Chapter 1 An Overview of Banks and Their ServicesImagine a World Without BanksOne way to answer your question is to imagine, for a moment, a world without banking institutions, and then to ask yourself a few questions. This is not just an academic exercise; many former eastern-block nations began facing this question when they began to create financial markets and develop market-oriented banks and other financial institutions. If there were no banks Where would you go to borrow money? What would you do with your savings? Would you be able to borrow (save) as much as you need, when you need it, in a form that would be convenient for you? What risks might you face as a saver (borrower)?It is said that the earliest bank is old-style Chinese private bank (money house)（钱庄）. In fact, money house was the place for keeping currency. That is to say, I keep money for you, you pay fee for me. Money house didnt use customers money. While modern banks borrow your money to others, require others to pay much more money and then return a little part to you. Bank itself cannot creat wealth, but it can make money alive by adjusting and restructuring social fortune. Nowadays, money hi-tech projects are laid aside without money. Whereas, the banks magic powermake much more money with a little own money. We will explore its secret by learning commercial bank operation and management. 1 Learning and Management Decision Objectives(1) What is a bank?(2) Introduction to commercial bankWhat is commercial bank?How many roles commercial banks play in the economy today?What is special?What is the features of commerical banks?(3) Commercial banks facing challenge all sides todayHow recent trends in banking, including increased competition, technological change, consolidation into larger firms, and globalization, can affect a bank managers decision making.2What is a Bank?As important as bankers are to the economy as a whole and to the local communities they call home, there is still much confusion about what exactly a bank is. A bank can be defined in terms of (1) the economic functions it serves and the services it offers its customers, or (2) the legal basis for its existence.2.1 The Economic Functions and the Services OfferedCertainly banks can be identified by the function they perform in the economy. Banks are those financial institutions that offer the widest ranges of financial services-especially credit, savings, and payment savings -and perform the widest ranges of functions of any business firm in the economy. Historically, banks have been recognized for the great range of financial services they offerfrom checking accounts and savings plans to loans for businesses, consumers, and governments. However bank service menus are expanding rapidly today to include security trading and underwriting, financial planning, the management of pension plans, advice for merging companies, and numerous other innovative services. Banks no longer limit their service offerings to traditional banking services but have increasingly become general financial-service providers.To add to the prevailing uncertainty about what a bank is, over the years literally dozens of organizations have emerged from the competitive financial marketplace proudly bearing the label of bank. As Exhibit 1-1 shows, for example, there are the Peoples Bank of China, the Commercial Bank, the Policy Bank, Credit Union, the Community Bank and Foreign Bank, etc.The Peoples Bank of ChinaCommercial Bank Policy Bank Credit Union Foreign BankEXHIBIT 1-1 The Different Kinds of Banks in ChinaName of Banking-Type Firm Definition or DescriptionThe Peoples Bank of China: A bank is responsible for controlling a countries monetary policy. It is normally the issuing bank and controls bank licensing, and any foreign exchange control regime. （banks bank, issuing currency bank）. We can divide the central banks duty into four general areas. (1) Conducting monetary policy; (2) Regulating banking institutions and protecting the credit rights of consumers; (3) Maintaining the stability of the financial system; (4) Providing financial services to the government.Policy Bank: A bank is established, owned or guaranteed by government. It is a financial institution which is specialized in policy financial activity to support developing economy, prompt social progress and matching macro-economic regulation, not for profit. It includes China Development Bank（中国开发银行）, Agricultural Development Bank of China（中国农业发展银行） and the Export-Import Bank of China（中国进出口银行）.Commercial Bank: Bank is taking deposits and making loans for profits. For example, Industrial & Commercial Bank of China, Agricultural Bank of China, Bank of China and Construction Bank of China, Bank of Communication, China Everbright Bank（中国光大银行） etc.Foreign Bank: Foreign bank is approved by Bank Monitoring Committee