Rebecca Storey Mr. Michael ward BUS-225 January 25, 2020 Review Questions 1 – Discuss how and why banks suffered financial difficulties during the financial crises. Banks were suffering from the financial crises because it put them at extreme risk – to the point of being almost constantly close to bankruptcy. This was because the bank’s asset holding’s value plummeted as a result of home owner equity dropping, which meant the banks couldn’t retain enough capital to their liabilities. 3 – Compare commercial banking with investment banking. What is universal banking? Commercial banking has to do with civilians and businesses making deposits, taking out loans, and checking accounts. Investment banking has to do with businesses telling debt and equity securities in order to increase financial capital. While commercial and investment banking are separate, universal banking is a combination of both, resulting in bank users having the capability to use commercial or investment banking options in one place. 4 – Describe the functions of banks and the banking system. There are five functions in banking: 1) accepting deposits, 2) granting loans, 3) issuing checkable deposit accounts, 4) clearing checks, and 5) creating deposit money. In investment banking, there is a sixth function: raising financial capital for businesses.
The banking system uses deposits that they have collected for issuing loans, which results
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- Spring '20