7.00 Explain the importance of banking among government, business, and the consumer

1. 7.00 Explain the importance of banking among government, business, and the consumer

2. 7.01 Analyze the roles/responsibilities of the Federal Reserve • I. STRUCTURE OF THE FEDERAL RESERVE SYSTEM. • II. FEDERAL RESERVE ACTIVITIES

3. I. STRUCTURE OF THE FEDERAL RESERVE SYSTEM Organized by the Federal Gov. in 1913 to supervise and regulate banks. • Assists banks with serving the public more efficiently. • Known as the “bank’s bank”. The central bank of the U.S. • All national banks are required to join the Fed. • State banks have the option of joining the system.

4. I. STRUCTURE OF THE FEDERAL RESERVE SYSTEM Divisions of The Federal Reserve: • Divisions are called districts--12 districts in the U.S. • Every state comes under a district. • Each Federal Reserve Bank is a corporation, owned by its member banks.

5. II. ACTIVITIES OF THE FEDERAL RESERVE The Federal Reserve supervises banks: • Accepts deposits • Lends money • Holds reserves • Sets limits for loans • Approves bank mergers • Inspects banks

6. II. ACTIVITIES OF THE FEDERAL RESERVE The Federal Reserve participates in open market operations: • Buys & sells fed. gov. securities • Monitors the reserve requirement • Monitors the discount rate • Supplies paper currency

7. II. ACTIVITIES OF THE FEDERAL RESERVE • The Federal Reserve clears checks between banks in different cities. EFT and Automated clearinghouses are used.

8. 7.02 Evaluate ways that commercial banks can assist consumerswith money management. COMMERCIAL BANK SERVICES THAT ASSIST WITH MONEY MANAGEMENT

9. COMMERCIAL BANK SERVICES THAT ASSIST WITH MONEY MANAGEMENT Accepting deposits: • Safe method of saving for the future • Money earns interest • Less temptation to spend money

10. COMMERCIAL BANK SERVICES THAT ASSIST WITH MONEY Mgt. Transferring Funds (EFT): • Automatic payments • Helps in budgeting • Helps with bill paying • Automatic transfer • Systematic savings habit • (Transfer to savings account) • Savings transferred to checking when needed • Automatic deposit • Paychecks deposited into check acnt. • ATM

11. COMMERCIAL BANK SERVICES THAT ASSIST WITH MONEY Mgt. Transferring Funds (continued): • Debit card (or payment with ATM card) • Purchases made without cash • Home banking • Inquiries • Assistance with accounts • Use computer in bill paying

12. COMMERCIAL BANK SERVICES THAT ASSIST WITH MONEY Mgt. Lending Money: • Loans for major purchases • (Home, automobile, college) • Bank credit card

13. COMMERCIAL BANK SERVICES THAT ASSIST WITH MONEY Mgt. Storing Valuables: • Offer safe-deposit boxes • Boxes are in well-guarded vaults • Used to store items and documents of value: • Jewelry • Bond/stock certificates • Birth records • Wills, and insurance policies

14. COMMERCIAL BANK SERVICES THAT ASSIST WITH MONEY Mgt. Providing Financial Advice: • Investment services • Manage money more efficiently • Advice on investments

15. COMMERCIAL BANK SERVICES THAT ASSIST WITH MONEY Mgt. Trust Management: • Managing investments on behalf of the young and elderly

16. Obj. 7.03 Discuss technological advances and their impact on the banking industry. TECHNOLOGY IN THE BANKING INDUSTRY

17. TECHNOLOGY IN THE BANKING INDUSTRY • Electronic Funds Transfer II. Magnetic Ink/Optical Character Recognition (MICR/OCR) • Automated Clearinghouse (ACH) IV. Other Uses of the computer in banking

18. I. Electronic Funds Transfer Automatic Teller Machines (ATMs): • Convenient & easy to use (24 hrs). • Eliminates need for some bank tellers. • Fees for transactions generate income for bank. • Funds transferred more quickly. • Customer safety is a concern as ATMs are accessible 24 hours a day.

19. I. Electronic Funds Transfer Banking at home: • Allows customers on-line access to account info & transactions at any time & place. • Some employees will need re-training. • Account security becomes an issue.

20. I. Electronic Funds Transfer Point of Sale (POS) transactions: • Now possible using an ATM card (gas stations, supermarkets, retail stores & restaurants) • Reduces amount of paper work for transactions. • Customer accounts are updated instantly.

21. I. Electronic Funds Transfer Direct Deposit: • Allows customer paychecks to be deposited electronically. • Reduces paper work. • Customer accounts are updated instantly.

22. I. Electronic Funds Transfer Debit Cards: • Will reduce/eliminate the need for checkbooks. • Convenient and easy to use. • Accounts are updated immediately.

23. I. Electronic Funds Transfer Electronic Money (E-cash): • Customer pays face value for a programmed plastic card worth a certain amount of money. • Customer can use the card in place of cash, until all E-cash is spent. • Funds are transferred electronically from the customer’s account to the merchant’s account. • May be a problem for the Federal Reserve & our monetary system.

24. II. Magnetic Ink/Optical Character Recognition (MICR/OCR) • Check are sorted & exchanged electronically. • Saves time and money. • Most checks are not verified by humans at the bank. • Bank is responsible if a forged check is cashed.

25. III. Automated Clearinghouse (ACH) • Electronically transfer funds between accounts in different banks. • Used for Federal Reserve check clearing.

26. IV. Computer Banking Other Uses • Fast/instant loan approval for customers. • Computer generated customer bank statements. • Photogenic record of canceled checks on microfilm (check safekeeping). • Up-to-date customer records. • Customer can print checks at home with personal computers.