With the diversification of the source of income of universal banking, banks have achieved a higher level of solidity and reduced the risks that can arise in the face of various financial problems. For this reason, we recommend you read this article with which you will learn What are the characteristics, objectives and importance of universal banking?
What is universal banking?
Universal banking is defined as a business model which is intended to provide financial services and products. Provides updated systems and better infrastructure management.
Universal banking has been influenced by the electronic banking and of globalization giving importance to international relations. As a consequence, remote financial operations have become more widely used.
Pros and cons of universal banking
Universal banking can be beneficial by providing economies of scale. Therefore, companies spend less each time they receive a service. In addition, universal banking can expand your source of income and decrease risks to which it is exposed.
One of the cons of universal banking is the challenge that arises before supervisors. This is produced by the great diversity of activities. For this reason, the state has the responsibility to monitor all banking performance areas.
What are the characteristics, objectives and importance of universal banking?
Universal banking has grown as a product of the globalization and the transformation of banking worldwide. In this regard, universal banking allows any financial operation to be carried out under the policies established by law.
Characteristics of universal banking
Universal banking provides various operations that are normally granted by specialized financial institutions. In addition, it allows operations with financial intermediation under different terms.
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The organizational structure, as well as the magnitude and variety of the businesses are peculiarities of universal banking. Likewise, it can maintain a high level of capitalization that exceeds that of specialized banking.
The objectives of universal banking
Universal banking aims to invest in private entities, participate in the investment market, guarantee the financial interests of organizations by maintaining effective communication, provide various financial services, develop the private sector and reduce the costs of services through an economy of scale.
Loans and savings
Frequently, the development of a business depends on the request for a loan and the application of a investment scheme. For this reason, universal banking seeks to expand services and influence the financial market.
He imposed on the private sector
Without a doubt, this is one of the main objectives of universal banking. Therefore, clients turn to it, generating a stable and balanced link. The bank behaves as an effective and indispensable contributor to the private sector.
Another objective of universal banking is the decrease in costs of services through economy of scale. To achieve this, it provides loans with low interest rates that motivate other sectors and thus increase competitiveness.
Importance of universal banking
Universal banking is relevant to society because it offers you a varied list of products and services. Also, it incites the competitiveness between companies by reducing costs. For this reason, it is important to know the theory of cost and production in economics.
Generally, universal banking promotes economic development through the financing and design of credit instruments. Similarly, it provides greater diversification against risks due to adaptability to changes.
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Universal banking facilitates the generation of a more efficient system through the financial innovation. This process depends to a great extent on the techniques that are developed at the regional level for the production of banking services.
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