Banking Terms is a dedicated section of Studybee.Net. We intend to present to you an easy to understand definition of banking terminology and terms/ words used in everyday banking industry. Our focus is also on elucidating various segments of banking. It also includes how they work. What do we suppose banks to function. Technical terminology of banking is also explained here. Though banking is a universally applicable and relatable subject; however, our articles will include practice specifically in local context i.e. Pakistan. However, banking laws remain universal in most cases.

Understanding the Governance Structure of Pakistani Banks:

Any banking company in Pakistan is created/ governed in the light of Banking Companies Ordinance 1962 (BCO 1962). Though like any other company, it has to be registered with SECP (Securities and Exchange Commission of Pakistan) yet it must also be given operating license by State Bank of Pakistan(SBP). The bank is headed by a chairman. But it also has a board of directors. This we refer as the governance. The board of directors oversee the bank’s governance. Referring Corporate Governance, the board delegates certain powers to its committees and the CEO of the Bank but it retains the power to elect CAE, Chief Audit Executive. They do so because of regulatory and IIA standards.

What is the Role of CEO

The CEO, Chief Executive Officer, then selects a team of Management Executives to run the day to day affairs of the bank. CEO is the most powerful executive, he fills in all the key posts of a bank. Chief Audit Executive is the only exception to it. The board’s Committee oversees the selection of Audit Executive. The role of the management is to accomplish the mission and vision of the bank. To accomplish goals, they administratively divided banks into department/ groups each led by a key executive.

How many departments a bank has?

We have mentioned below the generalized types/ categories of the departments a bank:

  1. Risk Management Group
  2. Business & Sales
  3. Operations
  4. Compliance Department
  5. Treasury
  6. Trade Processing
  7. Audit & Risk Review Group
  8. General Services Department

For any entity, Operations and Sales go hand in hand. So is the case with Banking. What do banks sell? Literally speaking they don’t sell anything but they do business. In a sense, they sell their loans and market their accounts. Against those accounts, they earn service charges. Against loans, they earn markup and service charges. Their primary role remained, lending and borrowing money(mostly deposits).

Elaborating Banking Terms

In modern times, banking has evolved manifold. Today the banks provide a lot more of services besides just lending money and borrowing. We will try to cover all such topics on separate pages.

  • Banking in Modern Times

Reference & Further Reading: