SIGNIFICANCE OF BANK

GROUP 1
WRITTEN REPORT

By:
Arbillo, Jenefer
Bahague, Decemark
Becamon, Charlen
BIoco, John Del
Bolina, Katherine
Buletic, Jhon Loyd

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 TABLE OF CONTENTS

1. Lesson Objectives 3

2. Introduction 3

3. Significance of Banks 4
3.1Function of Banks 4
3.2Signific of Banks in the economy 4

4. Significance of institutional 5-6

5. Categories of Bank 7

6. Types of Banks 8

7. Kinds of Deposit 9-10

8. Summary 10

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Lesson Objectives:
- To emphasize banks' vital role in economic stability.
- To highlight the importance of institutions supporting banking operations.
- To categorize banks based on functions and services provided
- To outline various types of banks and their specific functions.
- To explain different types of deposits and their characteristics.

INTRODUCTION
The banking sector is a cornerstone of modern economies, serving as a vital intermediary
between savers and borrowers. Banks facilitate the flow of money, enabling individuals
and businesses to manage their finances effectively. They provide essential services such
as accepting deposits, offering loans, and facilitating payments, which are crucial for
economic stability and growth.
In addition to traditional banks, other financial institutions play a significant role in the
financial landscape. These institutions, including insurance companies, investment firms,
and credit unions, contribute to the diversification of financial services available to
consumers and businesses. Understanding the interplay between banks and these
institutions is essential for grasping the broader financial system.
Banks can be categorized into various types based on their functions and services.
Commercial banks focus on providing services to the general public, while investment
banks specialize in capital markets and corporate finance. Central banks, on the other
hand, manage a country's monetary policy and regulate the banking system. Cooperative
banks serve specific communities, emphasizing member participation and mutual benefit.
Deposits are the lifeblood of banks, and understanding the different kinds of deposit
accounts is crucial for consumers. From savings accounts that encourage saving to fixed
deposits that offer higher interest rates for longer commitments, each type of deposit
serves a unique purpose and caters to different financial needs.
In summary, a comprehensive understanding of banks, other financial institutions, their
categories, types, and deposit options is essential for navigating the financial landscape
effectively. This knowledge empowers individuals and businesses to make informed
financial decisions, contributing to overall economic health and stability.

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 I. SIGNIFICANCE OF BANKS

Banks serve as the cornerstone of the modern financial system. Their significance extends far beyond
simply holding and lending money. They play a crucial role in facilitating economic growth, enabling
commerce, and supporting the overall well-being of individuals and businesses.

Functions of Banks

 Deposit Taking: Banks act as safe custodians for individuals' and businesses' savings and
checking accounts. This function provides a secure and convenient way to store funds.

 Lending: Banks extend loans to individuals, businesses, and governments, enabling them to
finance investments, purchase homes, and meet other financial needs.

 Payment Processing: Banks facilitate the transfer of funds through various channels, including
electronic transfers, checks, and debit/credit cards, enabling seamless transactions

 Investment Services: Many banks offer investment services such as brokerage accounts, wealth
management, and financial advisory services.

 Currency Exchange: Banks provide currency exchange services, enabling international trade
and travel.

Significance of Banks in the Economy

 Economic Growth: Banks play a vital role in stimulating economic growth by channeling funds
from savers to borrowers, enabling businesses to expand, create jobs, and drive innovation.

 Financial Inclusion: Banks provide access to financial services for individuals and businesses,
promoting financial inclusion and reducing poverty.

 Price Stability: Banks contribute to price stability by influencing interest rates and money
supply, which helps to control inflation.

 Payment System Stability: Banks ensure the smooth and efficient functioning of the payment
system, enabling businesses to operate effectively and consumers to conduct transactions
seamlessly.

Banks play a vital role in the functioning of the modern economy. Their core functions of deposit taking,
lending, and payment processing are essential for individuals, businesses, and the overall economic
well-being of society. While facing challenges such as technological disruption and cybersecurity
threats, banks are adapting and evolving to meet the changing needs of their customers and the evolving
financial landscape.

II. SIGNIFICANCE OF INSTITUTION

The significance of institutions related to banks can be understood through various dimensions such
as regulatory roles, community support, financial stability, and economic development. Here are
some key points concerning the significance of other institutions in relation to banks:

1. Regulatory Authorities
a) Central Banks- Institutions like the Federal Reserve in the U.S. or the European Central
Bank play a crucial role in monetary policy and maintaining financial stability. They
influence interest rates, control inflation, and serve as lenders of last resort.

b) Financial Regulatory Agencies- Organizations like the Securities and Exchange

Commission (SEC) or the Financial Conduct Authority (FCA) enforce rules to protect
investors and maintain market integrity.

2. Intermediaries
a) Credit Unions- These member-owned financial cooperatives provide services similar to
banks and often focus on serving their communities with lower fees and better rates.

b) Microfinance Institutions- They offer financial services to underserved populations,

contributing to financial inclusion and economic development.

3. Insurance Companies
Banks and insurance companies often work together; the insurance sector provides risk
management products that can be crucial for businesses and individuals, thus promoting economic
stability.

4. Investment Institutions
a) Pension Funds and Mutual Funds- They provide capital for banks and other ventures,
influencing liquidity and investment levels in the economy.

5. Core Financial Ecosystem

a) Payment Networks- Systems like Visa and Mastercard facilitate trade and commerce,
relying on banks for transaction processing and maintaining the flow of money.

b) Fintech Companies- These firms disrupt traditional banking with innovative technologies,
enhancing competition and improving customer experience in areas like payments, lending,
and investment.

6. Development Institutions
 - Organizations like the World Bank or regional development banks provide funding for projects
that require large amounts of capital, which can also involve partnerships with local banks.

7. Educational Institutions
- Universities and training programs generate skilled professionals for the banking sector and
conduct research that informs banking practices and policies.

8. Consumer and Advocacy Groups

These organizations play a role in holding banks accountable, promoting transparency and
consumer rights, and advocating for fair lending practices.

9. Ratings Agencies
Credit rating agencies assess the creditworthiness of banks and their financial products, which
influences investment decisions and market confidence.

10. Non-Governmental Organizations (NGOs)

Some NGOs push for more equitable banking practices, influencing policy changes and driving
social responsibility initiatives in the banking sector.

In summary, the significance of other institutions concerning banks lies in their roles as regulators,
enablers, intermediaries, and advocates. They contribute to a stable, efficient, and inclusive financial
system, which is critical for overall economic health.

III. CATEGORIES OF BANK

The banking sector is a vital component of the global financial system, facilitating economic activities
and providing essential services to individuals, businesses, and governments. Understanding the various
categories and types of banks is crucial for comprehending their roles in the economy. Each category
serves distinct functions, from commercial banks that cater to everyday consumers to investment banks
that assist corporations in capital markets. By categorizing banks based on their services and clientele,
we can better appreciate their contributions to financial stability, economic growth, and the overall well-
being of society.
Banks can be categorized based on their functions, services, and regulatory frameworks. The primary
categories include:

1. Commercial Banks: These banks provide a wide range of financial services to individuals and
businesses, including accepting deposits, offering loans, and facilitating payment services. They
are the most common type of bank and play a crucial role in the economy by providing liquidity
and credit.
Example: Metrobank (Metropolitan Bank and Trust Company), BDO Unibank, Inc.,
Philippine National Bank (PNB)
These banks are key players in the Philippine banking sector, serving both individual and corporate
clients

2. Investment Banks: Investment banks specialize in providing services related to capital

markets, such as underwriting, facilitating mergers and acquisitions, and offering advisory
services. They primarily serve corporations, governments, and institutional investors.
Example: BDO Capital & Investment Corporation and First Metro Investment Corporation

3. Central Banks: Central banks are national institutions responsible for managing a country's
monetary policy, regulating the banking system, and ensuring financial stability. They control
the money supply, set interest rates, and act as a lender of last resort.
Example: Bangko Sentral ng Pilipinas (BSP)

4. Cooperative Banks: These are member-owned financial institutions that provide banking
services to their members, often focusing on community development and financial inclusion.
They operate on a cooperative model, where profits are shared among members.
Example: Cooperative Bank of Bulacan, Rural Bank of San Leonardo (Cooperative)
These banks operate on a cooperative model, serving their members and focusing on community
development.

5. Development Banks: Development banks focus on providing long-term financing for projects
that promote economic development, such as infrastructure, agriculture, and small businesses.
They often work in partnership with governments and international organizations
Example: Philippine National Bank (PNB) Development Bank, Development Bank of
the Philippines (DBP)
These banks focus on providing financing for projects that promote economic development and support
various sectors, such as infrastructure and agriculture

IV. TYPES OF BANKS

Banks can be classified into various types based on their functions, services, and target clientele. Each
type serves a specific purpose within the financial system, catering to different needs of individuals,
businesses, and governments. Here are seven common types of banks:

1. Retail Banks: Retail banks focus on providing financial services to individual consumers
and small businesses. They offer products such as savings accounts, checking accounts,
personal loans, mortgages, and credit cards.
Example: Bank of the Philippine Islands (BPI); BPI offers a wide range of services to
individual consumers, including savings accounts, checking accounts, personal loans, and
mortgages.

2. Commercial Banks: Commercial banks serve a broad range of clients, including individuals,
businesses, and governments. They provide services such as accepting deposits, making
loans, and offering payment processing.
Example: Metrobank (Metropolitan Bank and Trust Company); Metrobank provides a
variety of financial services, including personal and business banking, loans, and investment
products.

3. Investment Banks: Investment banks specialize in providing services related to capital

markets, including underwriting, facilitating mergers and acquisitions, and offering advisory
services to corporations and governments.
Example: BDO Capital & Investment Corporation, First Metro Investment Corporation
Both institutions engage in activities typical of investment banks, such as underwriting,
advisory services, and capital market operations, which positions them as key players in the
investment banking sector in the Philippines.

4. Central Banks: Central banks are national institutions responsible for managing a country’s
monetary policy, regulating the banking system, and ensuring financial stability. They control
the money supply and set interest rates.
Example: Bangko Sentral ng Pilipinas (BSP); The BSP is the central bank of the
Philippines, responsible for formulating and implementing monetary policy, regulating the
banking system, and ensuring financial stability in the country.

5. Online Banks: Online banks operate exclusively over the internet, offering banking services
without physical branches. They often provide higher interest rates on deposits and lower
fees due to reduced overhead costs.
Example: ING Philippines and UnionBank Online; These banks primarily operate
through digital platforms, offering services such as savings accounts, loans, and other
financial products without the need for physical branches.

These types of banks play distinct roles in the financial ecosystem, catering to various needs and
functions. From retail banks that serve individual consumers to investment banks that assist corporations
in capital markets, each type contributes to the overall stability and efficiency of the financial system.
Understanding these types helps individuals and businesses make informed decisions about their
banking needs.

V. KINDS OF DEPOSIT
What is Deposit?
A deposit is a sum of money collected, secured, or kept in a bank account or some specific locations
temporarily that can be withdrawn when required. Customers can also earn interest on their deposited
amount in the bank. There are two major types of deposits, demand deposits and time deposits. Let us
know more about them below.

How do deposits work?

Deposits are kept in bank accounts to keep them safe and earn interest. Also, customers can withdraw
and make more deposits at any point in time. The interest rates are different based on the bank.
However, customers can not withdraw their amount from a timed deposit account before maturity
period.
Customers can deposit in their bank via any of the following methods given below.
 InPerson: Customers can personally visit their bank’s nearest branch and deposit the amount in
cash.
 Using ATM: Customers can also make deposits of their funds through the nearest ATM.
 Cheques: Candidates can also deposit through cheques by mentioning their amount and
signature on the cheque form.
 Online net banking: Customers can also earn deposits through online mode. Candidates can use
the e-payments method through net banking or bank mobile applications.

TYPES OF DEPOSIT
1. Demand Deposit: This is one of the most common types of deposits made by people for
safekeeping their money. There are no time limits on these deposits and customers can withdraw
these deposits at any point in time. They can also earn interest on these deposits

Types of Demand Deposit Account:

Demand deposits are the most frequently used deposit account. There are major types of demand deposit
accounts. Let us know about them one by one.
1. Checking Account
A checking account is a bank account that is frequently used by businessmen for frequent cash
withdrawals. Customers can withdraw their money without any limit. However, these checking
accounts do not offer any interest to their customers. Some of the services available to the customers are
ATMs, Credit Card, net banking, or online net banking.
2. Savings Account
A Savings account is a sum of amount kept for saving in a bank. Customers can also earn interest on
their deposits. Candidates can use these accounts to manage their expenses, savings, and investments.
Banks also give debit cards, ATMs, online banking, and net banking.
3. Money Market Accounts
Money market accounts are similar to savings accounts which can be used to deposit money. However,
money can be withdrawn from these accounts with the help of cheques. Also, the number of withdrawals
is limited for each month. Customers can also earn interest equal to or higher than savings accounts.

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 2. Time Deposits: As the name suggests, time deposits are meant for a fixed interval of time.
Customers keep their deposited amount in a bank for a fixed interval of time. They can withdraw
these funds only after the completion of their maturity. However, if withdrawn earlier at any
point then banks charge a predetermined fee amount.

Types of Timed Deposits:

Timed deposits are the sum of amounts kept for a fixed unit of time. Customers can earn a fixed amount
of interest amount based on their deposits till their maturity period. Some major types of timed deposits
are mentioned below.
1. Fixed Deposit
A fixed deposit is a type of timed account that is provided by banks and financial institutions. These
types of deposits are kept for a fixed interval for a predetermined period for a few months to several
years. The interest earned on a fixed deposit is generally higher than a regular savings account.
2. Recurring Deposits
A recurring deposit is a type of deposits that allow customers to achieve their financial goals and earn
monthly deposits through regular monthly deposits. The recurring deposit offers higher interest rates,
guaranteed returns, and flexible tenures.

Key Takeaways
- A deposit is money kept in a bank account for safekeeping.
- It can also refer to money used as security or collateral when buying goods or services.
- A demand deposit account is like a regular checking account, where you can take out money
whenever you need it.
- A time deposit account requires you to keep your money in the account for a set period. If
you withdraw early, you might have to pay a fee.

CONCLUSION
The Significance of Banks underscores the vital role of banks in the economy, focusing on their
functions like deposit-taking, lending, payment processing, investment services, and currency exchange.
It also discusses the significance of other financial institutions related to banks, such as regulatory
authorities, intermediaries, and development institutions. The document categorizes banks based on their
functions and services, including commercial banks, investment banks, central banks, cooperative banks,
and development banks. Additionally, it explains various types of deposits, emphasizing the importance
of understanding banks and other financial institutions for making informed financial decisions.

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