Guide to Analysing Companies

1 Collecting deposits from savers and paying interest on
these deposits (the cost of having the use of money over
time).
2 Granting loans to borrowers who seem likely to make good
use of them. This is what banks do to earn enough interest to
pay their depositors.
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BANK
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3 Money transmission, enabling customers of one bank to trans-
fer funds directly from their account to somebody else at the
same or another bank. This service is provided by means of
cheques, standing orders, direct debits and so on.
4 Advisory services, in particular, advising companies on how
and where to raise new capital and then arranging for the
new capital to be raised.
5 Lending their good name to help customers that they trust.
This is fundamental to trade finance. An exporter gives credit
to an importer because the importer’s bank gives its word to the
exporter’s bank that payment will be forthcoming. The two
banks trust each other; if the importer and exporter did too, they
would not need the banks.
6 Providing services to other banks in order, for example, for
them to clear funds between themselves. This is a principal
function of central banks.
The first three functions are fundamental to the business of
commercial banks; the fourth and fifth are fee-earning services
that are at the heart of the business of investment banks.
A bank is a place that will lend you money 
if you can prove you don’t need it.
Bob Hope
Banker’s acceptance
See acceptance.
Banker’s draft
An order from a buyer or importer to its bank instructing it to
make a payment to the seller or exporter’s bank. The draft is sent
to the seller, which presents it to its bank for payment. The seller’s
bank in turn presents it to the buyer’s bank for reimbursement.