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Banking

Industry Overview
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.

Goods and services
Banking 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.

Industry Organization
There are 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
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 opened branches.

Savings 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
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.

Interest 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 agencies.

Impact of Technology
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.

Advancements 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.

Recent Developments
Declining home 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.

Working Environment 
The 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 work.

Employment
The 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, and Texas.

STEM Degree 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 security systems. 

Industry Forecast
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 advisor firms.

The 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 advisors.
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.

Related Degree Fields

Professional Associations/Other Resources

Note: Some resources in this section are provided by the US Department of Labor, Bureau of Labor Statistics.
 


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