There are two general reasons for using a bank account. The first and most common is the convenience and safety provided by a current account at a bank. The second is that small and perhaps regular surpluses are available to be saved, and for this purpose a bank provides deposit accounts.
A deposit account will not offer a high rate of interest and would not be the best way to save large sums of money for any long period of time, but it is designed to make saving simple, convenient and safe. It is especially appropriate for those who may save small amounts from time to time without any planned regularity or for those who wish to save for a particular purpose in the immediate future, for example for annual holidays or for the purchase of a major item such as a car.
Most customers of bank who have opened a deposit account will also have a current account and this makes the transfer of amounts of money from one to the other an easy matter. Regular payments into a deposit account can be made through a standing order to the bank who will automatically transfer the agreed amount according to your instructions. Other payments are made on standard forms but it is most convenient and provides a useful record if the depositor uses a paying in book. Interest is calculated every six months and added to the account. The rate of interest varies from time to time and is publicly advertised in any bank. Because the bank uses money deposited with them to lend to others it normally requires about seven days notice of intention to withdraw money from a deposit account, but unless there is a heavy demand for money they are not likely to insist on this and cash is often immediately available to those who wish to withdraw it. There is an assumption that such notice was given and you would lose seven day’s interest on the money.
The increasing need for security and the use of computers in wage payments have combined to make it more common to have a bank account than to be without one. This kind of account is a current one and its most common use is a single regular payment in either a weekly wage or a monthly salary and regular payments out to meet the normal everyday expenses. Most payments are still made by cheque although the use, of the standing order or the direct debit is becoming very common. It is normally expected that a current account will remain in a balance and customers who regularly maintain an agreed minimum balance are often given the services of the bank without charge. In general, however, charges are made which vary with the size of the balance, the amount of use of the bank’s services and the number of transactions. If the account is overdrawn a further charge, which is interest on the overdrawn amount, is also made.
BANK OF ENGLAND
Today the British banking system is a complicated system. The system is headed by the Bank of England.
The Bank of England was established privately under a royal charter in 1694 and chartered by the government in return for a loan. The bank was also allowed to issue its own notes. Although started as a private bank, it gradually evolved into a Central Bank.
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The Bank of England was the first central bank. It serves as the banker to the government of the United Kingdom, with sole authority to issue notes in England and Wales, and also as the banker to the country’s commercial banks. Until 1946 the bank was privately owned, but it has long governed its operations in the national interest.
From its founding in 1694 it acted as the government’s banker, lending it money to fund the national debt. It soon acquired a practical monopoly of the note issue; eventually other banks began keeping deposits with the Bank of England and using it as a clearing house for their transactions with one another. By 19th century, the Bank of England had become a “banker’s bank”. It had also acquired another function associated with central banking – that of being the “lender of last resort,” to which other banks could turn for aid when they were hard pressed.
During the 19-th century the Bank of England developed techniques for regulating interest rates and the amount of credit issued by itself and by the banking system generally. As the leading bank in the world’s leading financial center, its actions were considered critical in maintaining the international gold standard. By adjusting its discount rate, that is the interest it charged on loans to commercial borrowers, it was able to affect the international flow of-short-term capital. An increase in the discount rate would attract money to London and at the same time discourage borrowers; a reduction in the discount rate would have the opposite effect. The Bank of England was nationalized in 1946.
Today the bank is able to adjust the country’s supply of money through the purchase and sale of securities. It also controls interest rates and sets limits on the amount of bank credit.
The head of the Bank is Governor of the Bank appointed by the Queen on recommendation of the Prime Minister. The Queen also appoints Deputy Governor and the Court of Directors, which consists of 16 directors.
Additional Material
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MANAGING IN FUTURE
What does it mean “managing the future”? It means paying attention to the past, to present, and to past and current patterns of change in the world around you. In managing the future, understanding and initiating action are top priorities. Constant innovation and improvement are valuable action steps. Relying solely o the past is neither possible nor good business. Using a past orientation results in missing opportunities and not keeping up with changes in today’s emphasis on the customer. The past-oriented manager wants to attract and retain customers, but focuses on other parts of the business: the accounting system, tax laws, the source and flow of available raw materials.
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One future-oriented company that respects and has learned from the past and appreciates its founder is McDonalds’s. This fast-food firm knows that the past can’t be repeated. This firm is in constant search of innovations to remain competitive, to build on its past reputation, and to improve its position in holding off more and more competitors. McDonald’s innovations include the Big Mac, the Egg Mc Muffin, etc.
McDonald’s keeps innovating and improving and learns from the past because it can’t afford to be lazy and nonrespective. The competition is too fierce and opportunistic. The firm responds to its changing external and internal environment with new products environmentally friendly waste products, improved service and better ways doing business.
Whether McDonald’s Corporation founder Ray Kroc ever studies or considered the historical roots of management isn’t known. However, by reviewing Kroc’s style and strategies, we get the impression that he used the past as a way of learning how to manage his and McDonalds’s future.
Kroc was an innovator who favoured taking action to stay ahead of the competition. The firm’s history clearly shows that his insistence on quality has become a part of McDonald’s internal cultural fabric.
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