Section I

Banks
Its Role In The Financial Life Of A Nation

2013

n consideration to definition and underlying concepts under English Common Law, Banks are typically financial institutions and intermediary that accepts deposits and uses the collected deposits to finance lending activities1 although the definition itself is elaborated for several legal sectors without an all-encompassing terminology.2 These lending activities may either be made directly through the deposits or indirectly through after the unison formation of the capital market and its usage. A bank establishes an economical connection in-between individuals with capital deficits and detriments and individuals with visible surpluses. There are segmented categories on how different banking tiers i.e. central banks and commercial banks can have an impact on financial life of a nation which is given below with a brief overview on how they could affect finance and economy.

Activities Aligned With Central Bank

Central Bank

Responsible For

Issuance Of Bank Notes Creation Of Monetary Policies Conducting Monetary Exchange Credit Allocation For National Development
Directs Toward

Monitor

Accelerates Capital Formation Monetize Economy Implements Policies Develops Industries & Sectors Creates Money Empowers Credit Regional Development

Execution

Commercial Bank

Activities Aligned With Commercial Bank

Affects

Financial & Economic

Affects

Growth/Decline
Figure: Central & Commercial Banks Impact On Finance & Economy
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1 2

See United Dominions Trust Ltd v Kirkwood, 1966, English Court of Appeal, 2 QB 431 Common law / The Anglo-Saxon legal system based on judi-cial precedents, customs and traditions. See, for example,Chovancov, Katarina: Vylenie psobnosti Arbitration Act1996 v bankovch verovch zmluvch (Excluding applicationof the Arbitration Act 1996 in bank credit agreements); publis-hed in Legal View, 86, 2003, no. 5, pp. 521-530.

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Banks
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2013

Mechanics Of Financial Development

Banks, as agents of financial development, are highly regulated in most countries due to their major involvement and influence in the financial system and the economy; the dynamics of which are yet to be determined to date.3 In the global financial arena, banks follow up and operate under the fractional reserve system. The fractional reserve system is the system where banks hold a relatively small capital reserve for withdrawal by its customers while stationing all of its profit pools for lending activities; which are its most profit making activity and the prime determinant of a banks success. Although the amount of capital in reserve is set by a certain amount i.e. the minimum capital requirements which are based on the Basel I4 under the Basel Accords, an international capital standard which all banks have to comply with.

Historic View Of The Economic Significance Of Banks

Banks were typically existent as mere concepts and ideas that were practiced in the ancient world. These concurrent and collective concepts of credit and lending evolved in the 14th century in rich cities like Florence5, Venice, San Gimignano, Rome and Forli; all of which were stationed in Italy in its renaissance era.6 The oldest existing bank today is also situated in Italy.7 In terms of economic development and the improvement of per capita lifestyle of a nation, banks, in all respect, plays a pivotal role in all its sector including the central bank portraying the authoritative financial entity of a country and commercial banks as elements of finance directly responsible for directing micro-factors that depicts and forecasts the economic trend of a given region.

Syed Sadhli Ahmed Roomy

See Epstein, G. (2006) Central Banks As Agents Of Economic Development, United Nation University, World Institute For Economic Development Research, Katajanokanlaituri 6 B, 00160 Helsinki, Finland. p.1 4 See The accord was originally meant to apply only to internationally active banks leaving national authorities the freedom to set stricter standards as they might see fit (BIS 1988, p. 2), however most countries adopted the Basel I framework for both national and international credit institutions. 5 See Hoggson, N. F. (1926) Banking Through the Ages, New York, Dodd, Mead & Company. 6 See Goldthwaite, R. A. (1995) Banks, Places and Entrepreneurs in Renaissance Florence, Aldershot, Hampshire, Great Britain, Variorum. 7 See Boland, Vincent (13/14 June 2009). "Modern dilemmas for world's oldest bank". Financial Times. p. 9.

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Banks
Its Role In The Financial Life Of A Nation
Aiming at Financial Development

2013

Financial development is a broad terminology typically meaning a welldefined, well-functioning and developed financial sector which facilitates the exchange of goods and services, incorporate effective allocation of resources and mobilization of savings and assists in the diversification of risks as relevant variables.8 Emerging economies has traditionally demonstrated embryonic financial systems which are made of subsidiaries stationed by foreign banks provisioned to pursue foreign trade financing and a very limited number of local activities apart from government banks like the central bank which is the overbearing authority.9 It is often seen that local private banks were created to fill gaps left by a highly saturated and subsidized financial sector which is an indicator of an unstable and desperate financial sector. In many countries, financing of priority sector and its subsequent economic development was triggered by selective credit policies. Avertedly, financial development in terms of promoting investment in capital formation, trade and industry; monetization of policies and credit regulatory control; and finally, influencing financial, economic, agriculture and balanced development in both sectors and sub-sectors are guiding phenomena in current banks.10 In short, banks trigger economic and financial development by,

Banking Mechanics

1. 2. 3. 4. 5. 6.

Issuance Of Bank Notes Netting & Settlement Payments Credit Intermediation Credit Quality Improvement Maturity Transformation Money Creation

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See King, Robert. G. and R. Levine (1993), Finance and Growth: Schumpeter Might Be Right, The Quarterly Journal of Economics, August, 717-737. 9 See Rajan, R.G. and L. Zingales (2003), Saving Capitalism from Capitalists, Crown Business, New York. 10 See World Bank (2006), World Development Indicators, Washington. pp 2-3.

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Banks
Its Role In The Financial Life Of A Nation

2013

Banks are considered as agents that guides financial/economic development of a nation. The term agent, in this context means that banks try to center themselves to promote development.11 The typology of banks also plays as financial indicators with two-tiered banking system i.e. central banks and commercial banks. Banks, as agents of development, serves as an agent that strove to create a context of macroeconomic stability in terms of financial stability through financial regulations and governing control. The actual aptitude of banks in the dynamics of the financial life of a nation is multifold with the specific attributes of development segregated in differential banking systems and nature of the financial institutions.12

Role Of Central Bank In The Economic Development Of A Country

From the 90s to present, theoretical frameworks and generic practices of central banking experienced a dramatic change. Best Practices are adopted by the majority of central banks operating in nations13 which is consistent of the following process-oriented factor coming as, 1. Independence Of Central Bank 2. Concentration On Inflation Combat 3. Adopting Indirect Monetary Policy Methods

The combat mechanics of central banking are currently clustered around inflation targeting and interest rates in the indirect monetary policy are shortterm as opposed to direct mechanics traditionally been used in central banking systems such like credit ceiling.14 It is a direct result of the highly notorious US debt ceiling crisis experienced in 2009 which lead banking sectors to argue neo-liberal approach to central banking in terms of packages which are highly idiosyncratic which is dramatically different from governing practices of traditionally dominant theory and practices used in central banking in both developed and developing economies.15 In the past and judging from existing data on central banking, US, England and Europe were involved in government financing, exchange rate management and strategic support to development and economic segments were done via using direct methods

Syed Sadhli Ahmed Roomy

11

See Caprio, Gerard Jr. and Patrick Honohan (2001). Monetary Policy Instruments for Developing Countries; A World Bank Symposium. Washington DC: World Bank. 12 See De Cecco, Marcello (1974). Money and Empire; The International Gold Standard, 1890-1914. Oxford: Basil Blackwell. 13 See Gerschenkron, Alexander (1962). Economic Backwardness in Historical Perspective. Cambridge MA: Harvard University Press, Belknap Press. 14 See Kindleberger, Charles (1996). World Economic Primacy, 1500-1990. Oxford: Oxford University Press. 15 See Maxfield, Sylvia (1997). Gatekeepers of Growth; The International Political Economy of Central Banking in Developing Countries. Princeton: Princeton University Press.

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Its Role In The Financial Life Of A Nation

2013

which was highly recognized as their sole determinant for existence. The newly introduced neo-liberal policy package is out of line to an arguably dynamism-resistant central banking practice done throughout history.16 Central Banks profusely influences the economic foundation of a given nation with its underlying functions.17 Major historic scholars identifies the functions that are attuned to the operant conditioning of central banks in countries which are, Unification & Issuance Of Bank Notes Acting As Governments Bank Acting As A Bank To Commercial Banks Serves As A Last Resort Lender For The Entire Financial System Implements Monetary Policies To Manage Foreign Exchange & PriceLevels Conducting Monetary Exchange To Manage Overall Level Of Economic Activity Credit Allocation In Promotion Of National Goals.

Central Banking Techniques That Influenced Financial Life

In the 1960s, central banks in different regions pursued different techniques that includes, 1. Providing capital and monetary flow to development institutions such like industrial and agricultural development banks. 2. Facilitated credit extension to development banks in addition to buying-out their securities. 3. Purchasing small segregated equities of development banks. 4. Securing a market for securities of varied development finance institutions by usage of profits from general operations of central banks. 5. Extensive usage of differential discount rates for the purpose of credit allocation for capital development prospects and projects. 6. Establishing portfolio ceilings on low-priority activities. 7. Influencing allocation of banks credits via the usage of import deposit requirements.

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16

See Woflson, Martin (1993). The Evolution of the Financial System and the Possibilities of Reform, in Gary A Dymski, Gerald Epstein and Robert Pollin (eds) Transforming the US Financial System; Equity and Efficiency for the 21st Century. Washington DC: Economic Policy Institute, pp 133-55. 17 See Mankiw, N. Gregory (2002). "Chapter 18: Money Supply and Money Demand". Macroeconomics (5th ed.). Worth. pp. 482489

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Banks
Its Role In The Financial Life Of A Nation
Linking Financial Impacts Initial Negative Impact

2013

Despite the impact on financial life, studies and perception are generalized to be negative on the techniques used to influence economic factors which lead to question the effectiveness of the techniques.18 Additionally, the perceived trade-off between the sustainability of financial and macro-economic stability and central banking policies of the given era is also considered to be a primary concern for nations.19

Long-Term Positive Impact

Although a studies are garnered with mixed and, on a major basis, negative aspects; similar techniques and central banks policy for industrial development assumed a contributory posture in ascertaining the rise of a multitude of successful developing countries in the late 20th century. It was further supported by Alice Amsdens report in defining the role of medium and long-term financing which were later supported by central banking systems and existing mechanics to serve as key factors.20 The developing countries, as per observational statistics, experienced an enormous growth in the post-World War II era and industrialized rapidly while incorporating midlevel and high-end technological prowess. It also exhibited a visible improvement in the condition of per capita lifestyle, economic stability, stockprice improvements and incremental investment rates due to extensive attraction of FDIs which were directly linked and attributed to central banking policies in studies conducted in the late 90s.21

Role Of Commercial Bank In The Economic Development Of A Country

Differentiating from an authoritative banking entity and control mechanism for the government like Central Banks, commercial banks also plays a significant role in dictating and directly affecting financial conditions of a given country. Commercial banks cannot only be considered as meager dealers of monetary origin but also the prime agents of financial development.

Syed Sadhli Ahmed Roomy

18

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See Brimmer, Andrew F. (1971). Central Banking and Economic Development: The Record of Innovation, Journal of Money, Credit and Banking, 3(4): 780-92. 19 See Sylla, Richard, Richard Tilly and Gabriel Tortella (1999). The State, the Financial System and Economic Modernization. Cambridge: Cambridge University Press. 20 See Amsden, Alice H. (2001). The Rise of The Rest; Challenges to the West from Late-

Industrializing Economies. Oxford: Oxford University Press.

21

See Knodell, Jane. (2004). Central Banking in Early Industrialization, in Marc Lavoie and Mario Seccareccia, Central Banking in the Modern World; Alternative Perspectives. Northampton, MA: Edward Elgar, pp. 262-81.

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Banks
Its Role In The Financial Life Of A Nation

2013

Their function specifically promotes them to be the reservoirs of resources which is a key necessity for economic development of a nation. It is to be mentioned that as an individual unit, a commercial bank has very lesser impact on finance and economy but on a collective whole or as a banking system which operates within a regional boundary; commercial banks tend to significantly impact economical and financial presets.22 From existing literature, industrial revolutions in currently developed countries were triggered due to potent commercial banking systems. In consideration of developing countries, commercial banks are considered as a foundation for economic development and is said to be so due to their contribution in regards to certain factors.23

Financial Development Factors Of Commercial Banks Accelerating Rate Of Capital Formation

Capital formation is considered to be the most significant factor in economic development. The underlying problem for developing and underdeveloped nations is that most of the third world countries are portrayed by a slower paced rate of capital formation in contrast to developed nations.24 In disposition to capital formation, commercial banks serve the following functions, Encouraging Per Capita Savings Mobilizing Idle Resources For Production Diverting Resources From Consumption To Capital Formation

Creates Provisions Of Finance & Credit

As a very important source of credit for commerce i.e. industry and trade, commercial banks serves as a pillar for development. Instrumental to commerce, there are segregated elements that are both internal (nation-wide) trade scenarios in addition to external (foreign trade) scenarios in terms of which commercial banks contribute in procuring huge remittance.25 Additionally, credit repayment can be made in a number of methods that are highly feasible to customers hence such the ease of access to opportunities via granting credits are made possible by commercial banks.
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22 23

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See Chang, Ha-Joon and Ilene Grabel (2004). Reclaiming Development. London: Zed Press. See Worsley P. (1984), The Three Worlds: Culture and World Development. Weidenfeld en Nicolson, London. 24 See Epstein, Gerald (2003). Alternatives to Inflation Targeting Monetary Policy for Stable and Egalitarian Growth: A Brief Research Summary, www.umass.edu/peri. 25 See Kindleberger, Charles (1993). A Financial History of Western Europe, (2nd ed.). Oxford: Oxford University Press.

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Banks
Its Role In The Financial Life Of A Nation
Monetizes Economy

2013

A poor financial and economic condition is interrelated and characterized by the presence of largely non-monetized sectors of a nation. These sectors serve as significant barriers to development in terms of both finance and economy of a given nation. Commercial banks, in this regard, are highly involved in distribution of branches in operant positioning within nations hence such it enables backward regions to enjoy sound development via integrating its policies and promoting monetization process in the sub-economic levels.26 In short, commercial banks are coverts debts into money via the implementation of the given process.

Inducing Innovation
Innovations are largely funded by bank credits provided by commercial banks in developed countries whereas investment is profusely motivated.27 Enterprise in developing countries are is attributive to high risk for which entrepreneurs are demotivated to pursue innovations and invest in newer ventures due to lacking of large fund since innovation itself is characterized as expensive. To combat this dilemma, commercial banks provides the finance in terms of loans which allows prospective entrepreneurs to step-up and engages in innovational activities through investment which ultimately results in the adoption of methods that increase productivity and capacity in both economic and financial settings.28

Implements Monetary Policy

An established and effective monetary policy is necessary to govern development. Although the creation of monetary policies are limited to central banks leaving commercial banks with lesser power in the creation and alteration of monetary policies.29 However, the practice of monetary policies differs in respect to different nations meaning that there is no uniform evidence that the creation of monetary policy is absolute to central banking systems. In generic terms, the created monetary policies are implemented at

Syed Sadhli Ahmed Roomy

26

See US Congress, Joint Economic Committee (1981). Monetary Policy, Selective Credit Policy and Industrial Policy in France, Britain, West Germany and Sweden. Washington DC: Government Printing Office. 27 See Akhavein, J.D., A.N. Berger and D.B. Humphrey (1997), The effects of megamergers on efficiency an prices: evidence from a bank profit function, Review of Industrial Organization 12, 95 139. 28 See Benston, G.J., G.A. Hanweck, and D.B. Humphrey (1982), Scale economies in banking: a restructuring and reassessment, Journal of Money, Credit and Banking (14), 435-450. 29 See Berger, A. N., D. Hancock, and D.B. Humphrey (1993), Bank efficiency derived from the profit function, Journal of Banking and Finance 17, 317 -348.

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Its Role In The Financial Life Of A Nation

2013

agency-levels by commercial banks hence it can be said that commercial banks directly interact with population elements30 to ensure the effectiveness and smooth integration of existing policies which, in turn, directly affects the financial formation and structure of a nation.

Encouraging Rising Industries

Commercial banks influence star-pattern industries to involve in high productivity practices and technology. For example, the RMG sector of Bangladesh is highly supported by the entire financial system of high-end commercial banks. Although industry encouragement may exhibit immense discrimination which is particularly in due to the industry attractiveness matrix31 that banks tend to analyze in the larger context, the industries itself depicts the generic financial cycle that is present in every industry ultimately affecting GDP growth of a country. Commercial banks, in the given concept, provides financial assistance to the right manner of industries to for organizations to secure necessary material, machinery or other input devices which influences the nature and volume of the output.32 In a strictly humanistic viewpoint, a developed industry largely affects the human capital that are involved within its auspices hence such commercial banks are not only capable to encourage industries but also raise the financial standard of its underlying human elements.33

Ascertaining Agricultural Development

Complementing the previous factor, agriculture, as a sector, is key to a nations development or at least to those particular nations who are highly involved in agricultural fields and are historically potent in the given sector. Commercial banks tends to the micro-factors that are involved in this sector via targeting the population which largely resides in the rural areas of a nation or towards existing SMEs involved in agriculture.34 A 360 degree development can only be achieved via priming development towards every sector which commercial banks acknowledges and facilitates. Banks in
30

Syed Sadhli Ahmed Roomy

See Yeager, Leland B. (1976). International Monetary Relations; Theory, History and Policy , (2nd ed.). New York: Harper & Row. 31 See Stiglitz, Joseph (1990). Peer Monitoring and Credit Markets World Bank Economic Review 4 (3). 351-366. 32 See The Economist (2007). Economics Focus: Small Loans and Big Ambitions, The Economist, March 17, 2007. 33 See Gine, Xavier, and Dean Karlan (2008). Peer Monitoring and Enforecement: Long Term Evidence from Microcredit Lending Groups with and without Group Liability. January, Yale University Department of Economics, working paper. 34 See Conning, Jonathan and Christopher Udry (2007). Rural Financial Markets in Developing Countries. Chapter 15 of Handbook of Agricultural Economics, Vol. 3. Robert Evenson, Prabhu Pingali, and T. Paul Schultz (ed.). Amsterdam: Elsevier.

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Its Role In The Financial Life Of A Nation

2013

underdeveloped countries and/or countries that have yet to realize efficient frontier35 in agriculture are not targeted by commercial banks in terms of agricultural development but rather the development of trade and commerce. In countries where agriculture is highly significant, commercial banks are observed to garner financial support in the form of credit to develop and modernize existing practices which leads to higher productivity and creation of employment and enterprise.

Regional Development
Development in too many fronts may even result in disruption of the financial system and shortages in the capital reserve.36 In addressing this issue, commercial banks tend to distribute the risks through its branches and focuses on regional development. Commercial banks transfer surpluses from developed and proficient regions to those that are lesser in development portrayed by a visible scarcity of resources.37 The reallocation of resources in the given context leads to segregated economic development of niche sectors of a nation although the practice of regional development is rare and are seldom seen in a few particular developing countries.

Export Promotion Cells

Established export promotion cells are a regularly practiced function of commercial banks. Contemplating on what an export promotion cell is, it serves as information hubs for prospective importer/exporter to advise them on trading factors and parties.38 This information is largely clustered around trade and economic condition of a nation and is supplied to customers both in and out of a nation. Export cells, although a potential tool to enable high growth, are also tools that are inherently indirect in affecting nationwide growth capacity as it only manages to influence individuals to engage in trade and commerce. Traditionally, export cells were made to address exporters but as of the present, importers are also allowed to enjoy the facilities of the cells. In

Syed Sadhli Ahmed Roomy

35

See Glaeser, Edward and Andrei Shleifer (2001). Not-for-profit Enterpreneurs Journal of Public Economics 81 (1): 99-115. 36 See Johnston, Don and Jonathan Morduch (2008). The Unbanked: Evidence from Indonesia. Presentation at World Bank Economic Review Symposium, March 15-16. 37 See World Bank (2007). Finance for All? Policies and Pitfalls in Expanding Access. World Bank Policy Research Report, August. Washington, DC: World Bank. 38 See James K. Jackson, Export-Import Bank: Background and Legislative Issues, Congressional Research Service Report for Congress 98-568E, January 19, 2001, p. 5.

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Banks
Its Role In The Financial Life Of A Nation

2013

this context, via indirect influence, commercial banks contribute to both a positive and negative impact on the process of economic development.39

Fulfilling Socio-Economic Objectives

In recent years, commercial banks, particularly in developing countries, have been called upon to help achieve certain socio-economic objectives laid down by the state.40 For example, nationalized bank in India have framed special innovative schemes of credit to help small agriculturists, self-employed persons and retailers through loans and advances at concessional rates of interest. Banking is thus used to achieve the national policy objectives of reducing inequalities of income and wealth, removal of poverty and elimination of unemployment in the country.41

Financing in the wrong and predictably inefficient segments of a nation can lead to misallocation of resources and credit rationing.42 Paired with the forecast errors and inefficient frontiers, banks are often characterized with inadequate banking supervision at the peak administrative levels and policy determination leading it to portray non-performing loans and undercapitalized banks.

In the event of economic deterioration, banks also plays a pivotal role as is gathered from existing statistics from recessionary periods and, in rare cases, full-fledged depression resulting in higher unemployment, turnover, fall of stock prices, unfavorable interest rates and/or uncontrollable economic inflation and deflation although all these negative impacts are specific to regions on which banking systems are similar and are further influenced by political and other unforeseen variables.

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39

See Lester B. Pearson, Partners in Development: Report of the Commission on International Development (NewYork: Praeger, 1969), quoted in Patricia Adams, Odious Debts (Toronto: Earthscan, 1991), pp. 845. 40 See Zysman, John (1983). Governments, Markets and Growth. Ithaca: Cornell University Press. 41 See Microbanking Bulletin (2005). Trend Lines, Issue 10, No. 5, March. 42 See Levine, R. and S. Zervous (1998), Stock Markets, Banks and Economic Growth, American Economic Review, Vol.88, pp 537-58.

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Section I

Banks
Its Role In The Financial Life Of A Nation

2013

Although banks are portrayed as technical tools to the government which engages in the elaborate maintenance of finance and economy in macro, meso and micro level factors, banks, in itself, is a financial institution that are largely for-profit in nature. In short, rather than aiming at continuous development, banks play a cameo role in finance and development with their own agenda being the increment of profits in a banking business. Newer forms of banks have risen recently that actively opposes this concept with the origination of community development banks and microcredit systems.

Community Development Banks: Aiming At Social Development

Community Development Banks or CDBs are largely considered to be a new form of banks that are profusely aligned with the social business metaphor given by Professor Yunus and participates in the empowerment of the society.43 It affects the financial and corporal economic trends of a nation but the generic impact is considered to be highly lesser and is only visible upon a long operational period. Unlike general commercial banks, CDBs does not foregoes through all of the policies given by central banks as their agenda altogether is different than that of for-profit banks.44 Hence, rather than financial/economic development, banks (general terminology) also focuses on improvement of lifestyle and social problem alleviation like poverty removal and women empowerment which has no remote connectivity to monetary policy implementation but rather is closely linked with function of credits and interest rates.

Uncontrollable External Factors: Political, Legal & Cultural

An additional concern is that banks are assumed to have little or no control over economy rather than being a meager influencing factor. Actual development is hindered by external factors specific to a nation such like political complexities, legal regulations and restrictions in addition to cultural dimensions unique to each nation.45 These factors are highly relevant in discerning the developmental capabilities and capacities in the overall economic settings in the event that the external environment is strictly negative in nature hence the actual effect of banks in national development falls largely in question.
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43

See Yunus, Muhammed. 2007. Remarks by Muhammad Yunus, Managing Director, Grameen Bank. Microcredit Summit E-News, Volume 5, No. 1, July 2007. 44 See Rutherford, Stuart (2006). Uses and users of MFI loans in Bangladesh, MicroSave Briefing Notes on Grameen II, Number 7. 45 See Connie Bruck, Millions for Millions, The New Yorker, October 30, 2006.

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Section I

Banks
Its Role In The Financial Life Of A Nation

2013

Although banks are portrayed as technical tools to the government which engages in the elaborate maintenance of cash creation, inflow and quality of credit improvement, its presence has a far deeper meaning in the contextual basis of a country. In terms of the general hypothesis of how banks contributes to the financial life of a nation, it can be safely assumed that the evolution of banks from its primordial functions to the present day is strictly due to the emerging needs and dynamics of humanity so as to serve economical and societal needs in order to garner profits in general.

Banks, as a financial institution and intermediary, has to fulfill policies that directly affects economic growth and underlines a stream of improvement in the financial life of a nation. Conditional to the improvement of financial life, the factor itself is consisted with several sub-factors which are highly difficult to determine and may even result in pseudo butterfly effects. Reaching for a more stable and affirmative financial condition of a country in the age of globalization, banks faces significant difficulties from foreign policies, internal political conflicts, unfavorable cultural dimensions that are different in each subsequent nation and finally, regulatory control of the law that banks have to abide by that may have the potential to restrict banks development potential towards the economy as well as a safeguard to disable banks from economic disruption. There are numerous examples of how banks have triggered economic depression via their policies and practices alone whereas those examples were out-classed by how banks saved volatile economies of underdeveloped, developing and developed nations from the brink of financial extinction. All in all, banks have an enormous impact on the financial life of a nation and has far reaching effect on other financial systems external to any specific country.

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