banking tactics

USSR-POLAND: Soviet Banking Tactics

Moscow in late December reportedly instructed Soviet-owned banks chartered abroad to createreserve accounts to guardossible Polish default. The Poles owed these banks more0 million by midyear, but the Foreign Trade Bank of the USSR apparently assumed moreillion of this debt during the fall.

Comment: While the reported instruction may simply reflect concern over Western regulatory requirements, it also suggests Soviet pessimism about Poland's ability to resolve its financial problems. The Foreign Trade Bank's apparent assumption of roost of the Polish debt owed to these Soviet-owned banks puts themtronuer position toossible Polish default.

Read more: http://www.faqs.org/cia/docs/33/0000237153/USSR-POLAND:-SOVIET-BANKING-TACTICS.html#ixzz0aFFYRWPc

banking history(US)

History in the United States

Early Years to the Federal Reserve

In the United States the first bank was the Bank of North America, established (1781) in Philadelphia. Congress chartered the first Bank of the United States in 1791 to engage in general commercial banking and to act as the fiscal agent of the government, but did not renew its charter in 1811. A similar fate befell the second Bank of the United States, chartered in 1816 and closed in 1836.

Prior to 1838 a bank charter could be obtained only by a specific legislative act, but in that year New York adopted the Free Banking Act, which permitted anyone to engage in banking, upon compliance with certain charter conditions. Free banking spread rapidly to other states, and from 1840 to 1863 all banking business was done by state-chartered institutions. In many Western states it degenerated into "wildcat" banking because of the laxity and abuse of state laws. Bank notes were issued against little or no security, and credit was overexpanded; depressions brought waves of bank failures. In particular, the multiplicity of state bank notes caused great confusion and loss. To correct such conditions, Congress passed (1863) the National Bank Act, which provided for a system of banks to be chartered by the federal government.

In 1865, by granting national banks the authority to issue bank notes and by placing a prohibitive tax on state bank notes, an amendment to the act brought all banks under federal supervision. Most banks in existence did take out national charters, but some, being banks of deposit, were unaffected by the tax and continued under their state charters, thus giving rise to what is generally known as the "dual banking system." The number of state banks expanded rapidly with the increasing use of bank checks.

Recurrent banking panics caused by overexpansion of credit, inadequate bank reserves, and inelastic currency prompted Congress in 1908 to create the National Monetary Commission to investigate the banking and currency fields and to recommend legislation. Its suggestions were embodied in the Federal Reserve Act (1913), which provided for a central banking organization, the Federal Reserve System (see also central bank).

Further Legislation

Since the establishment of the Federal Reserve system, federal banking legislation has been limited largely to detailed amendments to the National Bank and Federal Reserve acts. The Glass-Steagall Act of 1932 and the Banking Act of 1933 together formed an extensive reform measure designed to correct the abuses that had led to numerous bank crises in the years following the stock market crash of 1929. The Glass-Steagall Act prohibited commercial banks from involvement in the securities and insurance businesses. The Banking Act strengthened the powers of supervisory authorities, increased controls over the volume and use of credit, and provided for the insurance of bank deposits under the Federal Deposit Insurance Corporation (FDIC). The Banking Act of 1935 strengthened the powers of the Federal Reserve Board of Governors in the field of credit management, tightened existing restrictions on banks engaging in certain activities, and enlarged the supervisory powers of the FDIC.

Deregulation, Bank Failures, and New Technology

Several deregulatory moves made by the federal government in the 1980s diminished the distinctions among various financial institutions in the United States. Two major changes were the Depository Institutions Deregulation and Monetary Control Act (1980) and the Depository Institutions Act (1982), which allowed savings and loan associations to engage in often-risky commercial loans and real estate investments, and to receive checking deposits. By 1984, banks had federal support in buying discount brokerage firms, and commercial banks were beginning to acquire failed savings banks; in 1985 interstate banking was declared constitutional.

Such deregulation was blamed for the unprecedented number of bank failures among savings and loan associations , with over 500 such institutions closing between 1980 and 1988. The Federal Savings and Loan Insurance Corporation (FSLIC), until it became insolvent in 1989, insured deposits in all federally chartered—and in many state-chartered—savings and loan associations. Its outstanding insurance obligations in connection with savings and loan failures, over $100 billion, were transferred (1989) to the FDIC.

Further deregulation occurred in 1999, when Congress overhauled the entire U.S. financial system. Among other actions, the legislation repealed the Glass-Steagall Act, thus allowing banks to enter the insurance and securities businesses. Supporters predicted that the measure would permit U.S. banks to diversify and compete more effectively on an international scale. Opponents warned that this deregulation could lead to failures of many financial institutions, as had occurred with the savings and loans.

In the last decades of the 20th cent., computer technology transformed the banking industry. The wide distribution of automated teller machines (ATMs) by the mid-1980s gave customers 24-hour access to cash and account information. On-line banking through the Internet and banking through automated phone systems now allow for electronic payment of bills, money transfers, and loan applications without entering a bank branch.

general history(banking)

General History

A simple form of banking was practiced by the ancient temples of Egypt, Babylonia, and Greece, which loaned at high rates of interest the gold and silver deposited for safekeeping. Private banking existed by 600 BC and was considerably developed by the Greeks, Romans, and Byzantines. Medieval banking was dominated by the Jews and Levantines because of the strictures of the Christian Church against interest and because many other occupations were largely closed to Jews. The forerunners of modern banks were frequently chartered for a specific purpose, e.g., the Bank of Venice (1171) and the Bank of England (1694), in connection with loans to the government; the Bank of Amsterdam (1609), to receive deposits of gold and silver. Banking developed rapidly throughout the 18th and 19th cent., accompanying the expansion of industry and trade, with each nation evolving the distinctive forms peculiar to its economic and social life.

banking facts

banking primarily the business of dealing in money and instruments of credit. Banks were traditionally differentiated from other financial institutions by their principal functions of accepting deposits—subject to withdrawal or transfer by check—and of making loans.

Types of Banks

Banks have traditionally been distinguished according to their primary functions. Commercial banks, which include national- and state-chartered banks, trust companies, stock savings banks, and industrial banks, have traditionally rendered a wide range of services in addition to their primary functions of making loans and investments and handling demand as well as savings and other time deposits. Mutual savings banks , until recently, accepted only savings and other time deposits, and offered limited types of loans and services. The fact that commercial banks were able to expand or contract their loans and investments in accordance with changes in reserves and reserve requirements further differentiated them from mutual savings banks, where the volume of loans and investments was governed by changes in customers' deposits. Membership in the Federal Deposit Insurance Corporation is compulsory for all Federal Reserve member banks but optional for other banks.

Other Financial Institutions

Types of financial institutions that have not traditionally been subject to the supervision of state or federal banking authorities but that perform one or more of the traditional banking functions are savings and loan associations , mortgage companies, finance companies, insurance companies, credit agencies owned in whole or in part by the federal government, credit unions, brokers and dealers in securities, and investment bankers. Savings and loan associations, which are state institutions, provide home-building loans to their members out of funds obtained from savings deposits and from the sale of shares to members. Finance companies make small loans with funds obtained from invested capital, surplus, and borrowings. Credit unions , which are institutions owned cooperatively by groups of persons having a common business, fraternal, or other interest, make small loans to their members out of funds derived from the sale of shares to members. The primary functions of investment bankers are to act as advisers to governments and corporations seeking to raise funds, and to act as intermediaries between these issuers of securities, on the one hand, and institutional and individual investors, on the other.

International Banks

The International Bank for Reconstruction and Development (World Bank) was organized (1945) to make loans both to governments and to private investors. The discharge of debts between nations has been simplified and facilitated through the International Monetary Fund (IMF), which also provides members with technical assistance in international banking. The former European Monetary Agreement also made possible the rapid discharge of debts and balance of payments obligations between nations. The European Central Bank (see European Monetary System ) was established in 1998 to help formulate the joint monetary policy of those European Union nations adopting a single currency.

banking shares

As well as the banks, British Airways climbed 6p to 208.4p ahead of passenger figures for November due later in the session.

Among other top flight stocks, home improvement retailer Kingfisher gave up gains seen after it revealed like-for-like sales were up 5.7% in the 13 weeks to October 31, driven by higher sales of "big ticket" items and improved DIY performance. Shares were later 0.2p lower at 235.8p, although Homebase rival Home Retail Group still cheered 3.1p to 313.1p.

Outside the top flight, shares in brewer Marston's were 4% higher, up 4p to 93.9p, as the company offset any disappointment over lower full-year profits by reporting an improved sales trend at its managed pubs in recent weeks.

Transport firm Go-Ahead was another stock on the front foot after it announced the disposal of its loss-making aviation services business. Shares were 36p higher at 1264p, even though it warned the move would result in a £20 million hit to results.

bank loans

1. Assess your current financial situation by listing your assets, detailing your monthly income and deducting any liabilities, debts or expenses.

2. Step2

   Ask your employer for a letter confirming your monthly income and job security, and back it up with pay stubs or, if your salary is deposited directly into your bank account, invoice statements.

3. Step3

   Do some shopping. You may or may not qualify to get a personal loan through your regular bank. If you don't, there are dozens of lenders out there who specialize in personal loans.

4. Step4

   Compare not only interest rates, but also repayment terms. Find out if your monthly loan payment is fixed or variable, and opt for a fixed term whenever possible. Ask about any up-front fees, and make sure you know whether the loan is disbursed all at once or in installments.

5. Step5

   Offer collateral to get a lower interest rate. Even if you have excellent credit, an unsecured personal loan will always come at a higher interest rate than a secured one.

6. Step6

   Complete all application materials in full, including supporting documentation listing your assets, liabilities and income.

7. Step7

   Check over the loan documents once they're prepared. The terms you and the lender agreed to should be represented honestly and in good faith in the loan documents. You can sign off on the loan if all items appear as discussed with the lender.

8. Step8

   Repay the loan according to the terms outlined in your agreement. If you default, you risk losing the collateral you offered up to secure your loan. If you have an unsecured loan, failure to make payments will have a profoundly negative impact on your credit rating.

bank profits

Citigroup’s $1.6 billion in first-quarter profit would vanish if accounting were more stringent, says Martin Weiss of Weiss Research Inc. in Jupiter, Florida. “The big banks’ profits were totally bogus,” says Weiss, whose 38-year-old firm rates financial companies. “The new accounting rules, the stress tests: They’re all part of a major effort to put lipstick on a pig.”

Further deterioration of loans will eventually force banks to recognize losses that their bookkeeping lets them ignore for now, says David Sherman, an accounting professor at Northeastern University in Boston. Janet Tavakoli, president of Tavakoli Structured Finance Inc. in Chicago, says the government stress scenarios underestimate how bad the economy may get.

The accounting rule changes that matter most for the banks came on April 2, when the Financial Accounting Standards Board gave companies greater latitude in how they establish the fair value of assets. Lawmakers, including Representative Paul Kanjorski, a member of the House Financial Services Committee, had complained that existing mark-to-market standards worsened the financial crisis.

Debt Valuation

Along with that change, FASB also let companies recognize losses on the value of some debt securities on their balance sheets without counting the writedowns against earnings. If banks plan to hold the debt until maturity, they can avoid hurting the bottom line.

At Citigroup, the recipient of $346 billion in fresh capital and asset guarantees from the government, about 25 percent of the quarterly net income came thanks to the debt securities rule change, the bank said.

Another $2.7 billion before taxes came from an accounting rule that lets a company record income when the value of its own debt falls. That reflects the possibility a company could buy back bonds at a discount, generating a profit. In reality, when a bank can’t fund such a transaction, the gain is an accounting quirk, Weiss says.

Citigroup also increased its loan loss reserves more slowly in the first quarter, adding $10 billion compared with $12 billion in the fourth quarter, even as more loans were going bad. Provisions for loan losses cut profits, so adding more to this reserve could have wiped out the quarterly earnings.

Wells Fargo

Without those accounting benefits, Citigroup would probably have posted a net loss of $2.5 billion in the quarter, Weiss estimates. In the five previous quarters, Citigroup lost more than $37 billion.

Wells Fargo also took advantage of the change in the mark- to-market rules. The new standards let Wells Fargo boost its capital $2.8 billion by reassessing the value of some $40 billion of bonds, the bank said in May. And the bank augmented net income by $334 million because of the effect of the rule on the value of debts held to maturity.

Wells Fargo spokeswoman Julia Tunis Bernard declined to comment, as did Citigroup’s Jon Diat.