal
s Agent Problem
• Role and Economic
Functions of Banks in our
modern economy
Meaning of a bank and banking
The following below are few definition of WHAT is a BANK?

 According to some school of Thought, a bank is an organization also

called a corporation, chattered by a state or government, which does most
or all of the followings:
 receives demand deposits, and time deposits,
 honour instruments drawn on them, and pays interest on them;
 discount notes,
 makes loans, and invests in securities;
 collects, drafts, and notes; certifies depositor’s cheques;
 issues drafts and casher’s cheques.
 A bank is a financial intermediary that accepts deposits and
channels those deposits into lending activities either directly or
indirectly through financial markets (Gladys A.A Nabieu, 2011)
Business of Banking
On the other hand, business of banking is of either one or
both of the following definitions:

 Receiving from the general public money on current, deposit,

savings or other similar accounts repayable on demand or
with a period of call or notice

 paying or collecting cheques drawn by or paid in by

customers according (Banking ordinance, Section 2
interpretation, Hong Kong)
Types of banks
In Ghana, the BOG identifies and classifies banks under five (5) major
categories:
 Commercial Banks
 Development Banks
 Universal Banks
 Merchant Banks
 Rural Banks

Other forms of banks includes;

 Central banks
 Islamic banks
 Investment banks
 Community development Banks
 Postal savings banks
 Offshore banks
 Savings banks
 Ethical banks
Banking structure in Ghana
Banks and the principal agent problems
The following are the challenges banks encounter as a result of
information asymmetric:
 Adverse Selection

 Moral Hazards
However, the following principal agent theory can be applied as
stakeholders in the banks.
 The shareholders and its management

 The bank and its officers

 The bank and its debtors

 The depositors and the bank

The role of banks in an economy

The roles of banks includes:

 Deposits mobilization

 Development in various sectors

 Mobilizing human resources, factor inputs and innovative products

 Provides short-term and medium term financial assistance in every

economy, etc.
Economic functions of banks

 Fund size transformation

 Maturity transformation

 Risk transformation

 Issue of money

 Netting and settlement of payment(clearing)

 Credit intermediation

 Improvement in credit quality


END OF LECTURE ONE