Giro (Ofer Abarbanel online library)

giro (/ˈdʒaɪroʊ, ˈʒɪəroʊ/),[1] or giro transfer, is a payment transfer from one bank account to another bank account and initiated by the payer, not the payee.[2] The debit card has a similar model. Giros are primarily a European phenomenon; although electronic payment systems such as the Automated Clearing House exist in the United States and Canada, it is not possible to perform third party transfers with them. In the European Union, there is the Single Euro Payments Area (SEPA) which allows electronic giro or debit cardpayments in Euros to be executed to any Euro bank account in the area. Continue reading “Giro (Ofer Abarbanel online library)”

Funds transfer pricing (Ofer Abarbanel online library)

Funds transfer pricing (FTP) is a process used in banking to adjust the reported performance of different business units of a bank. A bank could have different kinds of business units. FTP can be understood as a mechanism for distributing revenue between profit centres, which can contribute to a better financial performance evaluation of these business units. The split of these units between deposit-raising units and funds-advancing units affects whether they receive a positive or negative revenue adjustment. Both borrowing and lending contribute to the performance of the bank as a whole. FTP is a mechanism to adjust these profitabilities to incorporate true funding costs. Therefore, FTP can be seen as an internal measurement tool to demonstrate the financial impact of destination and source of funds.[1] Continue reading “Funds transfer pricing (Ofer Abarbanel online library)”

Full-reserve banking (Ofer Abarbanel online library)

Full-reserve banking (also known as 100% reserve banking) is a proposed alternative to fractional-reserve banking in which banks would be required to keep the full amount of each depositor’s funds in cash, ready for immediate withdrawal on demand. Funds deposited by customers in demand deposit accounts (such as checking accounts) would not be loaned out by the bank because it would be legally required to retain the full deposit to satisfy potential demand for payments. Proposals for such systems generally do not place such restrictions on deposits that are not payable on demand, for example time deposits.[1] Continue reading “Full-reserve banking (Ofer Abarbanel online library)”

Free banking (Ofer Abarbanel online library)

Free banking is a monetary arrangement where banks are free to issue their own paper currency (banknotes) while also subject to no special regulations beyond those applicable to most enterprises.

In a free banking system, market forces control the supply of total quantity of banknotes and deposits that can be supported by any given stock of cash reserves, where such reserves consist either of a scarce commodity (such as gold) or of an artificially limited stock of fiat money issued by a central bank. Continue reading “Free banking (Ofer Abarbanel online library)”

Fractional-reserve banking (Ofer Abarbanel online library)

Fractional-reserve banking is the common practice by commercial banks of accepting deposits, and creating credit, while holding reserves equal to a fraction of the bank’s deposit liabilities.[1] Reserves are held as currency in the bank, or as balances in the bank’s accounts at the central bank. Fractional-reserve banking is the current form of banking practiced in most countries worldwide.[2] Continue reading “Fractional-reserve banking (Ofer Abarbanel online library)”

Fiscal agent (Ofer Abarbanel online library)

fiscal agentfiscal sponsor, or financial agent is a proxy that manages fiscal matters on behalf of another party. A fiscal agent may assist in the redemption of bonds or coupons at maturity, disbursing dividends, and handling tax issues. For example, the United States Federal Reserve is the fiscal agent of the federal government of the United States. Continue reading “Fiscal agent (Ofer Abarbanel online library)”

Financial system (Ofer Abarbanel online library)

A ‘financial system’ is a system that allows the exchange of funds between lenders, investors, and borrowers. Financial systems operate at national and global levels.[1] They consist of complex, closely related services, markets, and institutions intended to provide an efficient and regular linkage between investors and depositors.[2]

Money, credit, and finance are used as medium of exchange in financial systems. They serve as a medium of known value for which goods and services can be exchanged as an alternative to bartering.[3] A modern financial system may include banks (public sector or private sector), financial markets, financial instruments, and financial services. Financial systems allow funds to be allocated, invested, or moved between economic sectors. They enable individuals and companies to share the associated risks.[4] Continue reading “Financial system (Ofer Abarbanel online library)”

Financial inclusion (Ofer Abarbanel online library)

Financial inclusion is where individuals and businesses have access to useful and affordable financial products and services that meet their needs that are delivered in a responsible and sustainable way. Financial inclusion is defined as the availability and equality of opportunities to access financial services.[1] Those companies that promote financial inclusion argue that financial services can be viewed as having significant positive externalities when more people and firms participate. One of its aims is to get the unbanked  and underbanked to have better access to financial services. The availability of financial services that meet the specific needs of users without discrimination is a key objective of financial inclusion. For example, In the United States this condition represents a third of the Hispanic community born in America and half the foreign Hispanic community living in the United States remain unbanked.[2] For this example, giving financial services is key in order to growth as a society. Continue reading “Financial inclusion (Ofer Abarbanel online library)”

Federal funds rate (Ofer Abarbanel online library)

In the United States, the federal funds rate is the interest rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight, on an uncollateralized basis. Reserve balances are amounts held at the Federal Reserve to maintain depository institutions’ reserve requirements. Institutions with surplus balances in their accounts lend those balances to institutions in need of larger balances. The federal funds rate is an important benchmark in financial markets.[1][2]

The interest rate that the borrowing bank pays to the lending bank to borrow the funds is negotiated between the two banks, and the weighted average of this rate across all such transactions is the federal funds effective rate. Continue reading “Federal funds rate (Ofer Abarbanel online library)”