English reader on

 

The complicated world of banking 

It is difficult to build up a full picture of the whole banking system 

because it is so complicated. However, if we concentrate on the idea that 

banks encourage people to leave their savings with them and then lend the 

money out again to other people, we can build up a very simple picture of 

the banking system. You will notice that an extra type of financial 

institution called a discount house is included in this diagram. Discount 

houses are different from any of the other banks because they never 

attempt to attract money from the general public. The money used for 

lending comes from the commercial banks. 

The Bank of England and the National Savings Bank, do not aim to 

make a profit from the process of borrowing money and lending it. As 

government banks, any money they can attract is in effect lent to the 

government to spend or to save as it wishes. 

In this unit, we will examine more closely the work of the three main 

banks. In addition, we will look at the work of an issuing house (merchant 

bank) which has a very special job to do in helping to keep money 

circulating around the economy.