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Tasks and functions of the German credit institutions

There are credit institutions worldwide. They are aimed at private individuals and companies who want to invest their money well and receive interest in return. Or they give their customers credit. The following article is intended to describe exactly what this means and the different types of credit institutions.

What a credit institution is

What a credit institution is

When we speak of a credit institution, it is generally used to describe a financial institution. One is dedicated to monetary transactions and deals in securities. It therefore provides paid services for the movement of capital. A distinction is made between different types of credit institutions such as the universal banks or the savings banks and cooperative banks. The former are aimed at customers of very different social backgrounds and interests, while the latter are aimed primarily at people with an average income. There are also so-called special banks, such as the building societies.

You are responsible if people want to conclude building loan contracts in order to build a property in the future. There are also the installment banks. Consumer credit and leasing financing are classified in this group. These forms of banks have grown historically, which will be described below. A distinction is also made between a bank and a credit institution. The latter is the umbrella term for the former. The fact that the two terms are used synonymously is due to the fact that no distinction is made in English-speaking countries. A savings bank also describes the bank here. The name bank is derived from the Italian word banco, which actually does not describe the seat. Instead, in Italian it is the changer’s table.

How credit institutions came into being

How credit institutions came into being

Before today’s credit institutions could emerge, there were early forerunners. For example in Mesopotamia. Bank-like structures already existed there in the second century BC. A financial system was already widespread in the Islamic world in the Middle Ages. At that time one spoke of the so-called Hawala system, based on the lawyer Abu Bakr b. Mase-ud al-Kasani goes back. It was founded in 1327. Banking and credit came to Europe too.

It found its way into the thriving Florence of the 13th century. Because of the fact that Florence was so busy, the banking business went well and bankers and merchants made big money. Originally, they worked as a wholesale merchandiser before turning to banking and offering finance to Europe. The most important and influential banking family are the Bardi, the Acciaiuoli and the Peruzzi family. These families spread with their bank branches in all major European cities. They financed private individuals, but above all the Pope and the Catholic Church. When these banks went bankrupt, another family of bankers rose: the Medici, which are still known today. Vieri di Cambio de Medici built his bank between 1348 and 1392. However, the bank lost its great influence when its two sons took the lead.

However, his nephew Giovanni Bicci de Medici succeeded in moving the main branch from Rome to Florence and founding the well-known Banco Medici there. This created the basis for the Medici family to become the richest family in the world. Monte di Pieta, founded in 1462, was a more social variant of the banking and credit institutes. It dates back to the influence of the Franciscan brothers, who were committed to the ideal of poverty, and who demanded a bank for the people, which lends to those in need. A number of other such banks emerged in the shortest possible time in Italian cities, which were independent of one another. Monte di Pieta, founded in 1472, still stands in the city of Siena, which is known today as Banca Monte dei Paschi. The largest German bank is located in Frankfurt am Main. It is the Deutsche Bank.

What tasks credit institutions pursue

What tasks credit institutions pursue

In the past, it was noticed that credit institutions were needed. This is especially true in societies that have a division of labor, ie the tasks are divided among different employees. Employees in such companies exchange their benefits with money. Banks were needed in an economy based on the division of labor, since the services of economic agents were exchanged with the intermediary of money. The credit institutions act as intermediaries between the individual employees. On the one hand, they invest money for the workers and, on the other hand, offer them loans in order to make larger expenditures.

Banks use their money as follows: If customers have deposited their money and do not need it, they can create a savings facility there. They receive interest on the money invested. On the other hand, whoever takes out a loan determines the bank’s second business basis. However, the monetary cycles of a credit institution are also monitored: This is done at the national and international level by laws that provide precise information on the staffing or prescribe the accounting. The so-called bank supervision monitors the credit institutions. The credit institutions also perform important functions at the economic level. The so-called central bank’s loans bring money into the economic cycle. They act as a central bank and are therefore not necessarily included in the group of credit institutions. For example, you alone can issue banknotes and operate as the state’s house bank.

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