COMMERCIAL BANKS FUNCTIONS THE SCOPE AVAILABLE 1 Functions The functions of commercial banks which are described below show how importan the presence of commercial banks is in modern economies 1 1......................................................................................................
COMMERCIAL BANKS' FUNCTIONS & THE SCOPE AVAILABLE Functions The functions of commercial banks which are described below show how importan the presence of commercial banks is in modern economies 1.1 Creation of money Money is created by commercial banks demand deposits, namely the means of payment via transfer mechanism (clearing) The ability to create demand deposits of commercial banks led to the possibility and function in the implementation of monetary policy The central bank can reduce or increase the money supply by aflecting the ability of commercial banks to create demand deposits 1.2 Smooth support payments mechanism Other functions of commercial banks are also very important is to support fluency payment mechanism This is possible because one of the services offered by commercial banks are the services associated with payment mechanisms Some services are very well known is the clearing, transfer money, deposit receipt deposit, gift with cash payment facilities, credit, payment facilities are simple and convenient, such as plastic cards and electronic payment systems 1.3 Community savings The deposit fund collected by the bank is the most common In Indonesia, the fund consists of demand deposits, time deposits, certificates of deposit, savings and/or any other form that can be equivalent The ability of commercial banks in raising funds is much greater than other financial institutions Deposit funds collected will be distributed to parties in need, primarily through credit 1.4 Supports smooth international transaction Commercial banks also are needed to facilitate and/or facilitate international transactions, both transactions of goods/services and capital transactions The difficulties of transactions between two parties of different countries always wrise because of differences in geography, distance, culture and the monetary system of each country The presence of commercial banks operating on an international scale will facilitate the settlement of such transactions With the commercial banks, the interests of the parties who conduct international transactions can be handled more easily, quickly and cheaply 1.5 Storage of valuable goods It is one of the earliest of the services offered by commercial banks, Communities can store valuables such as jewelry owned, money, and diplomas in the boxes provided by the bank intentionally for rent, eg safety box or safe deposit box The rapid economic development caused banks to expand services by storing the security or securities 1.6 Provision of other services Other services provided by commercial banks are also more numerous and widespread Currently, paying electricity, phone buying mobile phone bills, sending money via the automated teller machine, paying employee salaries are conducted by the use using bank services It is easy to use these services and they give users a sense of security and comfort The scope available to banks What is the actual function of a bank within an economy! By granting loans, processing payments, accepting deposits, carrying out investments, etc it is creating added value for its clients, employees, service providers and shareholders In this, it is no different from any other company The real difference lies in the extent of the potential damage were a bank to collapse Then it would not only be employees losing their jobs, shareholders losing their capital and clients their provider; clients could potentially lose their entire savings and financial assets This explains why banks are so heavily regulated and so strictly monitored Nevertheless, the economic benefits generated by a bank are basically no different from the economic benefits generated by a doctor, teacher or train driver, by exercising, to the best of their knowledge and abilities, their specialist function in competition with others, companies and their employees make their contribution to economic benefit And their motivation needs not be a selfless one Pilots not fly planes to generate economic benefit, just as bankers not grant credits for any much selfless reasons Economic utility is created as a by-product anywhe women and men function successfully, and this does not apply solely to their jobs Even though a banker grants loans to many companies and sectors of the e economy this does not mean he can their work or bear their responsibilities The argumen of economic goals and responsibility is generally seized on by politicians when a a matter of re-distributing capital, risks, profits or costs Although not strictly wrong, the economic responsibility argument has the major political advantage the it can be flexibly deployed for absolutely anything You will look long and hard- and probably in vain for any 'handy' definition of a bank's economic responsibility that is at the same time general enough, which is why it is suggested that bankers act responsibly when they ensure that their house is in order and resin the temptation to pass off poor financial performance as a contribution to the economy IV COMMERCIAL BANK SERVICES Commercial bank services include various types of lending options, deposit accounts, online and electronic banking options Banks provide these services to both consumers and businesses In many instances, commercial banks services are provided free of charge although some banks assess monthly or annual fees for premium services Lending services Lending services available through most banks include credit cards and equity lines In both instances, clients are given access to a revolving credit line that typically has a variable-rate of interest Borrowers must make monthly interest only payments and credit cards and equity lines often have open-ended terms Additionally, most banks offer various types of mortgages and vehicle loans These include fixed rate amortizing loans and variable rate loans that often begin with am interest-only term Deposit accounts Deposit accounts available through commercial banks include both transactiona accounts called checking or current accounts, and many types of savings accounts Typically, commercial bank services available to transactional account holders include debit cards which enable account holders to make withdrawals E automated teller machines (ATMs) and point-of-sale (POS) terminals Account holders also receive checks while savings account holders are usually provided with withdrawal slips Long-term deposit accounts termed time deposit or certificates of deposit (CD) accounts provide consumers with higher levels of returns than basic savings accounts These accounts are typically illiquid and best suited for people who are saving for retirement or other long-term goals Online and electronic banking options Commercial bank services often include online banking and bill pay Account holders can transfer funds between accounts using bank websites and many banks also offer online monthly statements Bank customers can use bill pay services to pay one-time or recurring expenses such as college tuition, mortgage payments or credit card bills Basic online banking services are normally free while customers using online bill pay services have to pay a monthly fee In addition, commercial bank services also include vault services Many banks enable clients to rent smail vaults or safe deposit boxes in which they can stow important documents and other valuables Some banks provide clients with safe deposit boxes free of charge while others assess an annual fee Other services Other commonly available commercial bank services include wire transfers and document validation or notary services Account holders typically pay a fee to wire funds to accounts housed at other institutions that are located domestically or internationally Notary or validation services are often provided free of charge and involve an authorized bank officer witnessing the signature of a client Generally, notaries witness legal documents such as loan agreements, trust documents or wills ... and the monetary system of each country The presence of commercial banks operating on an international scale will facilitate the settlement of such transactions With the commercial banks, the. .. from any other company The real difference lies in the extent of the potential damage were a bank to collapse Then it would not only be employees losing their jobs, shareholders losing their capital... via the automated teller machine, paying employee salaries are conducted by the use using bank services It is easy to use these services and they give users a sense of security and comfort The scope