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Introduction to Banking: How Banks Work & Make Money Part 1 | CFI Course
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Introduction to Banking: How Banks Work & Make Money Part 1 | CFI Course

Introduction to Banking Course

Overview of the Course

  • Lisa Dorian introduces herself as the Managing Director and Chief Risk Officer at CFI, outlining her role in guiding participants through the financial services industry.
  • The course aims to educate on key players in the financial services sector, their functions, target customers, and revenue generation methods.
  • Participants will learn about performance measures used by financial institutions and explore various career roles within the industry.
  • The course includes video lectures, interactive exercises, and concludes with a qualified assessment to test knowledge gained.

Types of Financial Institutions

  • Major categories include central banks, retail banks, commercial banks, and investment banks. Each serves distinct purposes within the economy.

Central Banks

  • Central banks manage all banking operations in a country and set monetary policy; examples include the Federal Reserve (USA), Bank of England (UK), and Bank of Canada.

Retail Banks

  • Retail banks cater to individual consumers offering products like checking accounts, savings accounts, consumer loans, mortgages, and credit cards.

Commercial Banks

  • Commercial banks serve businesses of all sizes with deposit products and credit-related services while also providing trade finance and foreign exchange solutions.

Investment Banks

  • Unlike retail or commercial banks, investment banks operate in capital markets assisting clients with securities transactions and research analysis for large corporations.

Organizational Structures of Financial Institutions

  • Common organizational types discussed include universal banks, large banks without investment banking services, community banks focused on local needs, online banks, credit unions, building societies, and savings & loan associations.

Universal Banks

  • Universal banks offer a full range of banking services including retail banking, commercial banking, and investment banking; notable examples are Citigroup (US), HSBC (UK), Deutsche Bank (Europe).

Large Banks

  • Large or big banks focus primarily on retail and commercial banking without investment services; they often have international reach but maintain strong home market operations. Examples include Wells Fargo (US), Lloyd's Bank (UK).

Investment Banks Special Mention

  • Investment banks are unique entities that facilitate access to capital markets for clients seeking growth opportunities; they typically operate internationally from major financial centers like New York or London.

Community Banks

  • Community banks prioritize individual consumers and small businesses within specific regions; there are over 18k such institutions in the US focusing on traditional lending models tailored to local needs.

Community and Alternative Banking Models

Overview of Community Banks

  • Community banks are typically established by local community members who pool their resources to create a self-help group, lending capital to each other.
  • In Nigeria, for instance, community banks operate under the Credit Development Division aimed at making credit accessible in rural areas, primarily targeting farmers to enhance productivity.

Digital and Online Banking

  • Online banks, or digital banks, provide similar services as traditional retail banks but operate exclusively through online platforms without physical branches.
  • Notable examples of digital banks include Digibank (India), Hello Bank (Europe), and Ali Bank (USA). Mashrek Neo from the UAE is highlighted for its diverse offerings including loans and investment capabilities.

Credit Unions vs. Community Banks

  • Credit unions share similarities with community banks but differ in that they serve specific demographics and are member-owned rather than customer-based.
  • Membership in credit unions often requires purchasing a nominal share and meeting certain eligibility criteria based on geography or profession.

Building Societies and Savings Associations

  • Building societies function similarly to credit unions but are primarily found in the UK and Australia, focusing on home mortgages while also offering retail banking products.
  • Savings and Loan associations (or Mutual Savings Banks), mainly located in the US, allow customers to be members with voting rights; they can also be structured as joint stock companies.

Distinctions Among Financial Institutions

  • Unlike other financial institutions, Savings and Loans Associations may operate as joint stock companies where shareholders can split profits and liabilities while being publicly traded.
Video description

Part 1 | Course Name How Do Banks Work? Learn the Essentials of Banking & Finance! Enjoying this lesson? Get full access to the complete course—plus interactive exercises, exclusive resources, and certification—when you join Corporate Finance Institute. Ever wondered how banks operate, generate revenue, and manage risk? Whether you’re an aspiring finance professional, banker, or investor, this course will give you a solid foundation in banking principles. What You’ll Learn: ✅ The role of banks in the global financial system ✅ How banks generate revenue & manage financial risk ✅ The difference between retail, commercial, and investment banking ✅ Key banking regulations & risk management strategies ✅ How interest rates, deposits & lending work in practice Why Learn with CFI? CFI is trusted by top financial institutions worldwide, including Goldman Sachs, CitiBank, and Morgan Stanley. Gain practical banking knowledge and prepare for a career in finance or banking! Enroll in the full course now: https://cfi.to/uihso Subscribe for expert finance training 🔔 #Banking #FinanceCareers #CorporateFinance #RetailBanking #InvestmentBanking #CFI