Group two

Siham Nuru BEE/1308 /11

Tizita Derso BEE/9832 /11
Yabsira Tariku BEE/9789 /11
Senia Abdella BEE/2797 /11
Sadiya Alemu BEE/7347 /11
Simegn Asnake BEE/0215 /11
Solomon Tolosa BEE/7473 /11
Shimelis Assefa BEE/3284 /11
Yabsira Zerihun BEE/ 8296/11
Tadesse H/gebriel BEE/2858 /11
 What is central banking
 A central bank is the term used to describe the authority
responsible for policies that affect a country’s supply of money
and credit.
 More specifically, a central bank uses its tools of monetary
policy open market operations.
• discount window lending,
• changes in reserve requirements to affect short-term interest
rates and
• the monetary base (currency held by the public plus bank
reserves) in order to achieve important policy goals.
 History of central banking
 The story of central banking goes back at least to the
seventeenth century, to the founding of the first institution
recognized as a central bank.
 the Swedish Riksbank. Established in 1668 as a joint stock
bank, it was chartered to lend the government funds and to act
as a clearing house for commerce.

A few decades later (1694), the most famous central bank of
the era, the Bank of England, was founded also as a joint stock
company to purchase government debt.
 Con…
 Other central banks were set up later in Europe for
similar purposes, though some were established to
deal with monetary disarray.
 The Federal Reserve System belongs to a later wave
of central banks, which emerged at the turn of the
twentieth century.
 These banks were created primarily to consolidate the
various instruments that people were using for
currency and to provide financial stability
 Con…
 Many also were created to manage the gold standard,
to which most countries adhered.
 The gold standard, which prevailed until 1914, meant
that each country defined its currency in terms of a
fixed weight of gold.
 Central banks held large gold reserves to ensure that
their notes could be converted into gold, as was
required by their charters.
 February 15, 1906, marked the beginning of banking in
Ethiopia Commercial bank
History

Ethiopia when the first

 Bank of Abyssinia was inaugurated by Emperor Menelik II. It
was a private bank
 whose shares were sold in Addis Ababa, New York, Paris,
London, and Vienna.
 In 1931, Emperor Haile Selassie introduced reforms into the
banking system.
 The Bank of Abyssinia was liquidated the newly established
Bank of Ethiopia.
 government-owned bank, taking over management, staff and
premises of the ceased bank
 CON..
 The CBE is a profit based financial institution
that grants
• loans,
• accepts,
• Deposit and offers other financial services, such as over
draft facilities and electronic transfer to funds
 Definition of Commercial bank

 Bank that offers a broad range of deposit accounts, including

checking, savings and time deposits and extends loans to
individuals and business.
 Commercial banks can be contrasted with investment banking
firms, such as brokerage firms, which generally are involved in
arranging for the sale of corporate or municipal securities.
 FUNCTIONS OF COMMERCIAL BANKS
OF ETHIOPIA
 The commercial banks of Ethiopia is too many and too
vast, it is difficult to mention each and every role and
function of the banks in overall aspects of the country.
 The functions of commercial banks of Ethiopia is clearly
stated at Art 2 sub Article 2 of the Banking Business
Proclamation No 592/2000.
 CON…
 Accepting Deposits: This is one of the primary function of
commercial banks of Ethiopia. The commercial banks
accept deposit of their customers. The customers deposit
in the commercial banks to be safe and secure their many
and to be free from theft and robbery
 Giving Loans: The second main function of commercial
banks in Ethiopia is rendering loan services to their
customers. Most of the time the banks require mortgage in
giving loan to their customers for guaranteeing of their
loans. The banks get loan interest as a benefit from their
borrowers
 CON…
 Many transfer services: The commercial banks are
engaged in transferring of many from one branch to
another branch. They collect service charge for their many
transfer services
 Buying and selling of foreign-exchange: The commercial
banks of Ethiopia can also buy and sell foreign exchange.
As we see every day in EBC, the foreign exchange rate is
disclosed to the public by business news. And by using
the exchange rate the banks
 ROLES OF COMMERCIAL BANKS
 Financing Industry: The commercial banks play an important
role in financing the industry sector of the economy. Industries
needs huge capital and they need the help of banks for loan
services and these commercial banks are providing this loan
services to the industry sector of the economy. And by
providing finance to this sector they banks help the economic
growth to be fast and sustainable
 Financing Trade:- In Ethiopia, the commercial Banks help the
financing both internal and external trade. The banks provide
loans to retailers and whole sellers to stock goods in which
they deal.
 CON…
 Financing agriculture: The commercial banks provide
loan to the unions and federations of cooperatives to
import fertilizers and other agricultural inputs to the
country
 Facilitating commerce: The commercial banks are helping
the society to make commerce by using e-commerce. The
customers use ATM and can buy any product or services at
any super market where such ATM technology exists .
 Help in implementing monitory policy: The commercial
banks help in reducing black market of foreign exchange
and other crimes relating to many in circulation
 COMMERCIAL BANKING
SERVICES
 Collection and payment of credit instruments- Banks deal with
such instruments. Modern banks collect and pay different types
of credit instruments as the representatives of the customers.
 ATMs services- ATMs replace human bank tellers in
performing giving banking functions such as deposits,
withdrawals, account inquiries.
 Home banking- is the process of completing the financial
transaction from one’s own home as opposed to utilizing a
branch of a bank.
 Con…
 It includes actions such as making account inquires,
transferring money, paying bills, applying for loans,
directing deposits.
 Online banking is a service offered by banks that allows

account holders to access their account data via the

internet. They are also known as “ Internet banking” or
“Web banking”.
 Mobile banking, Accepting deposit, Priority banking

,Private banking, Debit cards, Remittance of funds ,Bank

Guarantee, Foreign currency Exchange,
Consultancy
 Domestic and international banking operations
 A business is said to be domestic, when its economic
transactions are conducted within the geographical
boundaries of the country.
 international banking is a type of banking that has
presence across international borders
 International business is one which is engaged in
economic transaction with several countries in the world.
 It can be conducted easily. It is difficult to conduct
research
 Functions of International
Banking
 Taking deposits and making loans in domestic
currency to foreign governments, enterprises, and
individuals.
 Taking deposits and lending in foreign currencies to
domestic and foreign entities.
 Managing and acting as agents for syndicated loans,
designing special financing requirements for
international trade and projects .
 Foreign exchange transactions, dealing in gold and
precious metals, international money transfers.
 Con…
 Providing documentary letters of credit, standby
letters of credit, multiple currency credit lines, bank
acceptances, Euro note insurance facilities.
 Trading in currency futures and options, financial
futures and options, interest rate and asset swaps,
writing interest rate caps.
 Underwriting and placement of Eurobond issues,
distribution of Euro commercial paper , assisting
cross border mergers, acquisitions and sales, financial
advisory, and investment services
 Role of bank in financial management
 -play vital roles in the financial system and the
economy.
 -allocate funds from savers to borrowers in an
efficient manner…
 -Help to make the overall economy more efficient.
 -Their primary role to take funds(deposits)- from
those with money pool them and lend them to those
who need funds.