Chapter 01 - An Overview of the Changing Financial-Services Sector
rights protections.#### 8.2 **War and Military Interventions**Military interventions, whether for humanitarian
reasons or in response to threats, pose significant ethical and legal challenges. The question of whether military force
is justified to prevent atrocities or maintain national security is hotly debated. The legal framework governing the use
of force is established under the United Nations Charter, which permits intervention under certain conditions (e.g.,
self-defense or Security Council authorization).However, ethical dilemmas arise when military actions result in civilian
casualties or unintended consequences. For example, drone strikes, though often used to target terrorist leaders,
raise concerns about extrajudicial killings, civilian harm, and sovereignty violations. The legal justification for such
actions is often debated, and
CHAPTER 1
AN OVERVIEW OF THE CHANGING FINANCIAL-SERVICES SECTOR
Goal of This Chapter: In this chapter you will learn about the many roles financial service -
providers play in the economy today. You will examine how and why the banking industry and
the financial services marketplace as a whole is rapidly changing, becoming new and different
as we move forward into the future. You will also learn about new and old services offered to
the public.
Key Topics in This Chapter
Powerful Forces Reshaping the Industry
What Is a Bank?
The Financial System and Competing Financial-Service Institutions
Old and New Services Offered to the Public
Key Trends Affecting All Financial-Service Firms
Appendix: Career Opportunities in Financial Services
Chapter Outline
I. Introduction: Powerful Forces Reshaping the Industry
II. What Is a Bank?
A. Defined by the Functions It Serves and the Roles It Play:
B. Banks and their Principal Competitors
C. Legal Basis of a Bank
D. Defined by the Government Agency That Insures Its Deposits
III. The Financial System and Competing Financial-Service Institutions
A. Roles of financial system
1-1
, Chapter 01 - An Overview of the Changing Financial-Services Sector
B. The competitive challenge for banks
C. Leading Competitors with banks
Savings Associations
Credit Unions
Money Market Funds
Mutual Funds
Hedge Funds
Security Brokers and Dealers
Investment Banks
Finance Companies
Financial Holding Companies
Life and Property/Casualty Insurance Companies
IV. Services Banks and Many of Their Closest Competitors Offer the Public
A. Services Banks Have Offered for Centuries
1. Carrying Out Currency Exchanges
2. Discounting Commercial Notes and Making Business Loans
3. Offering Savings Deposits
4. Safekeeping of Valuables and Certification of Value
5. Supporting Government Activities with Credit
6. Offering Checking Accounts (Demand Deposits)
7. Offering Trust Services
rights protections.#### 8.2 **War and Military Interventions**Military interventions, whether for humanitarian
reasons or in response to threats, pose significant ethical and legal challenges. The question of whether military force
is justified to prevent atrocities or maintain national security is hotly debated. The legal framework governing the use
of force is established under the United Nations Charter, which permits intervention under certain conditions (e.g.,
self-defense or Security Council authorization).However, ethical dilemmas arise when military actions result in civilian
casualties or unintended consequences. For example, drone strikes, though often used to target terrorist leaders,
raise concerns about extrajudicial killings, civilian harm, and sovereignty violations. The legal justification for such
actions is often debated, and
B. Services Banks and Many of Their Financial-Service Competitors Began Offering in the
Past Cent ury
1. Granting Consumer Loans
2. Financial Advising
3. Managing Cash
4. Offering Equipment Leasing
5. Making Venture Capital Loans
6. Selling Insurance Policies
7. Selling and Managing Retirement Plans
C. Dealing in Securities:
1-2
, Chapter 01 - An Overview of the Changing Financial-Services Sector
Offering Security Brokerage and Investment Banking Services
1. Offering Security Underwriting
2. Offering Mutual Funds, Annuities, and Other Investment Products
3. Offering Merchant Banking Services
4. Offering Risk Management and Hedging Services
D. Convenience: The Sum
Total of All Banking and Financial Services
V. Key Trends Affecting All Financial-Service Firms
A. Service Proliferation
B. Rising Competition
C. Government Deregulation
D. An Increasingly Interest-Sensitive Mix of Funds
E. Technological Change and Automation
F. Consolidation and Geographic Expansion
G. Convergence
H. Globalization
VI. The Plan of This Book
VII. Summary
rights protections.#### 8.2 **War and Military Interventions**Military interventions, whether for humanitarian
reasons or in response to threats, pose significant ethical and legal challenges. The question of whether military force
is justified to prevent atrocities or maintain national security is hotly debated. The legal framework governing the use
of force is established under the United Nations Charter, which permits intervention under certain conditions (e.g.,
self-defense or Security Council authorization).However, ethical dilemmas arise when military actions result in civilian
casualties or unintended consequences. For example, drone strikes, though often used to target terrorist leaders,
raise concerns about extrajudicial killings, civilian harm, and sovereignty violations. The legal justification for such
actions is often debated, and
Concept Checks
1-1. What is a bank? How does a bank differ from most other financial-service providers?
A bank should be defined by what it does; in this case, banks are generally those financial
institutions offering the widest range of financial services. Other financial service providers
offer some of the financial services offered by a bank, but not all of them within one institution.
1-3
, Chapter 01 - An Overview of the Changing Financial-Services Sector
1-2. Under U.S. law what must a corporation do to qualify and be regulated as a commercial
bank?
rights protections.#### 8.2 **War and Military Interventions**Military interventions, whether for humanitarian
reasons or in response to threats, pose significant ethical and legal challenges. The question of whether military force
is justified to prevent atrocities or maintain national security is hotly debated. The legal framework governing the use
of force is established under the United Nations Charter, which permits intervention under certain conditions (e.g.,
self-defense or Security Council authorization).However, ethical dilemmas arise when military actions result in civilian
casualties or unintended consequences. For example, drone strikes, though often used to target terrorist leaders,
raise concerns about extrajudicial killings, civilian harm, and sovereignty violations. The legal justification for such
actions is often debated, and
Under U.S. law, commercial banks must offer two essential services to qualify as banks for
purposes of regulation and taxation, demand (checkable) deposits and commercial loans. More
recently, Congress defined a bank as any institution that could qualify for deposit insurance
administered by the FDIC.
1-3. Why are some banks reaching out to become one-stop financial - service
conglomerates? Is this a good idea, in your opinion?
There are two reasons that banks are increasingly becoming one-stop financial service
conglomerates. The first reason is the increased competition from other types of financial
institutions and the erosion of banks’ traditional service areas. The second reason is the
Financial Services Modernization Act which has allowed banks to expand their role to be full
service providers.
1-4. Which businesses are banking’s closest and toughest competitors? What services do they
offer that compete directly with banks’ services?
Among a bank’s closest competitors are savings associations, credit unions, money market
funds, mutual funds, hedge funds, security brokers and dealers, investment banks, finance
companies, financial holding companies, and life and property-casualty insurance companies.
All of these financial service providers are converging and embracing each other’s innovations.
The Financial Services Modernization Act has allowed many of these financial service providers
to offer the public one-stop shopping for financial services.
1-5. What is happening to banking’s share of the financial marketplace and why? What kind
of banking and financial system do you foresee for the future if present trends
continue?
The Financial Services Modernization Act of 1999 allowed many of the banks’ closest
1-4
rights protections.#### 8.2 **War and Military Interventions**Military interventions, whether for humanitarian
reasons or in response to threats, pose significant ethical and legal challenges. The question of whether military force
is justified to prevent atrocities or maintain national security is hotly debated. The legal framework governing the use
of force is established under the United Nations Charter, which permits intervention under certain conditions (e.g.,
self-defense or Security Council authorization).However, ethical dilemmas arise when military actions result in civilian
casualties or unintended consequences. For example, drone strikes, though often used to target terrorist leaders,
raise concerns about extrajudicial killings, civilian harm, and sovereignty violations. The legal justification for such
actions is often debated, and
CHAPTER 1
AN OVERVIEW OF THE CHANGING FINANCIAL-SERVICES SECTOR
Goal of This Chapter: In this chapter you will learn about the many roles financial service -
providers play in the economy today. You will examine how and why the banking industry and
the financial services marketplace as a whole is rapidly changing, becoming new and different
as we move forward into the future. You will also learn about new and old services offered to
the public.
Key Topics in This Chapter
Powerful Forces Reshaping the Industry
What Is a Bank?
The Financial System and Competing Financial-Service Institutions
Old and New Services Offered to the Public
Key Trends Affecting All Financial-Service Firms
Appendix: Career Opportunities in Financial Services
Chapter Outline
I. Introduction: Powerful Forces Reshaping the Industry
II. What Is a Bank?
A. Defined by the Functions It Serves and the Roles It Play:
B. Banks and their Principal Competitors
C. Legal Basis of a Bank
D. Defined by the Government Agency That Insures Its Deposits
III. The Financial System and Competing Financial-Service Institutions
A. Roles of financial system
1-1
, Chapter 01 - An Overview of the Changing Financial-Services Sector
B. The competitive challenge for banks
C. Leading Competitors with banks
Savings Associations
Credit Unions
Money Market Funds
Mutual Funds
Hedge Funds
Security Brokers and Dealers
Investment Banks
Finance Companies
Financial Holding Companies
Life and Property/Casualty Insurance Companies
IV. Services Banks and Many of Their Closest Competitors Offer the Public
A. Services Banks Have Offered for Centuries
1. Carrying Out Currency Exchanges
2. Discounting Commercial Notes and Making Business Loans
3. Offering Savings Deposits
4. Safekeeping of Valuables and Certification of Value
5. Supporting Government Activities with Credit
6. Offering Checking Accounts (Demand Deposits)
7. Offering Trust Services
rights protections.#### 8.2 **War and Military Interventions**Military interventions, whether for humanitarian
reasons or in response to threats, pose significant ethical and legal challenges. The question of whether military force
is justified to prevent atrocities or maintain national security is hotly debated. The legal framework governing the use
of force is established under the United Nations Charter, which permits intervention under certain conditions (e.g.,
self-defense or Security Council authorization).However, ethical dilemmas arise when military actions result in civilian
casualties or unintended consequences. For example, drone strikes, though often used to target terrorist leaders,
raise concerns about extrajudicial killings, civilian harm, and sovereignty violations. The legal justification for such
actions is often debated, and
B. Services Banks and Many of Their Financial-Service Competitors Began Offering in the
Past Cent ury
1. Granting Consumer Loans
2. Financial Advising
3. Managing Cash
4. Offering Equipment Leasing
5. Making Venture Capital Loans
6. Selling Insurance Policies
7. Selling and Managing Retirement Plans
C. Dealing in Securities:
1-2
, Chapter 01 - An Overview of the Changing Financial-Services Sector
Offering Security Brokerage and Investment Banking Services
1. Offering Security Underwriting
2. Offering Mutual Funds, Annuities, and Other Investment Products
3. Offering Merchant Banking Services
4. Offering Risk Management and Hedging Services
D. Convenience: The Sum
Total of All Banking and Financial Services
V. Key Trends Affecting All Financial-Service Firms
A. Service Proliferation
B. Rising Competition
C. Government Deregulation
D. An Increasingly Interest-Sensitive Mix of Funds
E. Technological Change and Automation
F. Consolidation and Geographic Expansion
G. Convergence
H. Globalization
VI. The Plan of This Book
VII. Summary
rights protections.#### 8.2 **War and Military Interventions**Military interventions, whether for humanitarian
reasons or in response to threats, pose significant ethical and legal challenges. The question of whether military force
is justified to prevent atrocities or maintain national security is hotly debated. The legal framework governing the use
of force is established under the United Nations Charter, which permits intervention under certain conditions (e.g.,
self-defense or Security Council authorization).However, ethical dilemmas arise when military actions result in civilian
casualties or unintended consequences. For example, drone strikes, though often used to target terrorist leaders,
raise concerns about extrajudicial killings, civilian harm, and sovereignty violations. The legal justification for such
actions is often debated, and
Concept Checks
1-1. What is a bank? How does a bank differ from most other financial-service providers?
A bank should be defined by what it does; in this case, banks are generally those financial
institutions offering the widest range of financial services. Other financial service providers
offer some of the financial services offered by a bank, but not all of them within one institution.
1-3
, Chapter 01 - An Overview of the Changing Financial-Services Sector
1-2. Under U.S. law what must a corporation do to qualify and be regulated as a commercial
bank?
rights protections.#### 8.2 **War and Military Interventions**Military interventions, whether for humanitarian
reasons or in response to threats, pose significant ethical and legal challenges. The question of whether military force
is justified to prevent atrocities or maintain national security is hotly debated. The legal framework governing the use
of force is established under the United Nations Charter, which permits intervention under certain conditions (e.g.,
self-defense or Security Council authorization).However, ethical dilemmas arise when military actions result in civilian
casualties or unintended consequences. For example, drone strikes, though often used to target terrorist leaders,
raise concerns about extrajudicial killings, civilian harm, and sovereignty violations. The legal justification for such
actions is often debated, and
Under U.S. law, commercial banks must offer two essential services to qualify as banks for
purposes of regulation and taxation, demand (checkable) deposits and commercial loans. More
recently, Congress defined a bank as any institution that could qualify for deposit insurance
administered by the FDIC.
1-3. Why are some banks reaching out to become one-stop financial - service
conglomerates? Is this a good idea, in your opinion?
There are two reasons that banks are increasingly becoming one-stop financial service
conglomerates. The first reason is the increased competition from other types of financial
institutions and the erosion of banks’ traditional service areas. The second reason is the
Financial Services Modernization Act which has allowed banks to expand their role to be full
service providers.
1-4. Which businesses are banking’s closest and toughest competitors? What services do they
offer that compete directly with banks’ services?
Among a bank’s closest competitors are savings associations, credit unions, money market
funds, mutual funds, hedge funds, security brokers and dealers, investment banks, finance
companies, financial holding companies, and life and property-casualty insurance companies.
All of these financial service providers are converging and embracing each other’s innovations.
The Financial Services Modernization Act has allowed many of these financial service providers
to offer the public one-stop shopping for financial services.
1-5. What is happening to banking’s share of the financial marketplace and why? What kind
of banking and financial system do you foresee for the future if present trends
continue?
The Financial Services Modernization Act of 1999 allowed many of the banks’ closest
1-4
