First a warning – Banking is not within my circle of competence. This post is an attempt to put forward whatever little I have studied and know about this industry. It’s now upon you to build on the same and learn more about how this industry works.
Wikipedia defines a bank as…
…a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly by loaning or indirectly through capital markets. A bank links together customers that have capital deficits and customers with capital surpluses.
Banks have come a long way from the temples of the ancient world, but their basic business practices have not changed.
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Banks issue credit to people who need it, but demand interest on top of the repayment of the loan. Although history has altered the fine points of the business model, a bank’s purpose is to make loans and protect depositors’ money. Even if the future takes banks completely off your street corner and onto the internet, or has you shopping for loans across the globe, the banks will still exist to perform this primary function.
Now, due to their importance in the financial system and influence on national economies, banks are highly regulated in most countries.