A bank is a financial institution that accepts deposits and channels those deposits into lending activities. Banks primarily provide financial services to customers while enriching investors. Government restrictions on financial activities by banks vary over time and location. Banks are important players in financial markets and offer services such as investment funds and loans. In some countries such as Germany, banks have historically owned major stakes in industrial corporations while in other countries such as the United States banks are prohibited from owning non-financial companies. In Japan, banks are usually the nexus of a cross-share holding entity known as the keiretsu. In France, bancassurance is prevalent, as most banks offer insurance services (and now real estate services) to their clients.
The level of government regulation of the banking industry varies widely, with countries such as Iceland, having relatively light regulation of the banking sector, and countries such as China having a wide variety of regulations but no systematic process that can be followed typical of a communist system.
Origin of the word
Silver drachm coin from Trapezus, 4th century BCThe name bank derives from the Italian word banco "desk/bench", used during the Renaissance by Jewish Florentine bankers, who used to make their transactions above a desk covered by a green tablecloth.[2] However, there are traces of banking activity even in ancient times.
In fact, the word traces its origins back to the Ancient Roman Empire, where moneylenders would set up their stalls in the middle of enclosed courtyards called macella on a long bench called a bancu, from which the words banco and bank are derived. As a moneychanger, the merchant at the bancu did not so much invest money as merely convert the foreign currency into the only legal tender in Rome—that of the Imperial Mint.[3]
The earliest evidence of money-changing activity is depicted on a silver drachm coin from ancient Hellenic colony Trapezus on the Black Sea, modern Trabzon, c. 350–325 BC, presented in the British Museum in London. The coin shows a banker's table (trapeza) laden with coins, a pun on the name of the city.
In fact, even today in Modern Greek the word Trapeza (Τράπεζα) means both a table and a bank.
Traditional banking activities
Large door to an old bank vault.Banks act as payment agents by conducting checking or current accounts for customers, paying cheques drawn by customers on the bank, and collecting cheques deposited to customers' current accounts. Banks also enable customer payments via other payment methods such as telegraphic transfer, EFTPOS, and ATM.
Banks borrow money by accepting funds deposited on current accounts, by accepting term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current accounts, by making installment loans, and by investing in marketable debt securities and other forms of money lending.
Banks provide almost all payment services, and a bank account is considered indispensable by most businesses, individuals and governments. Non-banks that provide payment services such as remittance companies are not normally considered an adequate substitute for having a bank account.
Banks borrow most funds from households and non-financial businesses, and lend most funds to households and non-financial businesses, but non-bank lenders provide a significant and in many cases adequate substitute for bank loans, and money market funds, cash management trusts and other non-bank financial institutions in many cases provide an adequate substitute to banks for lending savings to.[clarification needed]
The definition of a bank varies from country to country.
Under English common law, a banker is defined as a person who carries on the business of banking, which is specified as:[4]
conducting current accounts for his customers
paying cheques drawn on him, and
collecting cheques for his customers.
In most English common law jurisdictions there is a Bills of Exchange Act that codifies the law in relation to negotiable instruments, including cheques, and this Act contains a statutory definition of the term banker: banker includes a body of persons, whether incorporated or not, who carry on the business of banking' (Section 2, Interpretation). Although this definition seems circular, it is actually functional, because it ensures that the legal basis for bank transactions such as cheques do not depend on how the bank is organised or regulated.
The business of banking is in many English common law countries not defined by statute but by common law, the definition above. In other English common law jurisdictions there are statutory definitions of the business of banking or banking business. When looking at these definitions it is important to keep in mind that they are defining the business of banking for the purposes of the legislation, and not necessarily in general. In particular, most of the definitions are from legislation that has the purposes of entry regulating and supervising banks rather than regulating the actual business of banking. However, in many cases the statutory definition closely mirrors the common law one. Examples of statutory definitions:
"banking business" means the business of receiving money on current or deposit account, paying and collecting cheques drawn by or paid in by customers, the making of advances to customers, and includes such other business as the Authority may prescribe for the purposes of this Act; (Banking Act (Singapore), Section 2, Interpretation).
"banking business" means the business of either or both of the following:
1.receiving from the general public money on current, deposit, savings or other similar account repayable on demand or within less than [3 months] ... or with a period of call or notice of less than that period;
2.paying or collecting cheques drawn by or paid in by customers[5]
Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale), direct credit, direct debit and internet banking, the cheque has lost its primacy in most banking systems as a payment instrument. This has led legal theorists to suggest that the cheque based definition should be broadened to include financial institutions that conduct current accounts for customers and enable customers to pay and be paid by third parties, even if they do not pay and collect cheques.[6]
Accounting for bank accounts
Suburban branch bankBank statements are accounting records produced by banks under the various accounting standards of the world. Under GAAP and IFRS there are two kinds of accounts: debit and credit. Credit accounts are Revenue, Equity and Liabilities. Debit Accounts are Assets and Expenses. This means you credit a credit account to increase its balance, and you debit a debit account to decrease its balance.[7]
This also means you debit your savings account every time you deposit money into it (and the account is normally in deficit), while you credit your credit card account every time you spend money from it (and the account is normally in credit).
However, if you read your bank statement, it will say the opposite—that you credit your account when you deposit money, and you debit it when you withdraw funds. If you have cash in your account, you have a positive (or credit) balance; if you are overdrawn, you have a negative (or deficit) balance.
The reason for this is that the bank, and not you, has produced the bank statement. Your savings might be your assets, but the bank's liability, so they are credit accounts (which should have a positive balance). Conversely, your loans are your liabilities but the bank's assets, so they are debit accounts (which should also have a positive balance).
Where bank transactions, balances, credits and debits are discussed below, they are done so from the viewpoint of the account holder—which is traditionally what most people are used to seeing.
Wider commercial role
The commercial role of banks is not limited to banking, and includes:
issue of banknotes (promissory notes issued by a banker and payable to bearer on demand)
processing of payments by way of telegraphic transfer, EFTPOS, internet banking or other means
issuing bank drafts and bank cheques
accepting money on term deposit
lending money by way of overdraft, installment loan or otherwise
providing documentary and standby letters of credit (trade finance), guarantees, performance bonds, securities underwriting commitments and other forms of off-balance sheet exposures
safekeeping of documents and other items in safe deposit boxes
currency exchange
acting as a 'financial supermarket' for the sale, distribution or brokerage, with or without advice, of insurance, unit trusts and similar financial products
[edit] Economic functions
The economic functions of banks include:
1.issue of money, in the form of banknotes and current accounts subject to cheque or payment at the customer's order. These claims on banks can act as money because they are negotiable and/or repayable on demand, and hence valued at par. They are effectively transferable by mere delivery, in the case of banknotes, or by drawing a cheque that the payee may bank or cash.
2.netting and settlement of payments – banks act as both collection and paying agents for customers, participating in interbank clearing and settlement systems to collect, present, be presented with, and pay payment instruments. This enables banks to economise on reserves held for settlement of payments, since inward and outward payments offset each other. It also enables the offsetting of payment flows between geographical areas, reducing the cost of settlement between them.
3.credit intermediation – banks borrow and lend back-to-back on their own account as middle men.
4.credit quality improvement – banks lend money to ordinary commercial and personal borrowers (ordinary credit quality), but are high quality borrowers. The improvement comes from diversification of the bank's assets and capital which provides a buffer to absorb losses without defaulting on its obligations. However, banknotes and deposits are generally unsecured; if the bank gets into difficulty and pledges assets as security, to raise the funding it needs to continue to operate, this puts the note holders and depositors in an economically subordinated position.
5.maturity transformation – banks borrow more on demand debt and short term debt, but provide more long term loans. In other words, they borrow short and lend long. With a stronger credit quality than most other borrowers, banks can do this by aggregating issues (e.g. accepting deposits and issuing banknotes) and redemptions (e.g. withdrawals and redemptions of banknotes), maintaining reserves of cash, investing in marketable securities that can be readily converted to cash if needed, and raising replacement funding as needed from various sources (e.g. wholesale cash markets and securities markets).
[edit] Law of banking
Banking law is based on a contractual analysis of the relationship between the bank (defined above) and the customer—defined as any entity for which the bank agrees to conduct an account.
The law implies rights and obligations into this relationship as follows:
1.The bank account balance is the financial position between the bank and the customer: when the account is in credit, the bank owes the balance to the customer; when the account is overdrawn, the customer owes the balance to the bank.
2.The bank agrees to pay the customer's cheques up to the amount standing to the credit of the customer's account, plus any agreed overdraft limit.
3.The bank may not pay from the customer's account without a mandate from the customer, e.g. a cheque drawn by the customer.
4.The bank agrees to promptly collect the cheques deposited to the customer's account as the customer's agent, and to credit the proceeds to the customer's account.
5.The bank has a right to combine the customer's accounts, since each account is just an aspect of the same credit relationship.
6.The bank has a lien on cheques deposited to the customer's account, to the extent that the customer is indebted to the bank.
7.The bank must not disclose details of transactions through the customer's account—unless the customer consents, there is a public duty to disclose, the bank's interests require it, or the law demands it.
8.The bank must not close a customer's account without reasonable notice, since cheques are outstanding in the ordinary course of business for several days.
These implied contractual terms may be modified by express agreement between the customer and the bank. The statutes and regulations in force within a particular jurisdiction may also modify the above terms and/or create new rights, obligations or limitations relevant to the bank-customer relationship.
[edit] Entry regulation
Main article: Banking regulation
Currently in most jurisdictions commercial banks are regulated by government entities and require a special bank licence to operate.
Usually the definition of the business of banking for the purposes of regulation is extended to include acceptance of deposits, even if they are not repayable to the customer's order—although money lending, by itself, is generally not included in the definition.
Unlike most other regulated industries, the regulator is typically also a participant in the market, i.e. a government-owned (central) bank. Central banks also typically have a monopoly on the business of issuing banknotes. However, in some countries this is not the case. In the UK, for example, the Financial Services Authority licences banks, and some commercial banks (such as the Bank of Scotland) issue their own banknotes in addition to those issued by the Bank of England, the UK government's central bank.
Some types of financial institution, such as building societies and credit unions, may be partly or wholly exempt from bank licence requirements, and therefore regulated under separate rules.
The requirements for the issue of a bank licence vary between jurisdictions but typically include:
1.Minimum capital
2.Minimum capital ratio
3.'Fit and Proper' requirements for the bank's controllers, owners, directors, and/or senior officers
4.Approval of the bank's business plan as being sufficiently prudent and plausible.
[edit] Banking channels
Banks offer many different channels to access their banking and other services:
A branch, banking centre or financial centre is a retail location where a bank or financial institution offers a wide array of face-to-face service to its customers.
ATM is a computerised telecommunications device that provides a financial institution's customers a method of financial transactions in a public space without the need for a human clerk or bank teller. Most banks now have more ATMs than branches, and ATMs are providing a wider range of services to a wider range of users. For example in Hong Kong, most ATMs enable anyone to deposit cash to any customer of the bank's account by feeding in the notes and entering the account number to be credited. Also, most ATMs enable card holders from other banks to get their account balance and withdraw cash, even if the card is issued by a foreign bank.
Mail is part of the postal system which itself is a system wherein written documents typically enclosed in envelopes, and also small packages containing other matter, are delivered to destinations around the world. This can be used to deposit cheques and to send orders to the bank to pay money to third parties. Banks also normally use mail to deliver periodic account statements to customers.
Telephone banking is a service provided by a financial institution which allows its customers to perform transactions over the telephone. This normally includes bill payments for bills from major billers (e.g. for electricity).
Online banking is a term used for performing transactions, payments etc. over the Internet through a bank, credit union or building society's secure website.
Mobile banking is a method of using one's mobile phone to conduct simple banking transactions by remotely linking into a banking network.
Video banking is a term used for performing banking transactions or professional banking consultations via a remote video and audio connection. Video banking can be performed via purpose built banking transaction machines (similar to an Automated teller machine), or via a videoconference enabled bank branch.
Manufacturing is the use of machines, tools and labor to make things for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale. Such finished goods may be used for manufacturing other, more complex products, such as household appliances or automobiles, or sold to wholesalers, who in turn sell them to retailers, who then sell them to end users - the "consumers".
Manufacturing takes turns under all types of economic systems. In a free market economy, manufacturing is usually directed toward the mass production of products for sale to consumers at a profit. In a collectivist economy, manufacturing is more frequently directed by the state to supply a centrally planned economy. In free market economies, manufacturing occurs under some degree of government regulation.
Modern manufacturing includes all intermediate processes required for the production and integration of a product's components. Some industries, such as semiconductor and steel manufacturers use the term fabrication instead.
The manufacturing sector is closely connected with engineering and industrial design. Examples of major manufacturers in the United States include General Motors Corporation, Ford Motor Company, Chrysler, Boeing, Gates Corporation and Pfizer. Examples in Europe include Airbus, Daimler, BMW, Fiat, and Michelin Tyre.
History and development
In its earliest form, manufacturing was usually carried out by a single skilled artisan with assistants. Training was by apprenticeship. In much of the pre-industrial world the guild system protected the privileges and trade secrets of urban artisans.
Before the Industrial Revolution, most manufacturing occurred in rural areas, where household-based manufacturing served as a supplemental subsistence strategy to agriculture (and continues to do so in places). Entrepreneurs organized a number of manufacturing households into a single enterprise through the putting-out system.
Toil manufacturing is an arrangement whereby a first firm with specialized equipment processes raw materials or semi-finished goods for a second firm.
Economics of manufacturing
According to some economists, manufacturing is a wealth-producing sector of an economy, whereas a service sector tends to be wealth-consuming. [1][2] Emerging technologies have provided some new growth in advanced manufacturing employment opportunities in the Manufacturing Belt in the United States. Manufacturing provides important material support for national infrastructure and for national defense.
On the other hand, most manufacturing may involve significant social and environmental costs. The clean-up costs of hazardous waste, for example, may outweigh the benefits of a product that creates it. Hazardous materials may expose workers to health risks. Developed countries regulate manufacturing activity with labor laws and environmental laws. In the U.S, manufacturers are subject to regulations by the Occupational Safety and Health Administration and the United States Environmental Protection Agency. In Europe, pollution taxes to offset environmental costs are another form of regulation on manufacturing activity. Labor Unions and craft guilds have played a historic role negotiation of worker rights and wages. Environment laws and labor protections that are available in developed nations may not be available in the third world. Tort law and product liability impose additional costs on manufacturing.
Manufacturing and investment around the world
Surveys and analyses of trends and issues in manufacturing and investment around the world focus on such things as:
the nature and sources of the considerable variations that occur cross-nationally in levels of manufacturing and wider industrial-economic growth;
competitiveness; and
attractiveness to foreign direct investors.
In addition to general overviews, researchers have examined the features and factors affecting particular key aspects of manufacturing development. They have compared production and investment in a range of Western and non-Western countries and presented case studies of growth and performance in important individual industries and market-economic sectors.[3][4] On June 26 2009, Jeff Immelt, the CEO of General Electric, called for the United States to increase its manufacturing base employment to 20% of the workforce, commenting that the U.S. has outsourced too much in some areas and can no longer rely on the financial sector and consumer spending to drive demand.
COMMERCE SYSTEM
Microsoft Commerce Server is a Microsoft product for building e-commerce systems. It uses Microsoft .NET technology.
The latest release of the product is Commerce Server 2009. It was launched at the National Retail Federation (NRF) in New York in January 2009, with its official launch at the MIX09 event in Las Vegas in March 2009.
With its inaugural release in 2000, Commerce Server replaced Microsoft Site Server, expanding on the functionality of it and establishing a focus on e-commerce functionality (rather than concerning itself with document management or content metadata). It helps create e-commerce solutions and Web sites with high-performance, familiar tools that simplify setup, management, and administration tasks.
Microsoft Commerce Server 2009 provides a comprehensive solution for many business scenarios, including:
Business-to-consumer (B2C) sales of tangible or digital goods or online service delivery.
Business-to-business (B2B) scenarios, such as e-procurement and trading communities.
B2X scenarios, combining Business to Consumer (B2C) and Business to Business (B2B).
Self service portals using catalogs, profiles, or content targeting for personalized information delivery.
System Components
Commerce Server 2009, which became available on Microsoft's price list on April 1, 2009, introduced multi-channel awareness into the product, a new default site (running in Microsoft's SharePoint product) - including 30 new web parts and controls, and WYSIWYG (what-you-see-is-what-you-get) editing experiences for business people and site designers.
These features were introduced through the new Commerce Foundation - a new abstraction layer which unifies calling patterns of the core systems (see below) and allows for different presentation and business logic to be easily added and represented as 'selling channels'; and SharePoint Commerce Services which includes integration with Microsoft SharePoint - a new default site with 30 new web parts and controls pre-assembled. The default site can be skinned through the new page templating technology, allowing for individual pages to be easily changed by selecting a different template.
The product still retains its core systems of Catalog, Inventory, Orders, Profiles, and Marketing (discussed below).
Orders & Inventory
The Orders & Inventory system is responsible for tracking orders made by customers. The server can link with external systems that track inventory for a business so that inventory information is kept up-to-date and communicate with the appropriate parties when inventory runs low to indicate that it's time for new stock to be ordered. Business users are able to determine what "low" is through a management tool which lets them set inventory thresholds and get reports on product sales according to whatever metrics are desired, using Microsoft SQL Server Analytics.
[edit] Catalog
A company's products are intended to be described in the Catalog system. The products, the categories they belong to ,and relationships with other products are tracked by Commerce Server . A configurable metadata system enable the server to address any kind of merchant scenario.
[edit] Marketing
Managing promotions on a website can become a task unto itself, but the server addresses this web-trend by distilling the index operations associated with online advertising into a finite collection of functions. These let the business user manage ads and set rules that determine the conditions under which specific ads appear.
[edit] Profile
Almost every commercial website today makes an effort to personalize the content for an individual shopper. Its Profile system can do everything from tracking a shopper's product preferences, to tailoring the website presentation for the individual user.
[edit] Other Components
The server comes bundled with Data Warehouse Analytics, which offer sophisticated reporting functionality, dependent on the availability of Microsoft SQL Server Analytics module, in addition to the Commerce Server Staging (CSS) system. The Staging functionality automates the deployment of both dynamic and active content across a network infrastructure and can accommodate a wide variety of network configurations. (Some have remarked that the speed of CSS deployments is perhaps the most note-worthy aspect of this component.)[citation needed]. Commerce Server also comes with BizTalk adaptors, which allow for integration with Microsoft BizTalk for enterprise data manipulation.
[edit] Related Technologies
The product requires the presence of Microsoft SQL Server 2005 or later. Commerce Server also can leverage a number of other Microsoft server products, including BizTalk Server 2006, R2 or 2009 and Microsoft Office SharePoint Server (MOSS).
The product relies on components that are themselves dependent on the presence of the .NET Framework 3.5 and Microsoft's Component Object Model (COM). Recommended deployments are confined to Windows Server 2003 or higher.
[edit] Future Development
The Commerce Server Product Unit has planned to have periodic releases of the product over the next 5 years. The next planned release of Commerce Server is targeted for the 2010 time frame.[citation needed]
[edit] Versions for Windows
2000 - Commerce Server 2000
2002 - Commerce Server 2002
Service Pack 2 (2003)
Service Pack 3 (2004)
2004 - Commerce Server 2002 FP1
Service Pack 4 (2006)
2007 - Commerce Server 2007
Service Pack 1 (2008)
Service Pack 2 (2008)
2009 - Commerce Server 2009
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