HOW TO CREATE WEALTH WITH INTERNATIONAL BANKING SYSTEM

Global financial system

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This began around BC in Assyria and Babylonia. Later, in ancient Greece and during the Roman Empire , lenders based in temples made loans and added two important innovations: Archaeology from this period in ancient China and India also shows evidence of money lending activity. The origins of modern banking can be traced to medieval and early Renaissance Italy , to the rich cities in the centre and north like Florence , Lucca , Siena , Venice and Genoa. The Bardi and Peruzzi families dominated banking in 14th-century Florence, establishing branches in many other parts of Europe.

George , was founded in at Genoa , Italy.

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Modern banking practices, including fractional reserve banking and the issue of banknotes , emerged in the 17th and 18th centuries. Merchants started to store their gold with the goldsmiths of London , who possessed private vaults, and charged a fee for that service. In exchange for each deposit of precious metal, the goldsmiths issued receipts certifying the quantity and purity of the metal they held as a bailee ; these receipts could not be assigned, only the original depositor could collect the stored goods. Gradually the goldsmiths began to lend the money out on behalf of the depositor , which led to the development of modern banking practices; promissory notes which evolved into banknotes were issued for money deposited as a loan to the goldsmith.

Since the promissory notes were payable on demand, and the advances loans to the goldsmith's customers were repayable over a longer time period, this was an early form of fractional reserve banking. The promissory notes developed into an assignable instrument which could circulate as a safe and convenient form of money backed by the goldsmith's promise to pay, [6] allowing goldsmiths to advance loans with little risk of default. The Bank of England was the first to begin the permanent issue of banknotes , in The Rothschilds pioneered international finance on a large scale, financing the purchase of the Suez canal for the British government.

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. The definition of a bank varies from country to country. See the relevant country pages under for more information. 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: 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.

Conclusion

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:. 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.

Focused Solutions for Wealth Management

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 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 and , 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. 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 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.

Modular banking software combines efficiency with focus

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. 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.

Globalization has created wealth – but for whom?

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. 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 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. 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.

Banks are susceptible to many forms of risk which have triggered occasional systemic crises.

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. Savings and Loan crisis in the s and early s, the Japanese banking crisis during the s, and the sub-prime mortgage crisis in the s. Assets of the largest 1, banks in the world grew by 6. Growth in assets in adverse market conditions was largely a result of recapitalization. The United States has the most banks in the world in terms of institutions 5, as of and possibly branches 81, as of Japan had banks and 12, branches.

Between and banks engaged in around 28, mergers or acquisitions, either as the aqcuirer or the target company. The overall known value of these deals cumulates to around 5, bil.

How International Banking Works

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. Our labour and its value isn't factored into its humming computers. The ciphers that zip across the globe, bringing hardship to the many so that a few fatcats can prosper, are empty of conscience. The first is a David and Goliath story. Imagine high-powered politicians from the richest countries with reams of statistics and analysis on why a set of international investing rules would make the world a better place.

Imagine grassroots activists from various Non-Governmental Organizations around the world, linked via electronic mail, who are convinced it won't. Well, in the case of the routing of the proposed Multilateral Agreement on Investment it was the activists who won the day. They did it by using the Internet to broadcast information instantly, world-wide, and by pooling information that would embarrass their governments.

In doing so they broke down the wall of secrecy that traditionally surrounds international negotiations. The success of such networking, involving groups like the Penang-based Third World Network, was clear in April this year when ministers from the 29 industrialized OECD countries admitted that the global wave of protest had swamped the deal. It is unclear when, if ever, they will try again.

The second glimmer of hope came from a quite unexpected source: It's common for radical economists to denounce the IMF for its socially disastrous structural-adjustment policies in the 'developing' world. But when criticism comes from the Chief Economist of the World Bank it takes one by surprise. Then he took a swipe at the orthodox view that high interest rates and anti-inflationary policies are the necessary bitter pill that Majority World countries have to swallow. He went on to say that 'the dogma of liberalization has become an end in itself and not a means to a better financial system.

But Stiglitz and other critics of the IMF's rescue package for East Asia have been proven right as the affected countries have sunk deeper into recession. It's not much to be hopeful about, but at least someone in the World Bank has got their eyes open. The third glimmer came in May when the heads of the rich world met at Birmingham, England, for the annual G8 summit and found their conference hall surrounded by a human chain of 50, protesters calling for the cancellation of Third World debt.

This unprecedented display of solidarity with the world's poorest nations was inspiring, though to date only Norway seems to have taken any positive action. But to see cancellation of Third World debt as an act of 'charity', as some plainly do, is obscenely inappropriate.

Not only have debts been paid several times over in interest charges, but debt is actually at the core of what is so wrong with our money system today. Most of the money in the world is created, out of thin air, by banks through making loans see page What's more the loans to the Third World almost always have to be paid back or serviced in dollars or other 'hard' currencies.

This means that if the currencies of Third World countries take a battering, as they so often do, the cost of their debt rises. Their negotiating position is thus continuously being weakened. The consequences of our debt-based money system for the Third World are starvation, ill-health and unemployment. By the end of half the population of Indonesia is likely to join the millions in sub-Saharan Africa who live below the poverty line.

As long as this system reigns, gross inequality will prevail even if we do decide to cancel Third World debt. As long as commercial banks are given the privilege of creating most of the world's money through making loans, this pattern will go on being replicated, albeit in a milder form, throughout the industrialized countries too. It has to change. Abraham Lincoln knew this already in , the year he produced his potentially groundbreaking Monetary Policy.

In it he argued that the Government should create, issue and circulate 'all the currency and credit necessary to satisfy the spending power of the Government and that of consumers'. In this way, he wrote, 'the people will Democracy will rise superior to the money power.

Six weeks after making this proposal Lincoln was assassinated. If he had lived and been successful in pushing through his plans, it could have signalled the end of banking and money power in the US. One can only dream about how different the world might be today. More recently, economist Bryan Gould has argued for much the same idea: Why shouldn't a socially aware and economically responsible government create credit where appropriate in order to ensure Of course, 'socially-aware' and 'economically responsible' are key words.

And the idea is not for the government to simply take on the role of banker but to become the provider of a stock of money free from debt. Even if governments produced a larger proportion of the total money, it would buck the current trend. For example, the British Government in issued 21 per cent of money; today it's a paltry 3 per cent.

The idea of 'social credit', as it is called, was developed in some detail in the s by a certain Major CH Douglas whose theories are enjoying a renaissance among radical and green economists. In the words of one proponent, Frances Hutchinson: Social credit challenges the perpetual claim that the things a society needs like good healthcare and education cannot be provided because of 'lack of money'. The current debt-based system of creating money is founded on a false invention of scarcity, which is then reinforced by debt.

But to overturn a system that creates poverty, so that the privileged few can roll in the greenbacks, and replace it with something that places people first will require more than technical solutions. It will require a concerted social struggle to shift the massive concentration of financial wealth and real resources from this privileged minority which also controls the 'creation of money' within the international banking system.

However, there are some practical measures that could be taken to at least protect the most vulnerable in these times of tremendous global financial instability:. One measure, in isolation, is not enough. Custom A wealth management solution targeting your banking technology objectives At IPBS we focus on building relationships with our clients and developing enhancements that are intuitive to the needs of their particular financial institution. Custom At IPBS we focus on building relationships with our clients and developing enhancements that are intuitive to the needs of their particular financial institution.

Integrated IPBS is highly automated functionally and ensures maximum efficiency and cost effective operations by taking a single source transaction and automatically updating all relevant positions across the enterprise. Responsive With over 20 years as the leading wealth management software company in the western hemisphere, we pride ourselves on rapid implementation and in most cases full migration of legacy data. Subscribe to Newsletter Email Address. Thanks to IPBS we have automated what was previously a time consuming activity and freed up staff time to be spent on other valuable client relationship projects.

Dennis Hunter, Managing Director, Queensgate.

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