[COMMERCIAL BANK]
Group Members:
Bank is one of the most common monetary institutions used by millions of people in
the words. Thus a basic knowledge of the banking system is essential to an
understanding of how money works. This paper is made for giving better
understanding to commercial bank and also provides study case which allows the
reader to read the real example of commercial bank. There are two type of bank:
commercial bank and investment bank. Commercial banking is the commercial
banking systems in most nations are dominated by a few large banks, each of which
has many branches.
The commercial banking systems in most nations are dominated by a few large
banks, each of which has many branches. More and more commercial bank
develops along with the development of technology.
It is very necessary to know what commercial banking is and how it works. Thus, in the
future the reader could be able to know how commercial banking work chose the best bank
and compare their feature, such as: interest rates, convenience, FDIC membership,
size, and minimum deposit. Compare services like direct deposit, ATMs, online
banking, credit cards and debit cards.
The writers hope this paper could be the bridge to gain well understanding about
commercial banking, its feature, systems, etc.
Best regards,
Writers
Definition
A commercial bank is An institution which accepts deposits, makes business
loans, and offers related services. Commercial banks also allow for a variety of
deposit accounts, such as checking, savings, and time deposit. It is a type of
financial intermediary and a type of bank. Commercial banking is also known as
business banking. It is a bank that provides checking accounts, savings accounts,
and money market accounts and that accepts time deposits. Actualy, Commercial
bank is the term used for a normal bank to distinguish it from an investment bank.
This is what people normally call a "bank". The term "commercial" was used to
distinguish it from an investment bank. Since the two types of banks no longer have
to be separate companies, some have used the term "commercial bank" to refer to
banks that focus mainly on companies.
History
In the period of our freedom, the banking in Indonesia is going up and growing up
during the time. Some of Netherlands banks are controlled by Indonesia
government. In the july 5th 1946 , Indonesia build Bank Negara Indonesia or we
famous called it by BNI’46. This is the first bank which built and owned by Indonesia
Government.
Central Bank
4. Create a sound and effective banking system and financial system stability
Commercial Bank
♣ Primary functions:
The primary functions of a commercial bank include:
a) Accepting deposits
The most important activity of a commercial bank is to mobilize deposits from
the public. People who have surplus income and savings find it convenient to
deposit the amounts with banks. Depending upon the nature of deposits,
funds deposited with bank also earn interest. Thus, deposits with the bank
grow along with the interest earned. If the rate of interest is higher, public are
motivated to deposit more funds with the bank. There is also safety of funds
deposited with the bank.
♣ Secondary functions
Besides the primary functions of accepting deposits and lending money, banks
perform a number of other functions which are called secondary functions.
These are as follows :
a) Issuing letters of credit, travelers cheques, circular notes etc.
b) Undertaking safe custody of valuables, important documents, and
securities by providing safe deposit vaults or lockers;
c) Providing customers with facilities of foreign exchange.
d) Transferring money from one place to another; and from one branch to
another branch of the bank.
e) Standing guarantee on behalf of its customers, for making payments
for purchase of goods, machinery, vehicles etc.
f) Collecting and supplying business information;
g) Issuing demand drafts and pay orders; and,
h) Providing reports on the credit worthiness of customers.
These are the main activities These are the secondary activities
of the bank.
These are the main sources
These are not the main sources of
income of the banks
Type of Bank
There are four types of commercial bank in Indonesia:
A private bank that doesn’t have the permission to do foreign transaction like
Foreign exchange bank; so their job just in the domestic area (bank to bank
in the same country, etc). Examples for this bank are: Index selindo, Syariah
Mega Indonesia, Akita.
Banks Mixed
Bank that have two kind of ownership: one from domestic and the other one
from foreign company. They mix the bank into a private bank that have a
domicile in one country. Usually ,the bank’s name different with the bank
ownership name. Examples for this bank are: Panin, Commonwealth, OCBC
Indonesia, etc.
Bank that has a foreign ownership, example for this bank are: ABN Amro,
Bank of China limited, RBS, etc.
Features
There are several features offer by commercial bank in Indonesia:
ATM is one kind of feature that commercial bank have (but not the specific
feature because every bank whether government or commercial bank
have it). Nowadays people use ATM everywhere and every time because
it’s very simple. The purpose for this feature is not only to withdraw the
money, but also to pay bill (electricity, water, etc), buy a cell phone load,
etc.
2. Mobile banking
Mobile banking is one kind of feature that uses the cell phone. Mobile
banking comprise of 3 parts. The first one is mobile banking that uses
SMS, this feature is very simple and can use to do some transaction, and
the limitation of this feature is the amount of the characteristic. The
second one is Mobile web based, which the part of internet banking
also, but group in here because this feature must use cell phone as the
media, the disadvantage for this feature is no “off-line” system, if you are
out of the area you can’t use this feature. The last part of mobile banking
is Mobile client application, is the part of mobile banking that use
software and must install them, this feature usually required the java
program, and the disadvantage of this program is too hard to understand
because different device means different application that people should
install to the device.
3. Internet Banking
4. Debit Card
Debit card is one of the features that every bank has especially for
commercial bank. Debit card is very useful to do the payment or to
withdraw some money, because this card now not only uses in ATM, but
nowadays you can use this debit card to withdraw money from the cashier
(debit BCA).
5. Credit Card
Credit card is the general feature that every bank has. This card is used to
pay the charge if customer doesn’t have cash money. Every credit card
have a limited amount per month (silver +- 1 million rupiahs, Gold +- 7,5
Million rupiahs, Platinum depend on the banks), every month the bank will
charge you up to the use of the customer.
Nowadays, one of the banks in Indonesia has this feature. This feature is
the fastest multifunction payment tools to make the payment become
easier. This is different with the credit or debit card because the customer
doesn’t need to come to ATM to do the transaction, customer can directly
come to the counter that have logo for the flazz card itself. For the
payment, Flazz card use like a cell phone that you must charge the load to
use it. The range for this charges is around one hundred thousand rupiahs
until I million rupiahs.
System
REGULATIONS OF COMMERCIAL BANKING
For most developed countries the late 20th century was marked by a notable easing
of regulations and restrictions in the banking industry. In the United States, for
example, many regulations had originated in response to problems experienced
during the Great Depression, especially in 1933, when the federal government
closed the country’s banks and permitted only those deemed solvent to reopen. By
the end of the century the risk of widespread economic failure, such as that
experienced in the Great Depression, had grown increasingly unlikely. Banking
remains a heavily regulated business, however. Contemporary bank regulations are
intended to limit bank failures and to protect bank depositors from losses stemming
from such failures. Numerous other regulations apply to concerns such as the
privacy of bank customers, fair lending practices, and the prevention of money
laundering.
Payment System
Only commercial banks and the post office system (PT POS) provide payment
services in Indonesia. The post office system provides payment services by means
of Giro Book, but this is not included in the payment systems of banks. The payment
systems provided by commercial banks are explained below.
A. What is Citibank?
• Citibank is a major international bank, founded in 1812 as the City Bank of New York,
later First National City Bank of New York.
• Citibank is now the consumer banking arm of financial services giant Citigroup, one of
the largest companies in the world. As of June 2009[update], Citigroup is the third largest
bank holding company in the United States by total assets. Now is operated in more than
100 country around the world.
• Citibank, N.A., Indonesia Branch (“Citibank”) is a full branch of Citibank, N.A. with its
head office in New York, U.S.A. Citigroup Inc. (“Citigroup”) fully owns Citibank, N.A.
• Citibank was first established in Indonesia in 1918 through its predecessor company, The
International Banking Corporation in Batavia and Surabaya. While those branches were
closed in the late 1920s, Citibank returned to Jakarta in 1968 and established a full range
of banking activities.
B. History of Citibank
• Founded in 1812 as the City Bank of New York, ownership and
management of the bank was taken over by Moses Taylor, a protégé of
John Jacob Astor and one of the giants of the business world in the 19th
century.
• In 1863, the bank joined the U.S.'s new national banking system and
became The National City Bank of New York. By 1868, it was
considered one of the largest banks in the United States, and in 1897,
it became the first major U.S bank to establish a foreign department.
• Following its merger with the First National Bank, the bank changed its
name to The First National City Bank of New York in 1955, and then
shortened it to First National City Bank in 1962.
Time Activities
2004
Citibank launches Citifinancial
D. Citibank Product
In the development of Citibank, they have four key businesses that concern
to financial service for customer markets such as:
1. Retail Banking
2. Credit Card
4. CitiFinancial
• In August 2004, Citibank launched CitiFinancial, a neighborhood branch
based lending business, to fulfill the growing needs of loan without
collaterals for low–middle class.
• The range of product includes unsecured personal loans, installment loans,
insurance, secured loans, with flexible terms up to 48 months.
• This neighborhood approach allows CitiFinancial officers to do face–to–face
interaction with customers. When it comes to providing loans, CitiFinancial
always emphasizes on budgeting and cash flow analysis process. This way,
we educate our customers and prospects to manage their financial
responsibly by taking unsecured personal loan as per their capacity.
• Currently CitiFinancial has 56 branches in six major cities of Jakarta,
Bandung, Semarang, Surabaya, Medan, and Denpasar.
• Since 2007, CitiFinancial collaborates with PT. Pos Indonesia to expand the
distribution of CitiFinancial in the Indonesian market by leveraging strong
post office distribution.
E. OwnerShip Of Citibank
Conclusion
Commercial bank is one of the most important financial institutions which is closely
related to the economical situation among people, whether individual or group
(firm, organization etc.). It is the backbone of money circulation in every country in
the world. Commercial Bank has been developed so fast since the establishment of
the history. Nowadays, there are many features provide to make the customers
convenient and easy to access their account, transferring and doing other banking
activities. Every day, billion people use commercial banking to accommodate the
transactions. Since there are many Commercial Bank established in the world,
people should be selective in choosing bank.
Bibliography
♦ http://www.citibank.co.id/
♦ http://www.citibank.co.id/APPS/portal/loadPage.do?
tabNo=home&htmlPageName=info/det/about_us.htm&locale=en_ID
♦ http://chestofbooks.com/finance/banking/Banking-Principles-And-
Practice-2/Functions-Of-Commercial-Banks.html