Banks safeguard money and provide loans, credit, and payment services
such as checking accounts, debit cards, and cashier's checks. Banks also
may offer investment and insurance products. As a variety of models for
cooperation and integration among finance industries have emerged, some
of the traditional distinctions between banks, insurance companies, and
securities firms have diminished. In spite of these changes, banks
continue to maintain and perform their primary role -- accepting
deposits and lending money.
comprises two parts: Monetary AuthoritiesóCentral Bank, and Depository
Credit Intermediation. The U.S. Federal Reserve System is the central
bank of the United States and manages the Nation's money supply and
international reserves, holds reserve deposits of other domestic banks
and the central banks of other countries, and issues the dollars we use.
The credit intermediation and related services industry provides banking
services to consumers and businesses. It secures the money of
depositors, provides checking and debit card services, and lends money
to consumers and businesses through credit cards, mortgages, car loans,
investment loans, and lines of credit.
three basic types of banks: commercial banks, savings and loan
associations, and credit unions. Although some of the differences
between these types of banks have lessened, there are key distinctions.
Commercial banks, which dominate this industry, offer a full range of
services for individuals, businesses, and governments. Commercial banks
come in a wide range of sizes, from large global banks to mid-size
regional and small community banks. In addition to typical banking
services, global banks lend internationally and trade foreign
currencies. Regional banks have numerous branches and automated teller
machine (ATM) locations throughout a multi-state area and provide
banking services to individuals and local businesses. Community banks
are based locally and have fewer branches than regional or global banks.
In recent years, online banksówhich provide financial services entirely
over the Internetóhave entered the market, with some success. However,
even in Internet banking distinctions have lessened as traditional banks
also offer online banking, and some formerly Internet-only banks have
Banks and Savings and Loan Associations
Savings banks and savings and loan associations, sometimes called thrift
institutions, are the second largest group of depository institutions.
They were first established as community-based institutions to finance
mortgages for people to buy homes and still cater mostly to the savings
and lending needs of consumers. Over time, distinctions between savings
banks and commercial banks have largely disappeared.
Credit unions are another kind of depository institution. Credit unions
are formed by people with a common bond, such as those who work for the
same company, belong to the same labor union, or live in the same
county. Only people who have the common bond are allowed to become
members. Loans and savings accounts are restricted to members. Credit
unions are nonprofit organizations that are governed by a board elected
by the depositors (members).
Federal Reserve Banks
Federal Reserve banks are Government agencies that perform many
financial services for the Government. Their chief responsibilities are
to regulate the banking industry and to help implement our Nation's
monetary policy so our economy can run more efficiently by controlling
the Nation's money supply--the total quantity of money in the country,
including cash and bank deposits. For example, during slower periods of
economic activity, the Federal Reserve may purchase government
securities from commercial banks, giving them more money to lend, thus
expanding the economy. Federal Reserve banks also perform a variety of
services for other banks. For example, they may make emergency loans to
banks that are short of cash, and clear checks that are drawn and paid
out by different banks.
on loans is the principal source of revenue for most banks, making their
various lending departments critical to their success. The commercial
lending department loans money to companies to start or expand a
business or to purchase inventory and capital equipment. The consumer
lending department handles student loans, credit cards, and loans for
home improvements, debt consolidation, and automobile purchases.
Finally, the mortgage lending department loans money to individuals and
businesses to purchase real estate.
The money banks lend
comes primarily from consumer and business deposits in checking, money
market, and savings accounts and certificates of deposit. These deposits
often earn interest for their owners, and provide owners with payment
methods, such as online bill payments, checks, and wire transfers.
Deposits in many banks are insured and regulated by a US Government
agency, the Federal Deposit Insurance Corporation (FDIC), which
guarantees that depositors will get their money back, up to a stated
limit, if a bank should fail. Deposits in savings and loan associations
and credit unions are insured and regulated by other US government
Technology is having a major impact on the banking industry. For
example, many routine bank services that once required a teller, such as
making a withdrawal or deposit, are now more routinely handled through
ATMs that allow people to access their accounts 24 hours a day. Also,
direct deposit allows companies and governments to electronically
transfer payments into various accounts, changing the speed of
transactions. And, of course, many banks have integrated banking
services online so transactions can be made anywhere, anytime.
in technology have also led to improvements in the ways in which banks
process information. Use of check imaging, which allows banks to store
photographed checks on the computer, is one such example that has been
implemented by many banks. Other types of technology have greatly
impacted the lending side of banking. For example, credit scoring software allows loans to be approved in
minutes, rather than days, making lending departments more efficient.
prices were one cause of the recent financial crisis. As home values
declined, many borrowers stopped paying (defaulted) on their home loans
(mortgages.) With prices of houses declining and increasing rates of
default, banks suffered large losses. Some banks suffered larger losses
than other banks because they made riskier mortgage loans or owned
mortgages concentrated in areas of the country with the largest housing
price declines. Many banks with large losses were bought by other,
stronger banks, or were taken over by the FDIC.
The financial crisis
accelerated an ongoing fundamental change in the banking industry as
banks diversify their services to become more competitive. The financial
crisis has allowed stronger banks to buy other banks and companies that
provide other financial services at lower prices than before the crisis.
Some other financial services that many banks offer their customers
include: financial planning and asset management services, brokerage
services, and insurance services. Banks purchase companies that offer
these services and still offer them through a subsidiary or a third
party. The financial crisis also helped commercial banks increase their
share of the investment banking industry. Investment banks help
companies and governments raise money through the issuance of stocks and
bonds. As banks respond to regulatory changes and other changes driven
by the financial crisis, the nature of the banking industry will
continue to undergo significant change.
average workweek for nonsupervisory workers in depository credit
intermediation is about 36.2 hours. About 8 percent of employees, mostly
tellers, worked part time. Employees in a typical branch work weekdays,
some evenings if the bank is open late, and Saturday mornings. However,
banks are increasingly expanding the hours that their branches are open
and opening branches in nontraditional locations. For example, hours may
be longer for workers in bank branches located in grocery stores, which
are open most evenings and weekends. To improve customer service and
provide greater access to bank personnel, banks have phone centers,
staffed by customer service representatives. Employees of phone centers
spend most of their time answering phone calls from customers and often
work evening and weekend shifts.
Administrative support employees normally work in large processing
facilities in the banks' headquarters or other administrative offices.
Most support staff work a standard 40-hour week; some may work overtime.
Those support staff located in the processing facilities may work
evening shifts. Branch office jobs, particularly teller positions,
require continual communication with customers, repetitive tasks, and a
high level of attention to security. Tellers also work for long periods
in a confined space. Commercial and mortgage loan officers often work
out of the office, visiting clients, checking loan applications, and
soliciting new business. Loan officers may travel to meet clients, or
work evenings if that is the only time at which a client can meet.
Financial service-sales representatives also may visit clients in the
evenings and on weekends to go over the client's financial needs. The
remaining employees located primarily at the headquarters or other
administrative offices usually work in comfortable surroundings and put
in a standard workweek. In general, banks are relatively safe places to
banking industry employs about 1.8 million wage and salary workers.
About 7 out of 10 jobs were in commercial banks; the remainder were
concentrated in savings institutions and credit unions. About 85
percent of establishments in banking employed fewer than 20 workers.
However, these small establishments, mostly bank branch offices,
employed 38 percent of all employees. Banks are found everywhere in the
United States, but most bank employees work in heavily populated states
such as New York, California, Illinois, North Carolina, Pennsylvania,
Paths into this Industry
There are many career paths into every industry...within the Career
Cornerstone Center we focus on describing the STEM and Medicine (STEM)
career paths that may be prevalent in a given industry. The
prevalence of technology in the banking industry necessitates that many
computer specialists are employed to ensure electronic systems run
smoothly. In addition, engineers are developing enhancements to
ATM machines, debit cards systems, and developing software controls for
Wage and salary employment in banking is projected to grow 8 percent
between 2008 and 2018, compared with the 11 percent growth projected for
wage and salary employment across all industries.
Banks compete strongly
to attract new customers. Because convenience of local branches is one
of the most important factors for customers selecting a bank, the number
of local branches will continue to increase. New branches frequently
will be located in nontraditional locations, such as inside grocery
stores. A growing number of branches will increase employment of branch
managers and tellers.
Deregulation of the
industry allows banks to offer a variety of financial and insurance
products that they were once prohibited from selling. Managing and
selling these services will spur demand for financial analysts and
personal financial advisors. Demand for "personal bankers" to advise and
manage the assets of wealthy clients, as well as the aging baby-boom
generation, also will grow. However, banks will continue to face
considerable competition in financial services from nonbank
establishments, such as insurance companies and independent financial
increasing number of retired baby boomers should have a beneficial
effect on total employment in the banking industry. They are more likely
than younger age groups to hold bank deposits and visit branches to do
their banking. Many also need help in retirement planning and investing
which increases demand for financial managers and personal financial
Job prospects. Job opportunities should be favorable for office and
administrative support workers because they make up a large proportion
of bank employees and many individuals leave these positions for other
jobs that offer higher pay or greater responsibilities. The need for
skilled workers will create good job opportunities for individuals with
financial services backgrounds.
Note: Some resources in this section are provided by the US Department
of Labor, Bureau of Labor Statistics.