Bank Operations & Legal Implications
There are countless types of banks and financial institutions currently operating in the world. Each of these institutions seeks to provide a specific set of services, and it is not uncommon for an organization to tailor its services to a particular market or type of investor. In another sense, banking operations involves the practices and procedures that a bank uses to ensure that customers’ transactions are completed accurately and appropriately. For example, if a customer wishes to purchase stock shares, the bank ensures that the money and the stock are ready to be traded. The bank will oversee the actual transfer of the stock and funds, and it will ensure that any reporting requirements regarding the transaction are recorded. Throughout the process, the bank focuses on protecting its clientele and looking for any potential threats to the client’s finances.
Retail banking provides services to the general public, including mortgages, loans, deposits, and checking accounts. To build a customer base, most of the banks focus on providing highly convenient and accessible services to their clientele. Once a customer enlists a bank to provide a certain service, such as a checking account, the bank will typically then encourage the client to open a savings account as well. Internal banking operations at a retail bank involve opening new accounts, transferring money between accounts, and assisting customers with managing deposits.
Business banking is another common banking operation. Overall, business banks function very similarly to retail banks, except that their clientele consists primarily of businesses. Companies require a wide variety of banking services, including start-up loans, collecting deposits, and investments. Due to the complexities of many businesses, business banking is often more complex and sophisticated than retail banking. Companies often rely on banks for treasury functions, including managing the business’ accounts receivable and payable.
Private banking has become less common over the past years, which is partially due to the recent trend of larger banks opening up private banking departments. Private banking is tailored toward wealthy clients. Private banking services involve standard checking and savings accounts in addition to many estate planning services. Due to the large amount of wealth that their clients hold, private banks or private banking departments help individuals establish trusts and ensure that they are complying with applicable tax laws.
Investment banking is a highly sophisticated type of bank operation. These entities specialize in providing underwriting services, including both equity and debt, creating securities markets, engaging in stock trade, and providing consulting services for corporate clients. Investment banking is highly volatile, but it can lead to enormous financial gain. Common examples of transactions that are handled through investment banking institutions include mergers and acquisitions, trading, and capital markets and sales. These institutions are heavily scrutinized by regulatory agencies and must comply with a whole host of banking regulations.
