Topic: Banking; an ethical dilemma?
Name: Kan Shen
ID number: u1368086
Module: Introduction to financial services
Module code: BFE0012
Tutor: Shabbir Dastgir and David Pearson
Date: 11 March, 2014
Word count: 2300
With the massive development of modern society, people’s income statement has become better and better. The bank has played the important role in many different kinds of areas such as loan contracts, interest and reserves as well. Bank has become more and more significant in people’s life and no one can live without it. Due to the significant status the banks have, the question has come out that does any bank have the ethical dilemma and how ethical have recent banking practices been. In this assignment, the main target is to answer the question and making the analysis and discussion in the same time, including the definition of the bank, what kind of role the bank plays in the society, some typical examples, which are deeply associated with the modern society and the discussion of the examples. In the same time, the fractional reserves as well as maturity transformation are analyzed and discussed. Through the discussion of these two parts, the result can be got that banking system is ethical and positive to the modern society.
What is a bank and the role of bank
As is known to us all, the banking system still constitutes the largest part of the financial system in countries and plays the important role in the whole world in the same time, especially in some developing countries or markets such as China. ‘Banks are the major type of deposit-taking institution, they make their living predominantly by taking deposits which represent their liabilities and loaning these funds to borrowers which represent their assets’ (Pilbeam, 1998). The banks loan out the money in a higher interest rate to make the profit and sometimes some kinds of products are also seemed as the other way to get the benefits such as credit card facilities, the charge fee about the management of the bank account, insurance products and exchange service as well (Pilbeam, 1998). Banks play the important role in economy that it can encourage the growth of economy. According to Gobat (2014), the one of the most important roles of banks is that banks can match up creditors as well as borrowers. One reason why banks are essential to the society is that money could be created by the banks and it makes the great contribution to the international payment system. The individuals and governments need to find a place where can help them to keep their money or funds safety. The debit card or credit card has played the important role, which can make the transaction very fast and easy because each person such as young and old people has the right to use it with the different pin and that is the reason why it is safety. As a result, the economy grows obviously (Gobat, 2014). Money is the core of each bank. Banks can not be operated without enough money. Thus,...