Banking is the ultimate expression of using other people's money to produce profitable transactions. Banks use depositor's checking and savings accounts to fund loans made at a negotiated interest rate. The depositor funds are paid a certain interest rate and the loans are charged a higher interest rate. The difference between the two is the bank's profit. Banks also charge fees for certain services and have other profit-generating efforts but in the end the bank does it all with money is does not own and holds in trust for the many people doing their daily banking with the institution.
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Loaning money responsibly and prudently is one of a bank's foremost endeavours. Successful loan money based on established criteria and will only waver when extraordinary circumstances warrant making an exception.As with every banking function, the bank is using other people's money and must be perform with prudence and scepticism whenever considering lending for whatever reason. Customers with established track records and long-standing relations with the bank may be able to circumvent lending processes to some degree but this only comes after years of successful banking transactions.Banks must also be prudent in regards to deposits. Paying dividends on savings or checking must be a carefully balanced business decision. Payments must be kept competitive to keep a depositor's business but extravagance can lead to diminished bank profits. Successful banks always find the right balance.
Banking is a business and as such must always search for new customers and expand market share. A successful bank will market services, convenience and financial advantages. Banks resting on decades-old laurels will see an ageing customer base not invigorated with new customers and more importantly new money.Bank marketing efforts is regulated by federal and state agencies and monitors just what a bank can and cannot say. A successful bank, however, will work within those regulations to see deposits, reputable lending and market share constantly increase.
Banking practices are industry standards such as how the bank handles cash, deposits, withdrawals, payments and financial records. The successful bank will always have statements accurate to the penny and on schedule. Although no bank is perfect, the successful bank has a reputation for fewer mistakes and satisfied customers. Vigilant management, conscientious employees and always improving in areas of technology and customer service keeps successful banks in the lead.
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