This document discusses the diversity of banking institutions, including commercial banks, central banks, and specialized banks. It provides details on the key characteristics and functions of each type of bank. Commercial banks accept deposits and make loans to be profitable. Central banks direct monetary policy, regulate other banks, and act on behalf of the government. Specialized banks focus on specific economic sectors like agriculture, real estate, or industry through long-term financing and direct investment. Together these different bank types work to support economic development through the provision of various financial services.

1. Lec 5
Diversity of forms-The Banking
sector.

2. Content
1-commercial bank
2- central bank
3-specialiest bank

3. Introduction
In the last two decades of the 20th century and the beginning of the
21st century the business institutions in general and the
commercial banks in particular have faced a big challenges.
These periods were characterized by the increase in intense
competition and the amount of the direct and indirect governmental
intervention as well as the big technological advance in the
electronic calculators. The economic development in the state, to a
large extent, depends on the capability of the banks'
administrations facing the present time challenges.
Banks' administration, in this method, is how to run the commercial
banks offering its financial services of accepting all types of
deposits and granting loans to the public of different sects in order
to gain profit.

4. 1- Commercial Banks:
It is one of the financial institutions based on accepting deposits
and granting credit. The commercial bank in this form is considered
as a medium between those who have surplus funds and those
who need these funds. The commercial banks, so-called "Deposits'
Banks", could be defined as (a non-special credit institutions,
primarily accept the individuals' retractable upon request or a short-
term deposits. This definition distinctively determines the
commercial banks' characteristics from other banks.
1. They are non-special banks.
2. They accept the retractable upon request deposits.
3. Unlike the non-commercial banks, they exclusively create
money.
4. It is the medium between the lenders and borrowers.

5. The commercial banks have three distinctive
features regarding the profitability, liquidity and
safety:
A Profitability:
The commercial Banks are profitable financial
institutions. In other word, its main revenues are the
profits gained from gathering deposits and granting
loans. The difference between the generated profits
from deposits' investment and its paid interests
represents the revenues of the commercial banks.
The profitability is based on:
1. Returns resulting from reliance on the third-party
funds in financing the investment specially the stock
(shares and bonds).
2. But if the commercial bank relied on the property
funds in financing its investments, the inevitable result
would be the forever closure.

6. B Liquidity:
The retractable upon request deposits has the loan share
of the commercial bank's financial resources and the bank
must be ready to meet them at any time. This is the most
important trait of the commercial banks. At a time when the
other financial institutions could postpone the paying of
what it dues,
a mere rumor about the bank's insufficient liquidity could
undermine the depositors' confidence leading them
unexpectedly to withdraw their deposits making the bank
vulnerable to bankruptcy.
.

7. C Safety:
The commercial bank's capital is characterized by
smallness. It is not more than 10% of the net
assets. This means that the individual's deposits
represent 90% of the total funds resources. It is
clearly evident that the commercial bank uses the
third-party funds to finances its activities. What
distinguishes the commercial banks from other
banks is that it could turn the ( credits ) the
deposits into (assets).
From the above-mentioned we realize:
1. The smallness of the depositors' safety
edge.
2. The bigness of the financiers or the bank's

8. Three goals to be realized by the bank's administration:
 Firstly: achieving maximum profitability: by increasing
revenues as long as the bulk of the costs is fixed costs
while any revenues reduction leads to profits reduction as
well and vice-versa.
 -----
 Secondly: avoiding acute shortage of liquidity as it
undermines the depositors' confidence in the bank. There
is a direct correlation between the increase or decrease of
liquidity and the depositors' confidence.
 Thirdly: achieving maximum safety for the depositors.
 The three goals (profitability, liquidity and safety) have an
impact on the shaping of the basic policies governing the
commercial banks' activities. They are: attracting deposits,
granting loans and investment in stock.
 The diagram below represents the most important aspects
of the commercial bank's basic activity:

10. The figure shows that the role of the commercial banks
is basically limited to accepting whatever form of
deposits (retractable, for a period of time, saving
…etc) then employing these deposits in loaning
operations (granting loans) and investment. The figure
also shows that the liquidity is achieved by accepting
deposits which is employed to serve the development
projects, in other word, loans and investment
representing the bank's profitable activities.

11. 2-- The Central Bank:
It is an independent public legal personality. It
conducts the credit and banking policy and
supervising its execution. It has the right at any
time to look into the banks' folders and records in a
way that guarantees the obtaining of all the
information that help achieving its purposes.

12.  Today, the central bank conducts some or all of the
following posts:
 1. Organizing the currency issuance according to the
national economy requirements. So, the central bank is
the only institution that has the right to issue the currency.
 2. Performing the banking services demanded by the
government. It is the government agent in all its banking
transactions.
 3. Keeping the cash reserves for the commercial
banks. So it is the bank of banks.
 4. Keeping the state's reserves of the foreign cash
balances and running them on its behalf.
 5. Offering facilities for other banks and financial
institutions. It is the last resort as it is the bank of banks.
 6. Monitoring and directing the credit quantitatively and
qualitatively.

13. The central bank should have the following condition:
a. It should never accept private deposits.
b. It should never grant loans or dealing directly
with the private sectors Regarding the goals, the
central bank differs from the other banks. It might not
basically aim at gaining profits but rather achieving
national economic, monetary and financial goals.

14. bank:
No The Central Bank The Commercial Bank
1
Concerned with directing the
other banks. It is the bank of
banks and non-profitable
bank.
Aiming at gaining and
maximizing profits by
increasing the revenues.
2
There is no but one central
bank in the State
There are multiple
commercial banks in the
national economy
3
It Subjects generally to the
monetary authorities or the
supreme authorities in the
State
It subjects to the central bank
authority as it is the first
observer of the credit.
4
It rarely deals with the public
because its prime concerned
is to deal with the other
banks
It deals with the public by
accepting deposits and
granting loans. It is the
"deposits' bank".
5
The central bank's strength or
weakness relies on the extent
of independency form the
government in decision-
making.
The commercial bank's
strength or weakness relies
on the amount of deposits'
revenues because it operates
the third-party funds.

15. The central bank's domination over the banking system
could be represented as follows
The Central Bank
Special BanksInvestment BanksCommercial Banks

16. Special Banks:
They are the banks that conduct banking operations
serving a specific type of economic activity according to its
establishing decisions in which the retractable upon
request deposits are not one of its basic activities.
The above definition shows that the special banks share
the following characteristic:
1. It does not accept individuals' deposits. Instead it
relies on its own capitals and long-term accrued bonds as
well as long-term loans from the central bank and the
commercial banks.
2. The purpose of establishing the special banks
includes national and social aims. So, the State grants
them loans with special profit price through the central
bank.
3. The commercial banks' activity is not limited only to
loans granting

17. process but rather they often perform direct investment.
These include:
• Constructing new projects.
• Contribution to the projects' capitals.
• Offering technical experience and advice in its
specialization for money.
The special banks include:
• The Real Estate Bank.
• The Agricultural Bank.
• The Industrial Bank.

18. The above-mentioned banks' activities differ from
the commercial banks' activities because it
requires:
1. A long-term finance.
2. Special experiences.
3. Awareness of the operations' nature such as
agricultural, industrial and real estate activity.
4. Existence of Branches' network might be
extended to the small town in the State.