If asked to define a bank, many of us will stick with the usual definition that describes a bank as a place where we store our money and seek loans. Of course, one can define a bank in such a way. However, there is more to a bank than that terse definition. In fact, there are lots of fun stuff regarding a bank which I bet you want to know.
Some common fun facts about banks include:
- The United States is the country with the most bank
- Banks receive customer’s deposits and lend them out to make a profit
- Industrial and Commercial Bank of China is the largest and wealthiest bank in the world
- China, the U.K., and the United States have the biggest banks in the world
A bank is one of the most common and probably loved financial institutions worldwide. Why? Because they help safeguard our hard-earned money. Also, these financial intuition offer loans to individuals who need money for urgent expenses. In this article, I have taken my time to sift through some fun facts about banks.
Fun Facts About Banks
You have $2,000 you don’t need for, say, a few months and want to earn income from the money until you need it. Or you want to buy a nice Mercedes-Benz-A-Class sedan and need to borrow $35,000 and pay it back over 10 years. It will be hard, if not impossible, for an individual acting alone to locate either a potential borrower who needs exactly $2,000 for a few months or a lender who can spare $35,000 for 10 years.
That is where a bank comes in.
What Is a Bank?
A bank is a financial institution that deals in money and its substitutes and offers other financial services to the general public. Although banks do many things, their main role is to receive funds, also known as deposits, from those with money, pool them, and offer them to those in need (in the form of loans).
Banks act as intermediaries between depositors (who indirectly lend money to the bank) and borrowers (to whom the bank lends money). The amount banks pay for deposits and the profit they realize on their loans are both regarded as interest.
Depositors can be financial and nonfinancial companies, individuals and households, or even national and local governments. Borrowers are the same as well. Deposits can be available on-demand (a checking account, for instance) or with a little limitation (like savings and time deposits).
How Do Banks Work?
Banks play a key role in our economy. The main function of banks is to put customers’ money to use by lending it out to those in need of it. These people use it to purchase homes, businesses, send their kids to school, buy cars, etc.
When you stash your money in the bank, it goes into a big pool of money with everyone else’s, and your account is credited with how much you deposited. When you write checks or initiate withdrawals, that amount is removed from your account balance. What about the interest you earn on your balance? Of course, it is added to your account as well.
Banks make money via several means. They also create money. Banks create money in the economy by offering loans. The amount of money that banks can offer as loans is directed affected by the reserve requirement put in place by the Federal Reserve. The reserve requirement is currently 3% to 10% of a bank’s overall deposit. This amount can be retained either in cash on hand or in the bank’s reserve account with the Fed. To understand how this affects the economy, think about it this way.
When a bank receives a deposit of $200, assuming a reserve requirement of 10%, the bank can then lend out $180. That $180 is integrated into the economy, buying goods or services, and often ends up deposited in another bank. That bank can then lend out $161 of that $180 deposit, and that $161 goes into the economy to buy goods or services and eventually is deposited into another bank that ends up lending out a portion of it.
Characteristics of a Bank:
- Deal in money
A bank is a financial establishment that deals with other individuals money, i.e. money received from depositors.
- Individual/ Firm/ Company
A bank may be an individual, firm or company. A banking company means a company in the banking business.
- Accepting deposits
A bank accepts money from individuals in the form of deposits which are usually repayable on demand or after the expiry date of a fixed period. It ensures that customers’ deposits are safe. It also acts as a custodian of funds of its customers.
- Giving loans
A bank receives deposits from customers and lends them out in the form of loans to those who need them urgently.
- Payment and Withdrawal
A bank offers easy payment and withdrawal facilities to its account holders in the form of drafts and checks. It also brings bank money into circulation. Of course, this money is often in the form of checks, drafts, and so on.
That said, let’s look at some fun facts about banks.
Banks – Fun Facts:
- The first attempt at Central Banking was in 1791-1811
- 17.1 trillion In deposits are held by banks in the U.S.
- Banca Monte Dei Paschi di Siena is the oldest active bank globally. It opened in 1472 in the city of Siena, Italy.
- According to The Guinness Book of World Records, the largest bank robbery was the mass exportation of goods from the Reichsbank of Germany in 1945.
- By the year 1907, the United States banking system was deemed the largest globally.
- Banks accept deposits to lend them out for a profit.
- KFW development bank in Germany is the most secured bank in the world
- JPMorgan Chase & Co is considered the strongest bank in the U.S.
- Industrial and Commercial Bank of China is the largest and wealthiest bank globally.
- The U.S. has the most banks ( 4,344), followed by Russia and the United Kingdom.
- Bank branches may vanish by 2034 if current footprint reduction trend doesn’t end.