The assignment focuses on Functions of commercial banks-Bank Safety & Soundness. Additionally, history shows that banks have regularly suffered bouts of illiquidity and insolvency. For investors, this might cause varying degrees of pain which one might reasonably argue is the risk investors take
Functions of commercial banks-Bank Safety & Soundness
Must be wrote in first person broken down in subtopics and wrote in first person… Discuss the major functions of commercial banks and the role banks play on the economy. Also on the community, business, and individuals. Subtopic, Firstly, Bank Safety & Soundness Subtopic. Secondly Bank Regulation and Oversight Subtopic. Thirdly importance of Deposit Accounts Subtopic. Fourthly, Importance of Commercial Loans Subtopic. Fifthly Importance of Consumer Loans Subtopic. Sixthly Bank’s Role in the Local Community,
Functions of commercial banks-Bank Safety & Soundness
History shows that banks have regularly suffered from bouts of illiquidity as well as outright insolvency. For investors, this might cause varying degrees of pain which one might reasonably argue is the risk investors take. Furthermore, in properly functioning markets, asset pricing should account for this risk. However, bank failures also affect individual depositors as well as impacting overall economic activity.
Functions of commercial banks-Bank Safety & Soundness
Bank suspensions and examinations designed to evaluate an institution’s soundness, risks, and compliance in an attempt to prevent bank failures. The historical record of failures shows that this is far from a perfect process. Bank failures pose a significant risk to depositors who rely on pledges of safety by the banks and are in general not in a position to assess the validity of those pledges. Thus, there is a legitimate role for government oversight to ensure the safety of individual savings, up to some limit. Accordingly, the Federal Depositors Insurance Corporation (FDIC) was created in 1933. A further concern about bank failures is the risk of a breakdown in structure and functioning of the entire financial system.
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