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"Are banks losing their traditional role?" - Essay Example
Finance & Accounting
Pages 8 (2008 words)
Bank’s role Traditionally banks have played a crucial role in financial systems through playing an intermediary role in financial markets. Banks are considered to be asset transformers. They have created assets with one set of characteristics and accepted deposits with the other…
However, over the last few years, banking has changed radically and is expected to continue changing in a foreseeable future. The purpose of this essay is to discuss the principal functions of banks, the emerging challenges and the impact of market and global dynamism on the future of banks and banking institutions. The types of institutions performing banking business have been changing. Banks seem to be foregoing their traditional role. In many countries, the income coming off-balance sheet exceeds the income coming from the traditional intermediary roles in finances. Banks have become financial services organizations. The actual role of banks is increasingly becoming ambiguous since it is no longer clear what banks are or the details of the businesses they conduct. The actual definition of a bank seems to be missing. This has caused banks to be under intensive regulations compared to many financial institutions. Banks the world over are experiencing formidable challenges. Banking institutions have been losing their past monopolies and perceived comparative advantages. These attributes have underpinned the dominant positions taken by the banks in the financial systems. Banks are increasingly facing stiff competition from potential or actual suppliers of banking services (Fredrick 2005). ...
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