A bank is a monetary establishment that acknowledges stores from general society and makes credit.[1] Lending exercises can be performed either straightforwardly or by Implication through capital business sectors. Because of their significance in the monetary soundness of a nation, banks are profoundly controlled in many nations. Most countries have standardized a framework known as fragmentary save banking under which banks hold fluid resources equivalent to just a bit of their present liabilities. Notwithstanding different guidelines expected to guarantee liquidity, banks are by and large subject to least capital necessities dependent on a worldwide arrangement of capital principles, known as the Basel Accords.

Banking in its cutting edge sense developed in the fourteenth century in the prosperous urban communities of Renaissance Italy however from various perspectives was a continuation of thoughts and ideas of credit and loaning that had their foundations in the antiquated world. Throughout the entire existence of banking, various financial lines – remarkably, the Medicis, the Fuggers, the Welsers, the Berenbergs, and the Rothschilds – have assumed a focal part over numerous hundreds of years. The most established existing retail bank is Banca Monte dei Paschi di Siena, while the most established existing trader bank is Berenberg Bank.

idea of banking may have started in antiquated Babylonia and Old sangvi, with traders offering credits of grain as insurance inside a deal framework.

Banks in old Greece and during the Roman Empire added two significant developments: they acknowledged stores and changed cash.

Paleontology from this period in antiquated China and India additionally shows proof of cash loaning.

More current banking can be followed to middle age and early Renaissance Italy, to the rich urban communities in the middle and north like Florence, Lucca, Siena, Venice and Genoa.

The Bardi and Peruzzi families overwhelmed banking in fourteenth century Florence, setting up branches in numerous different pieces of Europe.[2] One of the most acclaimed Italian banks was the Medici Bank, set up by Giovanni di Bicci de' Medici in 1397.[3] The soonest realized state store bank, Banco di San Giorgio (Bank of St. George), was established in 1407 at Genoa, Italy.[4]

Present day banking works on, including partial hold banking and the issue of banknotes, arisen in the seventeenth and eighteenth hundreds of years.

Traders began to store their gold with the goldsmiths of London, who had private vaults, and charged an expense for that assistance.

In return for each store of valuable metal, the goldsmiths gave receipts affirming the amount and virtue of the metal they held as a bailee; these receipts couldn't be allocated, just the first contributor could gather the put away merchandise.

Bit by bit the goldsmiths started to loan the cash out for the benefit of the contributor, which prompted the advancement of current financial practices; promissory notes (which developed into banknotes) were given for cash saved as a credit to the goldsmith.[5] The goldsmith paid revenue on these stores.

Since the promissory notes were payable on request, and the advances (credits) to the goldsmith's clients were repayable throughout a more drawn out time-frame, this was an early type of partial save banking.

The promissory notes formed into an assignable instrument which could circle as a protected and helpful type of cash upheld by the goldsmith's guarantee to pay,[6] permitting goldsmiths to propel advances with little danger of default.[7] Thus, the goldsmiths of London turned into the precursors of banking by making new cash dependent using a credit card.

The Bank of England was quick to start the lasting issue of banknotes, in 1695.[8] The Royal Bank of Scotland set up the primary overdraft office in 1728.[9] By the start of the nineteenth century a brokers' clearing house was set up in London to permit numerous banks to clear exchanges.

The Rothschilds pi international finance on a large scale, financing the purchase of the Suez canal for the British government.

The word bank was taken Middle English from Middle French banque, from Old Italian banco, meaning "table", from Old High German banc, bank "bench, counter". Benches were used as makeshift desks or exchange counters during the Renaissance by Jewish^[10] Florentine bankers, who used to make their transactions atop desks covered by green tablecloths.^[11][12]

The definition of a bank varies from country to country.

See the relevant country pages under for more information.

Under English common law, a banker is defined as a person who carries on the business of banking by conducting current accounts for his customers, paying cheques drawn on him/her and also collecting cheques for his/her customers.^[13]

In most common law jurisdictions there is a Bills of Exchange Act that codifies the law in relation to negotiable instruments, including cheques, and this Act contains a statutory definition of the term banker: banker includes a body of persons, whether incorporated or not, who carry on the business of banking' (Section 2, Interpretation). Although this definition seems circular, it is actually functional, because it ensures that the legal basis for bank transactions such as cheques does not depend on how the bank is structured or regulated.

The business of banking is in many English common law countries not defined by statute but by common law, the definition above. In other English common law jurisdictions there are statutory definitions of the business of banking or banking business. When looking at these definitions it is important to keep in mind that they are defining the business of banking for the purposes of the legislation, and not necessarily in general. In particular, most of the definitions are from legislation that has the purpose of regulating and supervising banks rather than regulating the actual business of banking. However, in many cases the statutory definition closely mirrors the common law one. Examples of statutory definitions:

Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale), direct credit, direct debit and internet banking, the cheque has lost its primacy in most banking systems as a payment instrument. This has led legal theorists to suggest that the cheque based definition should be broadened to include financial institutions that conduct current accounts for customers and enable customers to pay and be paid by third parties, even if they do not pay and collect cheques.^[15]

Banks act as payment agents by conducting checking or current accounts for customers, paying cheques drawn by customers in the bank, and collecting cheques deposited to customers' current accounts. Banks also enable customer payments via other payment methods such as Automated Clearing House (ACH), Wire transfers or telegraphic transfer, EFTPOS, and automated teller machines (ATMs).

Banks borrow money by accepting funds deposited on current accounts, by accepting term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current accounts, by making installment loans, and by investing in marketable debt securities and other forms of money lending.

Banks provide different payment services, and a bank account is considered indispensable by most businesses and individuals.

Non-banks that provide payment services such as remittance companies are normally not considered as an adequate substitute for a bank account.

Banks can create new money when they make a loan.

New loans throughout the banking system generate new deposits elsewhere in the system.

The money supply is usually increased by the act of lending, and reduced when loans are repaid faster than new ones are generated.

In the United Kingdom between 1997 and 2007, there was an increase in the money supply, largely caused by much more bank lending, which served to push up property prices and increase private debt. The amount of money in the economy as measured by M4 in the UK went from £750 billion to £1700 billion between 1997 and 2007, much of the increase caused by bank lending.^[16] If all the banks increase their lending together, then they can expect new deposits to return to them and the amount of money in the economy will increase. Excessive or risky lending can cause borrowers to default, the banks then become more cautious, so there is less lending and therefore less money so that the economy can go from boom to bust as happened in the UK and many other Western economies after 2007.

Activities undertaken by banks include personal banking, corporate banking, investment banking, private banking, transaction banking, insurance, consumer finance, foreign exchange trading, commodity trading, trading in equities, futures and options trading and money market trading.

Banks offer many different channels to access their banking and other services:

A bank can generate revenue in a variety of different ways including interest, transaction fees and financial advice.

Traditionally, the most significant method is via charging interest on the capital it lends out to customers.^[17] The bank profits from the difference between the level of interest it pays for deposits and other sources of funds, and the level of interest it charges in its lending activities.

This difference is referred to as the spread between the cost of funds and the loan interest rate. Historically, profitability from lending activities has been cyclical and dependent on the needs and strengths of loan customers and the stage of the economic cycle. Fees and financial advice constitute a more stable revenue stream and banks have therefore placed more emphasis on these revenue lines to smooth their financial performance.

In the past 20 years, American banks have taken many measures to ensure that they remain profitable while responding to increasingly changing market conditions.

This helps in making a profit and facilitates economic development as a whole.^[18]

Recently, as banks have been faced with pressure from fintechs, new and additional business models have been suggested such as freemium, monetization of data, white-labelling of banking and payment applications, or the cross-selling of complementory products.^[19]

Banks face a number of risks in order to conduct their business, and how well these risks are managed and understood is a key driver behind profitability, and how much capital a bank is required to hold. Bank capital consists principally of equity, retained earnings and subordinated debt.

After the 2007-2009 financial crisis, regulators force banks to issue Contingent convertible bonds (CoCos).These are hybrid capital securities that absorb losses in accordance with their contractual terms when the capital of the issuing bank falls below a certain level. Then debt is reduced and bank capitalization gets a boost. Owing to their capacity to absorb losses, CoCos have the potential to satisfy regulatory capital requirement.^[20][21]

Some of the main risks faced by banks include:

The capital requirement is a bank regulation, which sets a framework within which a bank or depository institution must manage its balance sheet. The categorization of assets and capital is highly standardized so that it can be risk weighted.

The economic functions of banks include:

Banks are susceptible to many forms of risk which have triggered occasional systemic crises.^[24] These include liquidity risk (where many depositors may request withdrawals in excess of available funds), credit risk (the chance that those who owe money to the bank will not repay it), and interest rate risk (the possibility that the bank will become unprofitable, if rising interest rates force it to pay relatively more on its deposits than it receives on its loans).

Banking crises have developed many times throughout history when one or more risks have emerged for a banking sector as a whole.

Prominent examples include the bank run that occurred during the Great Depression, the U.S. Savings and Loan crisis in the 1980s and early 1990s, the Japanese banking crisis during the 1990s, and the sub-prime mortgage crisis in the 2000s.

Assets of the largest 1,000 banks in the world grew by 6.8% in the 2008/2009 financial year to a record US$96.4 trillion while profits declined by 85% to US$115 billion.

Growth in assets in adverse market conditions was largely a result of recapitalization.

EU banks held the largest share of the total, 56% in 2008/2009, down from 61% in the previous year.

Asian banks' share increased from 12% to 14% during the year, while the share of US banks increased from 11% to 13%.

Fee revenue generated by global investment banking totalled US$66.3 billion in 2009, up 12% on the previous year.^[25]

The United States has the most banks in the world in terms of institutions (5,330 as of 2015) and possibly branches (81,607 as of 2015).^[26] This is an indicator of the geography and regulatory structure of the US, resulting in a large number of small to medium-sized institutions in its banking system.

As of November 2009, China's top 4 banks have in excess of 67,000 branches (ICBC:18000+, BOC:12000+, CCB:13000+, ABC:24000+) with an additional 140 smaller banks with an undetermined number of branches. Japan had 129 banks and 12,000 branches. In 2004, Germany, France, and Italy each had more than 30,000 branches – more than double the 15,000 branches in the UK.^[25]

Between 1985 and 2018 banks engaged in around 28,798 mergers or acquisitions, either as the acquirer or the target company.

The overall known value of these deals cumulates to around 5,169 bil.

USD.^[27] In terms of value, there have been two major waves (1999 and 2007) which both peaked at around 460 bil.

USD followed by a steep decline (-82% from 2007 until 2018).

Here is a list of the largest deals in history in terms of value with participation from at least one bank:

Currently, commercial banks are regulated in most jurisdictions by government entities and require a special bank license to operate.

Usually, the definition of the business of banking for the purposes of regulation is extended to include acceptance of deposits, even if they are not repayable to the customer's order – although money lending, by itself, is generally not included in the definition.

Unlike most other regulated industries, the regulator is typically also a participant in the market, being either a publicly or privately governed central bank. Central banks also typically have a monopoly on the business of issuing banknotes. However, in some countries this is not the case. In the UK, for example, the Financial Services Authority licenses banks, and some commercial banks (such as the Bank of Scotland) issue their own banknotes in addition to those issued by the Bank of England, the UK government's central bank.

Banking law is based on a contractual analysis of the relationship between the bank (defined above) and the customer – defined as any entity for which the bank agrees to conduct an account.

The law implies rights and obligations into this relationship as follows:

These implied contractual terms may be modified by express agreement between the customer and the bank.

The statutes and regulations in force within a particular jurisdiction may also modify the above terms and/or create new rights, obligations or limitations relevant to the bank-customer relationship.

Some types of financial institution, such as building societies and credit unions, may be partly or wholly exempt from bank license requirements, and therefore regulated under separate rules.

The requirements for the issue of a bank license vary between jurisdictions but typically include:

Banks' activities can be divided into:

Most banks are profit-making, private enterprises.

However, some are owned by government, or are non-profit organizations.

Structure of the organised banking sector in India. Numbers of banks are in brackets.

The United States banking industry is one of the most heavily regulated and guarded in the world,^[30] with multiple specialized and focused regulators. All banks with FDIC-insured deposits have the Federal Deposit Insurance Corporation (FDIC) as a regulator. However, for soundness examinations (i.e., whether a bank is operating in a sound manner), the Federal Reserve is the primary federal regulator for Fed-member state banks; the Office of the Comptroller of the Currency (OCC) is the primary federal regulator for national banks. State non-member banks are examined by the state agencies as well as the FDIC. National banks have one primary regulator – the OCC.

Each regulatory agency has their own set of rules and regulations to which banks and thrifts must adhere.

The Federal Financial Institutions Examination Council (FFIEC) was established in 1979 as a formal inter-agency body empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions. Although the FFIEC has resulted in a greater degree of regulatory consistency between the agencies, the rules and regulations are constantly changing.

In addition to changing regulations, changes in the industry have led to consolidations within the Federal Reserve, FDIC, OTS, and OCC.

Offices have been closed, supervisory regions have been merged, staff levels have been reduced and budgets have been cut.

The remaining regulators face an increased burden with increased workload and more banks per regulator.

While banks struggle to keep up with the changes in the regulatory environment, regulators struggle to manage their workload and effectively regulate their banks.

The impact of these changes is that banks are receiving less hands-on assessment by the regulators, less time spent with each institution, and the potential for more problems slipping through the cracks, potentially resulting in an overall increase in bank failures across the United States.

The changing economic environment has a significant impact on banks and thrifts as they struggle to effectively manage their interest rate spread in the face of low rates on loans, rate competition for deposits and the general market changes, industry trends and economic fluctuations.

It has been a challenge for banks to effectively set their growth strategies with the recent economic market.

A rising interest rate environment may seem to help financial institutions, but the effect of the changes on consumers and businesses is not predictable and the challenge remains for banks to grow and effectively manage the spread to generate a return to their shareholders.

The management of the banks’ asset portfolios also remains a challenge in today's economic environment.

Loans are a bank's primary asset category and when loan quality becomes suspect, the foundation of a bank is shaken to the core.

While always an issue for banks, declining asset quality has become a big problem for financial institutions.

There are several reasons for this, one of which is the lax attitude some banks have adopted because of the years of “good times.”

The potential for this is exacerbated by the reduction in the regulatory oversight of banks and in some cases depth of management.

Problems are more likely to go undetected, resulting in a significant impact on the bank when they are discovered.

In addition, banks, like any business, struggle to cut costs and have consequently eliminated certain expenses, such as adequate employee training programs.

Banks also face a host of other challenges such as ageing ownership groups.

Across the country, many banks’ management teams and board of directors are ageing.

Banks also face ongoing pressure by shareholders, both public and private, to achieve earnings and growth projections.

Regulators place added pressure on banks to manage the various categories of risk.

Banking is also an extremely competitive industry.

Competing in the financial services industry has become tougher with the entrance of such players as insurance agencies, credit unions, cheque cashing services, credit card companies, etc.

As a reaction, banks have developed their activities in financial instruments, through financial market operations such as brokerage and have become big players in such activities.

Another major challenge is the ageing infrastructure, also called legacy IT.

Backend systems were built decades ago and are incompatible to new applications.

Fixing bugs and creating interfaces costs huge sums, as knowledgeable programmers become scarce.^[31]

To be able to provide home buyers and builders with the funds needed, banks must compete for deposits.

The phenomenon of disintermediation had to dollars moving from savings accounts and into direct market instruments such as U.S. Department of Treasury obligations, agency securities, and corporate debt. One of the greatest factors in recent years in the movement of deposits was the tremendous growth of money market funds whose higher interest rates attracted consumer deposits.^[32]

To compete for deposits, US savings institutions offer many different types of plans:^[32]

Bank statements are accounting records produced by banks under the various accounting standards of the world. Under GAAP there are two kinds of accounts: debit and credit. Credit accounts are Revenue, Equity and Liabilities. Debit Accounts are Assets and Expenses. The bank credits a credit account to increase its balance, and debits a credit account to decrease its balance.^[33]

The customer debits his or her savings/bank (asset) account in his ledger when making a deposit (and the account is normally in debit), while the customer credits a credit card (liability) account in his ledger every time he spends money (and the account is normally in credit).

When the customer reads his bank statement, the statement will show a credit to the account for deposits, and debits for withdrawals of funds.

The customer with a positive balance will see this balance reflected as a credit balance on the bank statement.

If the customer is overdrawn, he will have a negative balance, reflected as a debit balance on the bank statement.

One source of deposits for banks is brokers who deposit large sums of money on behalf of investors through trust corporations.

This money will generally go to the banks which offer the most favourable terms, often better than those offered local depositors.

It is possible for a bank to engage in business with no local deposits at all, all funds being brokered deposits.

Accepting a significant quantity of such deposits, or "hot money" as it is sometimes called, puts a bank in a difficult and sometimes risky position, as the funds must be lent or invested in a way that yields a return sufficient to pay the high interest being paid on the brokered deposits. This may result in risky decisions and even in eventual failure of the bank. Banks which failed during 2008 and 2009 in the United States during the global financial crisis had, on average, four times more brokered deposits as a percent of their deposits than the average bank. Such deposits, combined with risky real estate investments, factored into the savings and loan crisis of the 1980s. Regulation of brokered deposits is opposed by banks on the grounds that the practice can be a source of external funding to growing communities with insufficient local deposits.^[34] There are different types of accounts: saving, recurring and current accounts.

Custodial accounts are accounts in which assets are held for a third party.

For example, businesses that accept custody of funds for clients prior to their conversion, return or transfer may have a custodial account at a bank for this purposes.

In modern time there has been huge reductions to the barriers of global competition in the banking industry.

Increases in telecommunications and other financial technologies, such as Bloomberg, have allowed banks to extend their reach all over the world, since they no longer have to be near customers to manage both their finances and their risk.

The growth in cross-border activities has also increased the demand for banks that can provide various services across borders to different nationalities.

However, despite these reductions in barriers and growth in cross-border activities, the banking industry is nowhere near as globalized as some other industries.

In the US, for instance, very few banks even worry about the Riegle–Neal Act, which promotes more efficient interstate banking.

In the vast majority of nations around the globe the market share for foreign owned banks is currently less than a tenth of all market shares for banks in a particular nation.

One reason the banking industry has not been fully globalized is that it is more convenient to have local banks provide loans to small business and individuals.

On the other hand, for large corporations, it is not as important in what nation the bank is in, since the corporation's financial information is available around the globe.^[35]