The banking system refers to all commercial banks and other financial institutions that provide services such as accepting deposits from customers, making loans, facilitating payments, managing investments, etc.
Think of the banking system as a giant "financial hub." Just like how different airlines connect at an airport hub allowing travelers to easily switch flights between destinations; similarly, various banks come together within a banking system providing essential services that allow money flow between individuals and businesses.
Commercial Banks: These are institutions that accept deposits from customers (individuals/companies), provide loans/credit facilities (mortgages/auto loans), offer checking/savings accounts along with other basic financial services.
Central Bank: A central bank, like the Federal Reserve, is responsible for overseeing and regulating the banking system, conducting monetary policy, and maintaining financial stability.
Deposit Insurance: Deposit insurance is a guarantee provided by governments or agencies (like FDIC in the US) that protects depositors' funds up to a certain amount if a bank fails. It helps promote confidence and stability in the banking system.
Study guides for the entire semester
200k practice questions
Glossary of 50k key terms - memorize important vocab
© 2024 Fiveable Inc. All rights reserved.
AP® and SAT® are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.