Category: Banking

The Peculiarities Of Retail Banking

Introduction

As in the case study that Mr. Raj has recently graduated and got placed in a private sector bank and is unaware of the banking sector and its operations. Being his reporting manager, you need to brief him with the Principles of lending and need to explain him in details. Lending in its most general sense is the temporary giving of money or property to another person with the expectation that it will be repaid. In a business and financial context, lending includes many different types of commercial loans. When people or organizations such as banks lend you money, they give it to you and you agree to pay it back at a future date, often with a extra amount as interest. Not all banks are created equal, but many of them focus on the same areas throughout the loan review process. Learn what documentation, projections and narratives you’ll need to prepare as well as tips to ensure you negotiate the best loan package available. The system weighs five characteristics of the borrower and conditions of the loan, attempting to estimate the chance of default and, consequently. The five Cs of credit are character, capacity, capital, collateral, and conditions.

Some of the important considerations to be kept in mind by a banker in this respect are discussed below:

Safety

Safety means that the borrower should be able to repay the loan and interest in time at regular intervals without default. Banks are trustee of public money. Bank’s deposits are always payable on demand. Bank has to maintain trust of depositor forever. As such the first and foremost principle of lending is to ensure safety of funds lent. Further, it is just not the capacity of the borrower to repay but also his willingness to repay.

Liquidity

The term liquidity refers to the extent of availability of funds with the banker for providing credit to borrowers. It is to be seen that money lent is not going to be locked up for a long time. This schedule that is drawn up by the banker has to adhere to the requirement that at any point of time the banker should possess liquidity to meet the withdrawals of the depositors. It is to be kept in mind that various deposits have various maturities and some of it would also be payable on demand. A bank’s inability to meet the demand of its depositors can lead to a run on the bank which is a threat to its basic survival.

Purpose

The purpose should be productive so that the money not only remain safe but also provides a definite source of repayment. Loans may be required for productive purposes, trading purposes, agriculture, transport, self-employment etc. If a loan is required for a non-productive or speculative purpose, the banker should be very much cautious in entertaining such proposals. It is very difficult to ensure that the loan has been utilized for the purpose for which it was sanctioned. All banks are profit-earning institutions. The ultimate objective of lending is to earn profits.

Profitability

Banks are not charitable institutions. All banks are profit-earning institutions. The ultimate objective of lending is to earn profits. Banks receive interest on loans and advances lent, and they pay interest to their depositors. This difference between the receipts and payments will be the bank’s gross profit. Banks further incur various expenses as any organization does.

Security

The security offered by a borrower for an advance is as like as the insurance to the banker. It serves as the safety valve for an unforeseen emergency. So another principle of sound lending is the security of lending. Security offered against loan may be various. It may be a plot of land, building, flat, insurance policies; term deposits etc. There may even be cases where there is no security at all. The banker must realize that is it only a cushion to fall back upon in case of need.

Diversification

A prudent banker always tries to select the borrower very carefully and takes tangible assets as security to safeguard his interests. While this is no doubt an adequate measure, there are other unforeseen contingencies against which the banker has to guard himself. Further if the bank lends large amounts to a single industry or borrower, then the default by that customer can affect the banking industry as a whole and will affect the basic survival of the industry.

National Interest

Even when an advance satisfies all the aforesaid principles, it may still not be suitable. The advance may run counter to national interest. Bank has a significant role in the economic development process of a country. They should keep in mind the national development plan/program while going for lending but maintaining safety, liquidity and profitability

The conclusion

In the concluding lines I would like to say that Mr. Ajay has to follow these points. But not all banks are created equal, but many of them focus on the same areas throughout the loan review process. Learn what documentation, projections and narratives you’ll need to prepare as well as tips ensure you negotiate best loan package available. Banks are not charitable institutions. All banks are profit-earning institutions. The ultimate objective of lending is to earn profits. Banks receive interest on loans and advances lent, and they pay interest to their depositors. This difference between the receipts and payments will be the bank’s gross profit. Banks further various expenses as any organization does. After accounting for all such expenses and provisions, banks have to earn reasonable amount as net profit so that dividends can be paid to its shareholders. The trust and confidence level of the customer and investor will be high with a bank that has good track record of profits and dividend rates. Hence it’s important that whatever the business the bank engages itself with, the business be profitable enough not just to cover its costs but to ensure generation of surplus funds or margin.

As Online Payments Are Getting More Popular, Will Cash Become Oblivious Soon?

Abstract

With the invention of the Internet, the rise of technology and bring your own devices, it has revolutionized the human society forever in terms of creating a new environment to do existing activities in a more efficient way. Realising the importance of this, banks have also made their presence online, giving their clients’ the ability to monitor their assets and conduct transactions via mobile banking applications anywhere, anytime as long as the Internet is present. Almost every shop, every supermarket has a mobile payment system now, payment is simply done with a tap. This document will discuss why online payments are getting more and more popular, factors that are still holding people back from going online and rather stay with cash and finally, whether a cashless society can become a reality. The Internet have been changing everything the way people have been doing things. As of this date, if a person has access to the Internet, most likely he or she will get involved, more or less, in online banking. There is no deniability that it has brought comfortability and flexibility on managing finances, but concerns about security, malware infiltration and identity theft are what is holding some users from giving up on cash. However, as more banks are aware and investing more in cybersecurity and having insurance, they are confident in keeping up with the digital trend and provide their clients with the best services possible and making their experiences more convenient by the day.

Introduction

With the rise of the Internet, computers and mobile devices, never before have mankind witnessed so much innovation and life-changing inventions for just over the past 40 years. This includes an increase in online banking and e-commerce, more and more people are doing shopping online or doing traditional shopping but making payment via mobile phones. To demonstrate how game changing online banking can be, here are some statistics as of 2019:

• There are 4.4 billion people, in the world have access to the Internet
• And within those 4.4 billion Internet users, 2.8 billion people (over 60%) use e-commerce as a mean to purchase goods (Kemp, S 2019)

This is an area filled with potentials and opportunities for financial institutions to improve and expand their services. However, it can also become a gold mine for looters to target. People are familiar with IT and cybersecurity, however not everyone can understand the importance of safety and how-to setup proper security protocols, this allows hackers and scammers to take advantage of the situation and rob away the users’ assets. This is the major roadblock to get people to fully get rid of cash and upgrade to a new mean of transaction. Any change but include security and insurance to protect those affected by it.

This literature review will gather its ideas and provide its analysis through the use of business journals, graphs and statistics from websites to support the opinions in the paper. All resources mentioned are all recent and not over four years old with the oldest articles were composed in 2015. This is due to technology is constantly changing and any digital trends are only relevant for only a few years before considered out-of-date.

This document will discuss why online payments are getting more and more popular, factors that are still holding people back from going online and rather holding on to their cash. And finally, whether a cashless society can become a reality.

Are online payments getting more popular?

The definition of online payment

To comprehend what is the success and influential factors behind online payment, firstly, it needs to be known what an online payment is. According to Kabir, Saidin and Ahmin (2015), an online payment is an act of transferring currency between two or more parties to purchase goods and services or to pay off a certain expense using the Internet and electronic devices, such as computers and mobile phones instead of cash and cheques. Bezhovski (2016) provided further details of the types of online payments, including:

• Bank cards that are managed online, such as debit card and credit card
• Mobile payment
• E-wallet

Why is it replacing the traditional payment methods?

As the technology grows, the invention of smartphone and mobile applications has replaced traditional devices and already made them obsolete: alarm clocks, desk calendar, watches etc. Inevitably, online banking applications are gradually replacing cash and cheques in conducting payments for goods, services and expenses. To be able to influence billions of people, there are a few reasons behind that change:

Convenience

Almost everyone on Earth today has a smartphone on their hands, with applications that allows them to do everything mentioned above that in the past would require them to own each item in order to accomplish a certain task (Humbani, M & Wiese, M 2017). Online banking applications work the same way. They allow users to:

• View data about their financial figures
• Transfer money to another party
• Set up automatic payments for recurring payments
• Tap on the reader to pay for goods and services when they physically make a transaction
• Link their bank details to other online shopping applications, such as: eBay, Amazon etc., to make payments when shopping online

All those activities stated above, in the past would need to be done separately in person and required some time and effort. But now they are all integrated into one single online platform, in one mobile devices, what is left for the users is just to use the application (Humbani, M & Wiese, M 2017). They can do it anywhere, anytime as long as there is a stable Internet connection, which is a part of their mobile service package anyway.

Swift access to information and expenses management

Mobile phone online banking platform keep a record of all transactions made by users and cash flow analysis, preferably in a monthly basis; from there users can be aware of what they have been spending on and make financial plans for the future. This brings financial management to a whole new level as it reduces the margin error to almost zero because once a payment is made, it is recorded into the system and user can be aware of it (Sharma, S 2016). Unlike in the past where most people would write down every single transaction that was made, this is where human errors tend to come into play because people can forget one a few minor to major transactions, leading to financial deficiency in the long term.

Security

As the money is being held at the bank, there would be no cash for any criminals to target. Because of that, criminals nowadays change their targets to mobile phones as it had replaced everything else that a person may own. Supposably, the illegal possession of the phone was a success, the thieves will need to bypass the following:

• The device’s multiple layers of identity verification like passcode and biometric authentication that would lock the phone and erase all data after failed attempts.
• The same level of authentication within the app

But until they made it through all those roadblocks, users could have changed their passwords, quarantine that device and notify the bank.

For card users, a PIN number will keep anyone at bay for a while. However, before that, the victim can cancel the card or notify the bank, making it unusable and protect their resources.

To sum up, users have more control over their assets, and they should be safe as long as there are user awareness and proper security measures have been setup.

What is holding some people back from embracing online payments and continue with cash

Security breach from the external

Similar to computers, mobile banking applications are not excluded to any exposition to malware infection and targeting from cyber criminals (He, W, Tian, X & Shen, J 2015). Below are some of the most common schemes use by the attackers to exploit vulnerability, breach the security perimeters, gaining access to bank accounts and personal information of the banks’ clients:

• Malware: “Zitmo, Banker, Perkel/Hesperbot, Wrob, bankum, ZertSecurity, DroidDream and Keyloggers” (He, W, Tian, X & Shen, J 2015)
• Trojan virus and rootkits: create a backdoor for the attackers to infiltrate and gain control
• Phasing emails and text messages: the content tends to have a URL that redirects to the hacker’s page and tricking the user to send details to the hacker. (He, W, Tian, X & Shen, J 2015)
• Unsecure public Wi-Fi networks: often the connections are not encrypted, allowing hackers to penetrate (He, W, Tian, X & Shen, J 2015)
• Obsolete mobile app version or mobile operating system: this leads to the lack of latest patches; leaving the device exposed to newer levels of infection

Security breach from the internal

Yaseen (2016) stated that in 2011, based on Cyber Security Watch Survey, of all the cyber-attacks launched on banks, only 21% attacks were coming from people inside the banks comparing to 58% outside the bank. Although there is a huge difference between inside attacks versus outside attacks in terms of frequency, the damage done by insiders can be equally costly or even greater because outsiders can only get their hands on what they can get while insiders basically have access to everything. For example, in a Verizon Business report (Yaseen, Q 2016) stated that “outsiders exposed about 30,000 records, whereas insiders exposed about 375,000 records”. In that case alone, the fallout from insider threat is ten times more serious than outside threats.

The reason behind this is that the people behind it, they already have permission to access user data and information systems as part of their daily tasks. Due to constant exposure, they will be familiar with the system’s strengths and weakness, where and when to target and how to hide any evidence of any breach. The fallout mostly involves money of the bank, its clients and customer information being used for fraudulent purposes. It proves to be much more challenging to setup a proper security perimeter to prevent insiders since comparing to outsiders, it is relatively easy to put up a firewall that detects and block any external traffic. Whereas the people within, they need access to the required to do their jobs, sometimes it can be muddled, and this is one of the exploits where they can snoop around areas where they should not be. Therefore, another defence mechanism needs to be developed to suit this need and not just relying on the already existing but incompatible firewall and corporate policy to keep inside attackers at bay (Yaseen, Q 2016).

Service availability

There are two major components to make online payment services operational:

• Back end: servers to host the banking platform
• Front end: internet connection from the end users to reach that platform.

Both has to be up and running at all times if users are to access and use their services 24/7. However, nothing is definite and there are times when servers are down due to technical reason such as: a power outage, a cyber-attack, hardware component malfunction, system overload etc. or users’ internet connection are having problems. If either one major component is unavailable, the entire online banking platform will be unavailable. This can affect a lot of users that requires to make transactions or monitoring their assets and investments on that period, creating discontent and a huge loss in customer satisfaction. Although the probability of services being unavailable is very minimal and any maintenance schedules are informed to the customers, mishaps can happen and once is enough. It takes years to build up trust and confidence of a client in a service but only one incident to topple it all.

Can a cashless society become a reality?

Undoubtedly, there are discussion in favour and against of a cashless society, which is shown through the analysis above, however they are in terms of usability and from a user perspective. It needs to be looked further in an economic and social perspective.

Firstly, let’s look at the advantages:

1. Decline in illegal activities: As cash cannot be traced whatsoever, criminals always use cash in transactions, such as:

• Dealing with drugs and weapons
• Bribery
• Money laundering
• Money counterfeiting
• Burglary
• Bank heist

With a cashless society, the listed activities will come to a halt as the end goal: cash, is not there anymore so there is no reason for illegal activities to take place. In addition, online transaction will make sure that all transactions are legal and subjected to public budget through taxation. The possession of cash can lead to fraudulent in income reporting and exploiting government welfare and support services. (Fabris, N 2018)

2. Technological advancement: More banks are applying digital payments and mobile applications as part of their services, plus almost everybody has a smartphone these days to do all bank-related activities in that device. Technology can also help bank organizations to reduce cost by cutting down the number of physical branches, ATMs and employees. (Fabris, N 2018)

The digital trend seems to be unstoppable, nevertheless, there are still strong arguments against it:

1. Tradition: conservatism and unwilling to change has been around for generations. Not to mention, there are still areas not having access to the Internet due to its rural location and lack of infrastructure. (Fabris, N 2018)

2. Cybercrime: With burglars and robbers targeting cash dropping, hackers are taking their places by targeting online vaults through various techniques. This has resulted the loss of currency and customer information, which is deemed to be even more valuable than the money itself. (Fabris, N 2018)

Conclusion

Both sides, for and against, have provided very convincing points to defend their beliefs and disavowing the others as whether we can shift into a cashless society in the near future. However, judging from the past, when money was first invented as a general defining value for goods, it was invented to make transactions more comfortable and transform trade into a more flexible state up until today. In my opinion, as more bank institutes are realizing the importance of cyber security, upgrading their security infrastructures and the undeniable convenience, people will fully shift to online banking at some point. And with the people, as soon as the technical aspects are taken care of and more infrastructures are built to support such services, they will accept the reality of a cashless society, as innovation has been doing its job throughout human history.

Reference List

1. Bezhovski, Z 2016, “The Future of the Mobile Payment as Electronic Payment System”, European Journal of Business and Management, Vol.8, No.8, pp. 127-132, < http://eprints.ugd.edu.mk/15691/1/The%20Future%20of%20the%20Mobile%20Payment%20as%20Electronic%20Payment%20System.pdf >
2. Csiszar, J 2017, “Advantages and Disadvantages of Online Banking”, GoBankingRates, 18 November, viewed 18 August 2019, < https://www.gobankingrates.com/banking/banks/disadvantages-advantages-of-online-banking/ >
3. He, W, Tian, X & Shen, J 2015, “Examining Security Risks of Mobile Banking Applications through Blog Mining”, MAICS, viewed 18 August 2019, < https://www.researchgate.net/profile/Xin_Tian17/publication/282376655_Examining_security_risks_of_mobile_banking_applications_through_blog_mining/links/5718501508ae986b8b79eaf2/Examining-security-risks-of-mobile-banking-applications-through-blog-mining.pdf >
4. Humbani, M & Wiese, M 2017, “A Cashless Society for All: Determining Consumers’ Readiness to Adopt Mobile Payment Services”, Journal of African Business, vol. 19, no.3, pp. 409-429, < https://www.researchgate.net/profile/Michael_Humbani/publication/320918945_A_Cashless_Society_for_All_Determining_Consumers%27_Readiness_to_Adopt_Mobile_Payment_Services/links/5b31da994585150d23d45f32/A-Cashless-Society-for-All-Determining-Consumers-Readiness-to-Adopt-Mobile-Payment-Services.pdf >
5. Kabir, M, Saidin, S & Ahmi, A 2015, “Adoption of e-Payment Systems: A Review of Literature”, International Conference on E-Commerce, ICoEC, Sarawak Malaysia, pp. 113 – 120, < https://www.researchgate.net/publication/303329794_Adoption_of_e-Payment_Systems_A_Review_of_Literature >
6. Kemp, S 2019, “DIGITAL 2019: GLOBAL INTERNET USE ACCELERATES”, We Are Social, 30 January, viewed 12 August 2019, < https://wearesocial.com/blog/2019/01/digital-2019-global-internet-use-accelerates >
7. Sharma, S 2016, “A detail comparative study on e- banking VS traditional banking”, International Journal of Applied Research, pp. 302-307, < http://www.allresearchjournal.com/archives/2016/vol2issue7/PartE/2-6-146-742.pdf >
8. Yaseen, Q 2016, “Insider Threat in Banking Systems”, ResearchGate, pp. 222-236, < https://www.researchgate.net/profile/Qussai_Yaseen/publication/316665272_Insider_threat_in_banking_systems/links/5bcb7f53a6fdcc03c797d19d/Insider-threat-in-banking-systems.pdf >
9. Fabris, N 2018, ‘Cashless Society – The Future ofMoney or a Utopia?’, Journal of Central Banking Theory and Practice, pp. 53-66, < https://content.sciendo.com/abstract/journals/jcbtp/8/1/article-p53.xml >

Online Banking Security

INTRODUCTION

Banks global are organization that providing online and mobile financial, offering their clients a greater handy way to their banking affairs at the same time as at the identical time enhancing efficiency and saving on working prices. However, online banking has its drawbacks.

Online banking account are often aimed by way of cyber criminals. Security issues remain a first-rate situation for customers and corporations alike. As a result, banks want to implement security features to guard themselves and their consumer base.

Online banking security measures include: manage and secure high value transactions that require real time security capabilities, streamline and simplify the security process for high volume transaction while minimizing manual steps and leverage flexibility that fully enables benefits of integrated hardware, software and risk-based analysis capabilities to drive more secure and user-friendly authentication and transaction signing. (wikipedia, n.d.)

Definition of Computer Security Risks

A computer security risk is clearly something on your laptop which could damage or affected your data or allow someone else to get admission to your computer, without your know how or consent. There are quite a few various things that can create a pc danger, which includes malware, a preferred time period used to explain many types of bad software. We commonly think of pc viruses, however, there are numerous styles of terrible software program that may create a computer safety threat, such as viruses, worms, ransomware, adware, and Trojan horses. Misconfiguration of computer merchandisein addition to hazardous computing habits also pose dangers. (Nott, 2013)

Consistent with a Hurriz group study, safety is the most important obstacles to company internet offerings adoption. Internet services move transactions past firewalls and permit outdoor entities to invoke utility, doubtlessly giving outsiders get admission to touchy data. As a result, internet services gift new security challenges. Despite the fact that present protection requirements guard statistics because it travels over the net, internet offerings require extra measures to comfortable information. (h.m. Deitel)

This security protection is threatened through many risks and dangers, which can be known as computer protection dangers. those are “any occasion or motion that could purpose a loss or harm the computer hardware, software program, records, or information.the ones dangers can lead to humans, corporations and authorities dropping private facts, privacy contents and big quantities of cash. Certainly, amendment of statistics can be huge dangers distorting the functioning of the enterprise. An amendment of any parameter may additionally therefore ultimately lead to the manufacturing of a faulty stop product. (sarapenina, 2014)

TYPES OF SECURITY RISKS

Malicious Codes

Virus

Computer viruses are programs that spread from one computer to another, causing issues on each computer they touch. As viruses propagate, they utilize up so much memory that it can slow down computer frameworks to the point that they are unusable. A few viruses really assault records on the computer by erasing them or altering them in a few way that renders the computer unusable. The extent of harm caused by a virus changes. A few affect a generally small number of computers. Others have been so devastating that they can even cripple large companies. For example, in March 1999, when the Melissa virus hit, it was so damaging that it constrained Microsoft and other large companies to totally closed down their mail frameworks until the virus might be contained. (Varmosi, 2019)

Worm

Worm are little programs that as a rule take advantage of systems and spread to all computers organize. Worms check systems for computers with security gaps in programs or working frameworks, duplicate themselves on those computers, and after that begin all over from there. Since worms as a rule spread through systems, they can affect numerous computers in an awfully brief sum of time. For example, The Slammer worm, discharged in January 2003, spread more quickly than any other infection some time recently it. Inside 15 minutes, it had closed down cell phone and Web benefit for millions of individuals around the world. (Varmosi, 2019)

Trojan Horse

Trojan Horse are laptop programs that claim to be one of the component but are in reality viruses that damage the pc when the user runs them. Trojan horses cannot replicate robotically. Trojan can enables cyber-criminal to spy and steal the sensitive data and gain access to the system. For example, Trojan Ransom, this type of trojan can modify data in the computer and make the computer run correctly and cannot use the specific data anymore. The criminal only unblock the data and restore the computer performance if you paid them. (Varmosi, 2019)

Unauthorized Access and Use

Unauthorized computer access is popularly known as hacking. It is criminal actions where someone use the computer to gain access to a data system without permission to access that data. This activity is illegal and those involvedc will be punished.For example, the criminal gain the access to a bank computer and perform an unauthorized bank transfer. (computer hope, 2014)

Hardware Theft

Hardware theft is the act of stealing pc equipment. Hardware vandalism is the act of defacing or destroying computer system. Hardware vandalism takes many bureaucracy, from a person reducing a computer cable to people breaking into a commercial enterprise or faculty computer lab and aimlessly smashing computers (Shelly, 2016)

Software Theft

Software theft implies the unauthorized or unlawful replicating, sharing or utilization of copyright-protected computer program programs. Program burglary may be carried out by people, bunches or, in a few cases, organizations who at that point disperse the unauthorized computer program duplicates to users. The example of software theft is illegally duplicates or disseminates a program, steal computer program media, deliberately eradicates programs. (technopedia, n.d.)

Information Theft

Information theft happens when somebody takes individual or private data. Both business and domestic clients can drop casualty to information theft. An untrustworthy company executive may take or purchase stolen data to memorize approximately a competitor. A degenerate person may steal credit card numbers to form false buys. Information theft regularly is connected to other sorts of cybercrime. For example, a person to begin with might pick up unauthorized access to a computer and then steal credit card numbers stored in a firm’s accounting department. (vermaat, 2016)

Definition of Security Measure

Security measures mean the precautionary measures taken toward possible danger or damage (hisham, 2017) Security measure is a safeguards or countermeasures to avoid, detect, counteract, or minimize security risks to physical property, information, computer systems, or other assets. (wikipedia, n.d.)

Basic System Security Measures apply to all or any systems , no matter the amount of their System Classification, it is a baseline, that all systems should meet. Note that for many personal workstations, these squares measure the sole measures that apply. Part of the necessities is word protection, that is, all accounts and resources should be protected by passwords that meet the subsequent necessities, that should be mechanically implemented by the system and it should be a minimum of eight characters long (mark vimalan, 2014)

Type of Security Measure

Data Backup

A data backup is the result of replicating or documenting records and organizers for the reason of being able to re-establish them in case of information loss. Data lost can be caused by numerous things extending from computer infections to equipment disappointments to record debasement to fire, surge, or robbery. For example on the off chance that you’re dependable for trade information, a misfortune may include basic budgetary, client, and company information. On the off chance that the information is on a personal computer, you may lose money related information and other key records, pictures or music that would be difficult to replace. (winzip, 2019)

Cryptography

Cryptograph is about constructing and analysing third parties or to prevent public from reading privates messages. There are three type of cryptographiy : secret key cryptography (SKC) for privacy and confidential, public key cryptography (PKC) for authentication and Hash functions for message integrity. Cryptography is used in many applications such as banking transaction cards, computer passwords and e-commerce transactions. (guedez, 2018)

Anti-Virus

Antivirus program may be a sort of program planned and created to secure computers from malware like virus, computer worms, spyware, botnets, rootkits, key loggers and such. Antivirus programs work to filter, identify and evacuate viruses from your computer. There are numerous forms and sorts of anti-virus programs that are on the market. However, the prime objective of any antivirus program is to secure computers and evacuate viruses once detected. antivirus program is fundamentally expecting to guarantee total assurance for PCs against infection contaminations, various antivirus programs presently secure against diverse sorts of malware for example, spyware, adware, and rootkits as well. (judge, 2019)

Anti-Spyware

Anti-spyware program may be a sort of program outlined to avoid and identify undesirable spyware program establishments and to evacuate those programs on the off chance that introduced. Location may be either rules-based or based on downloaded definition records that distinguish as of now dynamic spyware programs. Anti-spyware items are accessible from a number of merchants, counting Sunbelt Computer program, TrendMicro and Webroot (Rouse, 2007)

Firewall

In computing, a firewall may be a arrange security framework that screens and controls approaching and active organize activity based on foreordained security rules.[1] A firewall regularly builds up a boundary between a trusted inside organize and untrusted outside organize, such as the Internet.[2] Firewalls are regularly categorized as either arrange firewalls or host-based firewalls. Arrange firewalls channel activity between two or more systems and run on organize equipment. Host-based firewalls run on have computers and control organize activity in and out of those machines. (wikipedia, n.d.)

Physical Access Control

Many organizations use access controls to minimize the chance that a perpetrator intentionally may access or an employee accidentally may access confidential information on a computer, mobile device, or network. An access control is a security measure that defines who can access a computer, device, or network; when they can access it; and what actions they can take while accessing it. The security program can be configured to alert a security administrator whenever suspicious or irregular activities are suspected. (vermaat, 2016)

Human Aspect: Awareness

Measure that can anticipate from burglary are utilizing locks, keen card or password and prevent transportability by limiting the equipment from being moved. It detect and protect all exits and record any equipment transported. For example of human perspectives awareness are association self-awareness, association client self-awareness and person client self-awareness. (waniey, 2017)

SCENARIO OF THE PROBLEM: ONLINE BANKING SECURITY

Internet banking services have been operated in Malaysia since 2001. Presently, only banking institutions licensed under the Banking and Financial Institution Act 1989 (BAFIA) and Islamic Banking Act 1983 are allowed to offer Internet Banking services here. There are 12 commercial banks (inclusive of Islamic banks) out of a total of 25 in Malaysia currently offering Internet Banking services. According to the 11th Malaysia Internet Survey conducted by AC Nielson, Internet Banking is the one of the most popular services utilised by Malaysian surfers. The survey found out that 51 percent out of the total respondent base of 8000 used the Internet for online banking once a month.

However, 2003 and 2004 saw the emergence of fraudulent activities pertaining to Internet Banking or better known in the industry as “phishing”. A total of 92 phishing cases were reported to the Malaysian Computer Emergency Response Team (MyCERT, www.mycert.org.my) in 2004. The modus operandi of this activity is to use spoofing techniques to gain names and passwords of account holders.

The victims reported being deceived into going to a fake website where perpetrators stole their usernames and passwords and later use the information for the perpetrators’ own advantage. Phishing is an attempt to commit fraud via social engineering. The impact is the breach of information security through the compromise of confidential data

CONCLUSION

Nowadays, online banking is very important as it can help us in various way. By using online banking we are able to get the access to our account easily. We can inquire our account balances, transfer funds and view our transaction history. Other than that, online banking is perform 21 hours, so we can access our account everyday and everywhere with the access to the internet. It is very conveniences. As we know that the internet is a wide area network of computers and connected around the world in order to facilitate data transmission and exchange

Due to the fact internet is universal, all web based services including online banking also have the possibility to get the security risk. Online banking is a financial organization so the most risk that always happen is phishing because the criminal wants to get the access to steal the money. Phishing is type of hacking that use many ways such as information theft, virus attack and unauthorized access. Information theft is occurs when the criminal uses your personal identifying information such as name security number. So the criminal will get access the account. Virus attack is commonly affected the online banking system will make the person to connect to their account as they will be connected to the false web site while the criminal get the access of their true online banking web site. The unauthorized access and use in phishing is use the computer or network without the owner permission. They can get the access by connecting to it and then logging in as legitimate user. It will cause damages but they will get access to the data, valuable information in the computer.

Despite all the risk, there were also ways to overcome. We called it as security measures. The example of security measure is physical access control, human aspect: awareness and antivirus. Physical access control helps to limits the access connections to computer network, system files and data. So the phishing activities can be prevent. Human aspect: awareness helps us as we can prevent the criminal from pursuing his action even he are able to steal money from your account by safeguard our personal information and reported the loss immediately so the bank can reimburse your account. Next, antivirus software that have special signatures that give protection and prevent the access to malicious attacks.

We should keep in mind that phishing can be sophisticated and we must always alerted on the online interface and protecting our financial information from phishing attack.

Digital Banking Practices In Business

Abstract

Online Banking is one of the major financial activities which will be carried out by any person who has a bank account. There are different activities that can be carried out once you log in to your bank account. Once a user logs in he or she can check the bank balance, check bank account transaction history or account summary, add beneficiary accounts, transfer funds to another account, download account summary. When we deal with a banking system main concern should be the security related to banking transactions and account login activity.

INTRODUCTION

Now demand for financial services is transmuting rapidly and deportment of customers regarding these services is withal going to transmute rapidly mostly, it is compulsory for the banking sector

additionally that in lieu of the traditional banking it must adopt electronic banking in business sectors and some incipient strategies in order to magnetize and retain subsisting along with incipient customers. E-banking in business is the most pioneering trend among the customers in the present era of thrust for many expeditious and is secured with financial services. The change from the traditional banking to e-banking has an elevating amendment in the field of banking dealings. More competition, the advancement of data & communication technology, and transmuting business environment, and so on are some of the consequential concerns that have coerced banking services to transmute

History of Digital Banking

The earliest forms of digital banking trace back to the advent of ATMs and cards launched in the 1960s. As the internet emerged in the 1980s with early broadband, digital networks began to connect retailers with suppliers and consumers to develop needs for early online catalogues and inventory software systems.

The Internet has became widely available and online banking started becoming the norm. In the early 2000 ,the improvement of broadband and ecommerce systems led to what resembled the present digital banking world. The proliferation of smartphones through the next decade has opened the door for transactions on the go beyond ATM machines. Over 60% of consumers now uses their mobilephone as the preferred method for the purpose of digital banking.

The challenge for banks today to facilitate demands that merge vendors with money through channels determined by the consumer. This dynamic shapes the basis of customer satisfaction,in which it can be nurtured with Customer Relationship Management (CRM) software. Moreover, CRM should be integrated into a digital banking system, since it provides means for banks to directly interact with the customers.

Highly beneficial option for businesses

Many businesses have built their brands and are thriving only due to digital banking. When we did not have the luxury of online banking, the businesses such as Amazon and eBay may not be in existence in present days. Moreover, now the businesses can enable online payments option and every process is made easier there after. The businesses can see their banking activities like the depositsm, bank checks, wired funds, etc. For waiting for monthly statements, the businesses can take instant decision about their functioning. The errors and the delays may be quickly sorted out before any negative impact in the business.

Increased productivity in business

Most businesses do not have to rely on the bank operation timings, with the help of digital banking,. Now the payments can be made and received even at any time. There are also some processes such as paying bills or making regular payments that can be automated in the platform of digital banking. As an output, the businesses are cable to save a lot of time on the manual processes and this has a larger impact on their productivity.

Transfer of payments easily

One of the major things for businesses these days is time, therefore they want to use it on something that is providing them more value. The digital banking is helpful in the businesses to easily transfer payments in their employee bank accounts. Some of the regular transfers can also be automated, and they professionals are cable of their valuable time on something that is more important. As an output, the internet banking includes more value to most of these businesses.

The businesses rely on efficient and rapid access to banking information for cash flow reviews, auditing and daily financial transaction processing. E-banking offers ease of access, secure transactions and 24-hour banking options now-a-days. From minimum start-up companies to more established entities, small businesses rely on e-banking to eliminate runs to the bank and to make financial decisions with updated details. In an information-driven business climate, companies who do not use e-bankin g are at a competitive disadvantage.

E-Banking Characteristics

As the businesses are becoming increasingly digitised, the business models of financial institutions are also changing very fast. Banking is a business activity and eBanking is its digital form, so eBanking model is different than the traditional banking system. The following are the characteristics of modern banking system

Issues

• Traditional Banking Habits
• Transaction Difficulty
• Technical Issues
• Small Budgets

References

1. Barquin S, Vinayak HV. Digital Banking in Asia: What do consumers really want. McKinsey and Company. Retrieved from, 2015. http://zenithinfobank.com/wp-content/uploads/2015/04/Digital_Banking_in_Asia_What_do_consumers_really_want.pdf
2. Chavan J. Internet banking-Benefits and challenges in an emerging economy .International Journal of Research inBusiness Management. 2013; 1(1):19-26. Retrieved from https://s3.amazonaws.com/academia.edu.documents/37989966/–1371887005-3.Manage-InternetJayashree_chavan__1.pdf?AWSAccessKeyId=AKIAIWOWYYGZ2Y53UL3A&Expires=1509391963&Signature=9nWLWRUa9fIN%2BE4HKtbY1W4wMys%3D&response-content disposition=inline%3B%20filename%3DINTERNET_BANKINGBENEFITS_AND_CHALLENGES.pdf
3. Chen J, Lam K. How to prepare for Asia’s digital-banking boom. McKinsey and Company. Retrieved from, 2014. http://asia.udp.cl/Informes/2014/Asias_digial-banking_boom.pdf
4. 4. Cuesta, C., Ruesta, M., Tuesta, D., & Urbiola, P. (2015). The digitaltransformation of the banking industry. BBVA Research. Retrieved from https://www.bbvaresearch.com/wp-content/uploads/2015/08/EN_ObservatorioBanca_Digital_vf2.pdf
5. Gautam L, Khare SK. E-Banking in india: Issues and challenges’. Scholar Journal of Economics, Business and Management. 2014; 1(2):54-56. Retrieved from http://saspjournals.com/wpcontent/uploads/2014/04/SJEBM-1254-56.pdf
6. Mia MAH, Rahman MA, Uddin M. E-Banking: Evolution, Status and Prospect. Journal of the Institute of Cost and Management Accountants of Bangladesh. 2007; 35(1):36-38. Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2371134
7. Rao YV, Budde SR. Banking technology innovations in India: Enhancing customer value and satisfaction. Indian Journal of Science and Technology. International Journal of Research in Finance and Management ~ 32 ~ 2015; 8(33):110.doi:10.17485/ijst/2015/v8i33/780
8. Safeena R, Date H. Customerperspectives on e-business value: case study on internet banking. The Journal of Internet Banking and Commerce. 1970; 15(1):1-13. Retrieved fromhttp://www.icommercecentral.com/open-access/customer-perspectives-on-ebusiness-value-case-study-on-internet-banking-1-13.php?aid=38282

The Operational Differences Between The Concept Of Banking In The Muslim World And The Western World

Introduction

This study will try and identify the differences between the Islamic and conventional banking from earlier days as well as today. While looking at the differences the study will identify the advantages and disadvantages for both sides equally. It will also talk about finances for both banking systems.

This study is going to look at all the sources available such as: books, journals, newspapers, previous studies and internet.

What is Islamic banking?

Islamic banking is a new way of financial intermediation and investment management that has emerged and gained a sizeable share of the market in its home base, the Persian Gulf countries. Islamic banking has popularized itself in Malaysia, Indonesia and the Americas, and a number of Muslim countries have adopted the new system at the state level (Asutay, 2013) Healy Consultants believes that Islamic banking brings forth many advantages and thus provides Islamic banking services. Below are listed the advantages and disadvantages of Islamic banking (Healy Consultants Pte Ltd 2003)

Advantage

• Islamic banking is becoming very popular amongst international investors. Having committed itself to a text accessible to all and Prophetic precedents available easily, Islamic banking is open to any innovations that are in congruence with its fundamentals. It is not a closed system. It has no regional, ethnic or class affiliations.
• In Islamic banking, only one kind of loan and that is qard-el-hassan (literally good loan) whereby the lender does not charge any interest or additional amount over the money lent.
• In Wadiah (safekeeping), a bank is deemed as a keeper and trustee of funds. A person deposits funds in the bank and the bank guarantees refund of the entire amount of the deposit, or any part of the outstanding amount, when the depositor demands it.(Zamir Iqbal and Abbas Mirakhor 2007:106)
• Islamic banking is more efficient in that it allocates investable funds on the basis of the expected value productivity of projects rather than on the criterion of the creditworthiness of those who own the projects, which is the case in debt-based finance.
• Islamic banking is less prone to inflation and less vulnerable to speculations, which are currently being fueled by the presence of huge quantities of debt instruments in the market.
• Islam encourages people to invest their money and to become partners in order to share profits and risks in the business instead of becoming creditors. As defined in the Shari’ah, or Islamic law, Islamic finance is based on the belief that the provider of capital and the user of capital should equally share the risk of business ventures, whether those are industries, farms, service companies or simple trade deals.

Disadvantages

• Investments should only support practices or products that are not forbidden or considered unlawful, or haraam, by Islamic law. Trade in alcohol, for example would not be financed by an Islamic bank; a real-estate loan could not be made for the construction of a casino; and the bank could not lend money to other banks at interest.
• Money is only a medium of exchange, a way of defining the value of a thing; it has no value in itself, and therefore should not be allowed to give rise to more money, via fixed interest payments, simply by being put in a bank or lent to someone else (Hadzic 2005:77).

All over Europe Islamic banks are establishing branches, Western banks are offering Shar’ia-compliant financial services, and European governments are trying to out-compete each other in welcoming them. Proponents of banking along the lines of Sharia’a (Islamic law) claim that the Islamic banking system is “more ethical” than the West’s capitalist system. This is not true. Unfortunately, however, in our age of crashing financial markets, many Westerners – not just the traditional anti-capitalist European left – seem very eager to buy that argument.(Fikret Hadzic 2005:78)

Advantages of European conventional banking

• Transaction costs will be eliminated
• Price transparency
• Uncertainty caused by Exchange rate fluctuations eliminated
• Single currency in single market makes sense
• Rival to the ‘Big Two’ – Japanese Yen and The US dollar (Fikret Hadzic 2005:80)
• Increased Trade and reduced costs to firms
• Inflation

Disadvantages

• The instability of the system
• Over estimation of Trade benefits
• Loss of Sovereignty
• Deflationary tendencies

More about Islamic Banking

After its first introduction on experimental basis in a small town of Egypt in 1963 many Islamic Banks, both with letter and spirit, were established in the Middle Eastern and Asian regions. The growth of Islamic banking has been increasing ever since, not only in terms of number of countries it is operating in but also in term of areas of finance it has ventured in. In three decades, Islamic banks have grown in number as well as in size worldwide and are being practiced on even more intensive scale (Jahangiri 2009:21).

Some countries like Sudan and Iran, have converted their entire banking system to Islamic Banking. In other countries where conventional banking is still dominating the Islamic Banking is operating alongside. Today, Islamic banks are operating in more than sixty countries.

Islamic Banking and Finance is growing at between 10% and 15% per annum and is boasting global assets in excess of $1Trillion. A recent survey indicated that there are more than 160 Islamic financial institutions existing worldwide. (Hadzic, 2005: 18)

Gradual and steady spread of the Islamic banks over time over the world is a lucid manifestation of success and the symbolic growth rate is the hallmark of this emerging market. Being fastest growing segment of the credit market in Muslim countries, market share of Islamic banks in Muslim countries has risen from 2% in the late 1970s to about 15 percent today (Asutay, 2013).

Islamic banking is getting popularity, warm welcome, and appreciation also by non-Muslims in Muslim and non-Muslim countries. Although, most of the Islamic banks are within Middle Eastern and/or Emerging countries, many universal banks in developed countries have started to spigot huge demand of Islamic financial products (Moin, 2008)

This also confirms that Islamic banking is as viable and efficient as the conventional banking is. Where the financial liberalization and deregulation have created new challenges and new realities for Islamic banks, the globalization effect has also put these institutions in cutthroat competition with traditional financial institutions in well developed financial markets.

It has become indispensable for Islamic banks to be innovative in designing Islamically acceptable instruments to grapple with the unremitting innovations in financial markets and to compete in local and global deposit markets. Moreover, for fund mobilization and utilization, Islamic banks must seek investment opportunities and avenues that offer competitive rates of return at acceptable degrees of risk. In order to maximize the value of the bank, management of the bank should carefully consider interactions between different performance measures.

Islamic finance refers to the means by which corporations in the Muslim world, including banks and other lending institutions, raise capital in accordance with Shari’ah or Islamic law. It is also referred to the types of investments that are permissible under this form of law. A unique form of socially responsible investment, Islam makes no division between the spiritual and the secular, hence its reach into the domain of financial matters.

Islamic Banking and Finance defined

Islamic banking has been defined as banking in consonance with the ethos and value system of Islam and governed, in addition to the conventional good governance and risk management rules, by the principles laid down by Islamic Shari’ah. Interest free banking is a narrow concept denoting a number of banking instruments or operations, which avoid interest. Islamic banking, the more general term is expected not only to avoid interest based transactions, prohibited in the Islamic Shari’ah, but also to avoid unethical practices and participate actively in achieving the goals and objectives of an Islamic economy.(Al-Gamal, 2007)

Islamic banking is the system of banking consistent with principles of Islamic law (Shari’ah) and guided by Islamic economics. Islamic economics is referred to that body of knowledge which helps realize human well-being through an allocation and distribution of scarce resources that is in conformity with Islamic teachings without unduly curbing individual freedom or creating continued macroeconomic and ecological imbalances.

A key element of Islamic economics is distribution of equitable rewards to the different factors of production. Islamic economic system seeks system of Redistributive justice where concentration of wealth in a few hands is countered and flow of money into the economy is fluent (Bank Alfalah limited 2006-2007)

Islamic banking is, therefore, seen as a lynchpin to achieving the economic and social goals of the Islamic economic system. As system of Islamic banking is grounded in Islamic principles and all the undertakings of the banks follow Islamic morals so it could be said that financial transactions within Islamic banking are a culturally-distinct form of ethical investing. Two basic principles behind Islamic banking are the sharing of profit and loss and, significantly, the prohibition of Usury, the collection and payment of interest, also commonly called Riba in Islamic discourse. Although collecting and paying interest is not permitted under Islamic law, revenue-sharing arrangements are generally permitted.(Ataul 2005:10)

Further differences

One must refrain from making a direct comparison between Islamic banking and conventional banking (apple to apple comparison). This is because they are extremely different in many ways. The key difference is that Islamic Banking is based on Shariah foundation. Thus, all dealing, transaction, business approach, product feature, investment focus, responsibility are derived from the Shariah law, which lead to the significant difference in many part of the operations with as of the conventional.

The foundation of Islamic bank is based on the Islamic faith and must stay within the limits of Islamic Law or the Shariah in all of its actions and deeds. The original meaning of the Arabic word Shariah is ‘the way to the source of life’ and is now used to refer to legal system in keeping with the code of behavior, called for by the Holly Qur’an (Quran). Amongst the governing principles of an Islamic bank are:

• The absence of interest-based (riba) transactions
• The avoidance of economic activities involving oppression (zulm)
• The avoidance of economic activities involving speculation (gharar)
• The introduction of an Islamic tax,( zakat)
• The discouragement of the production of goods and services which contradict the Islamic value (haram)

On the other hand, conventional banking is essentially based on the debtor-creditor relationship between the depositors and the bank on one hand, and between the borrowers and the bank on the other. Interest is considered to be the price of credit, reflecting the opportunity cost of money.

Islamic law considers a loan to be given or taken, free of charge, to meet any contingency. Thus in Islamic Banking, the creditor should not take advantage of the borrower. When money is lent out on the basis of interest, more often it leads to some kind of injustice. The first Islamic principle underlying for such kind of transactions is ‘deal not unjustly, and you shall not be dealt with unjustly’ (Suratul-Bakarah 2:279) which explain why commercial banking in an Islamic framework is not based on the debtor-creditor relationship.

The other principle pertaining to financial transactions in Islam is that there should not be any reward without taking a risk. This principle is applicable to both labor and capital. As no payment is allowed for labor, unless it is applied to work, there is no reward for capital unless it is exposed to business risk.

Thus, financial intermediation in an Islamic framework has been developed on the basis of the above-mentioned principles. Consequently, financial relationships in Islam have been participatory in nature (Al-Gamal, 2007).

Even though the direct comparison could not be made between the two the differences can still be seen. This study has singled some differences below (Al-Gamal, 2007).

The odd numbers refer to Conventional Banking and even numbers refer to Islamic Banking:

• The functions and operating modes of conventional banks are based on fully manmade principles.
• The functions and operating modes of Islamic banks are based on the principles of Islamic Shariah.
• The investor is assured of a predetermined rate of interest.
• In contrast, it promotes risk sharing between provider of capital (investor) and the user of funds (entrepreneur).
• It aims at maximizing profit without any restriction.
• It also aims at maximizing profit but subject to Shariah restrictions.
• It does not deal with Zakat.
• In the modern Islamic banking system, it has become one of the service-oriented functions of the Islamic banks to be a Zakat Collection Centre and they also pay out their Zakat.
• Lending money and getting it back with compounding interest is the fundamental function of the conventional banks.
• Participation in partnership business is the fundamental function of the Islamic banks. So we have to understand our customer’s business very well.
• It can charge additional money (penalty and compounded interest) in case of defaulters.
• The Islamic banks have no provision to charge any extra money from the defaulters. Only small amount of compensation and these proceeds is given to charity. Rebates are given for early settlement at the Bank’s discretion.
• Very often it results in the bank’s own interest becoming prominent. It makes no effort to ensure growth with equity.
• It gives due importance to the public interest. Its ultimate aim is to ensure growth with equity.
• For interest-based commercial banks, borrowing from the money market is relatively easier.
• For the Islamic banks, it must be based on a Shariah approved underlying transaction.
• Since income from the advances is fixed, it gives little importance to developing expertise in project appraisal and evaluations.
• Since it shares profit and loss, the Islamic banks pay greater attention to developing project appraisal and evaluations.
• The conventional banks give greater emphasis on credit-worthiness of the clients.
• The Islamic banks, on the other hand, give greater emphasis on the viability of the projects.
• The status of a conventional bank, in relation to its clients, is that of creditor and debtors.
• The status of Islamic bank in relation to its clients is that of partners, investors and trader, buyer and seller.
• A conventional bank has to guarantee all its deposits.
• Islamic bank can only guarantee deposits for deposit account, which is based on the principle of al-wadiah, thus the depositors are guaranteed repayment of their funds, however if the account is based on the mudarabah concept, client have to share in a loss Position.

Conclusion

This study shows us that there are similarities as well as differences between the Islamic and conventional banking. Islamic finance as defined in the Shari’ah or Islamic law is based on the belief that the provider of capital and the user of capital should equally share the risk of business ventures, whether those are industries, farms, service companies or simple trade deals. In other words these should be helping each other no matter what the circumstances are.

When looking deeper into this study the differences become crystal clear. For example in the Islamic banking there are not any doubts, but as the study takes a look at the conventional banking it is a different story. For instance there is the instability of the system which would for example not suit the UK at all.

Throughout most of the 1980s the UK refused to join the ERM (Exchange rate mechanism). It argued that it would be impossible to maintain exchange rate stability within ERM, especially in the early 1980s when the pound was a petro-currency and when the UK inflation rate was consistently above that of Germany (Hadzic, 2005:66). This forms a competition between them.

Over estimation of Trade benefits differentiates the two banking systems as well. Some economists argue that the trade and cost advantages of Economic and Monetary Union (EMU) have been grossly overestimated. There is little to be gained from moving the present system which has SOME stability built into it, to the rigidities which EMU would bring.

Loss of Sovereignty is yet another issue which moves the two types of banking into different directions. On the political side, it is undemocratic. Governments must be able to control the actions of the central banks because governments have been democratically elected by the people, whereas an independent central bank would be controlled by a non elected body.

It seems like that the Islamic bank is always there for a customer and a conventional bank is not. Conventional banking takes the majority of the profit but shares the losses with its customers, which is a total opposite from what the Islamic banking is trying to achieve. One is better off with the Islamic banking from whichever aspect of business we look at it.

References

1. Ahmad Waseem (2008), Islamic Banking in the United Kingdom: Opportunities and Challenges, Kingston Business School, London
2. Bank Alfalah limited (2006-2007), Islamic Banking, [online], available at: www.bankalfalah.com/islamic/index.asp, Lahore
3. El-Gamal Mahmoud (2000), A Basic Guide to Contemporary Islamic Banking and Finance, Rice University, Texas
4. Hadzic Fikret (2005), Islamsko Bankarstvo i Ekonomski Razvoj, Ekonomski Fakultet univerziteta u Sarajevu, Sarajevo.
5. Healy consultants Pte Ltd (2003), Islamic Banking, [online], available at: http://www.healyconsultants.com/company-incorporation/islamic-banking.html, Singapore.
6. Iqbal Munawar (2002), Islamic banking and finance, Edward Elgar, UK
7. Iqbal Zamir and Mirakhor Abbas, An introduction to Islamic finance, theory and practice, (2007), John Wiley and Sons, UK
8. Jahangiri Kashif (2009), The risk and rise of Islamic Banking, The international Services Summit, the four seasons hotel, Dublin, available at http://www.ifss2009.com
9. M. Clement and Wilson Rodney (2004), The politics of Islamic finance, Edinburgh university press, Edinburgh.
10. M. Hassan and Marvyn K Lewis (2007), Handbook of Islamic banking, Edward Elgar UK.
11. Muhammad Shehzad Moin (2008), Performance of Islamic Banking and Conventional Banking in Pakistan: A comparative study, University of Skovde
12. Pramanik Atual Huq, first edition 2005, second printing 2007, Islamic banking, how far have we gone, International Islamic university Malaysia, Malaysia

Banking: Private And Public Sector

What is Banking?

Banking can be characterized as the business movement of tolerating and defending cash possessed by different people and elements, and afterward loaning out this cash so as to procure a benefit. Nonetheless, with the progression of time, the exercises secured by banking business have broadened and now different administrations are likewise offered by banks. The financial administrations nowadays incorporate issuance of charge and Visas, giving safe guardianship of significant things, storage spaces, and ATM administrations and online exchange of assets the nation over/world.

Banking business has done marvels for the world economy. The straightforward looking strategy for tolerating cash stores from savers and afterward loaning similar cash to borrowers, banking action energizes the progression of cash to profitable use and speculations. This thus enables the economy to develop. Without banking business, investment funds would sit inert in our homes, the business visionaries would not be in a situation to collect the cash, common individuals envisioning for another vehicle or house would not have the option to buy autos or houses.

In straightforward words, we can say that Bank is a monetary foundation that embraces the financial movement i.e. it acknowledges stores and afterward loans the equivalent to acquire certain benefit.

What is private sector Banking?

The private part banks in India are banks where most of the offers or value is not held by the legislature yet by private investors. In 1969 every single significant bank were nationalized by the Indian government. Nonetheless, since an adjustment in government strategy during the 1990s, old and new private segment banks have reappeared. The private area banks are part into two gatherings by budgetary controllers in India, old and new. The old private area banks existed before nationalization in 1968 and kept their freedom since they were either excessively little or pro to be remembered for nationalization. The new private segment banks are those that have picked up their financial permit since the difference in approach during the 1990s.

Kotak Mahindra Bank is an Indian private area bank headquartered in Mumbai, Maharashtra, India. In February 2003, Reserve Bank of India (RBI) gave the permit to Kotak Mahindra Finance Ltd., the gathering’s leader organization, to continue banking business. It offers banking items and budgetary administrations for corporate and retail clients through an assortment of conveyance diverts and concentrated auxiliaries in the zones of individual money, venture banking, general protection, life coverage, and riches the board. As of April 2019, it is second biggest Indian private part bank by advertise capitalization.

Kotak Mahindra Bank earns approx 24000cr interest in a year and have 4600cr other income and thus have total income of approx 28500cr but the total expenses stand at 23600cr approx over different expenditure heads, thus the net profit stands at somewhere 4000cr approx. Income, expenses and profits are near about same every year over last three years but increasing gradually. In this announcement examination Kotak Mahindra Bank is acquiring enthusiasm of around of Rs.2000cr and is expanding each year. Their profits moved to 51% and other salary is expanding roughly around 20%. Despite the fact that their earnings expanded, alongside it their costs expanded with more than 2000cr consistently. The presumptive worth of bank is Rs.5, where their gainfulness proportion in Net overall revenue in 2017, 2018 what’s more, 2019 was 19.27, 20.68 and 20.32 separately. It’s expanding by 1.28% consistently and due to their increments in net revenue their deals just as their income increments and in this way, their stock cost increments and individuals get enthusiasm for purchasing their stocks as they see their benefits and are persuaded to go for broke. In the fragment of private banking Kotak Mahindra Bank stock merits purchasing with focus of approx. Rs1650 and a misfortune stop on approx Rs 1500. Kotak Mahindra Bank is one of the top banks who still are positive supporters of Nifty.

They have propelled new plans, for example,

• 32 FMP’s during NFO period.
• 3 interim plans just as 2 finished value reserves were propelled during NFO period.

They likewise have disentangled login get to and in addition they began snappy reclamation for speculators with the goal that they could have a sense of security despite the fact that they are happy to go for broke.

What is public sector Banking?

Open Sector Banks (PSBs) are a significant sort of bank in India, where a greater part stake (for example over half) is held by a legislature. The portions of these banks are recorded on stock trades. There is a sum of 12 Public Sector Banks close by 1 state-possessed Payments Bank in India.

The State Bank of India (SBI) is an Indian worldwide, open part banking and budgetary administrations statutory body. It is an administration partnership statutory body headquartered in Mumbai, Maharashtra. SBI is positioned as 236th in the Fortune Global 500 rundown of the world’s greatest companies of 2019. It is the biggest bank in India with a 23% piece of the pie in resources, other than a portion of one-fourth of the absolute advance and stores advertise. The Government of India assumed responsibility for the Imperial Bank of India in 1955, with Reserve Bank of (India’s national bank) taking a 60% stake, renaming it the State Bank of India.

SBI earns approx 243000cr interest in a year and have 36800cr other income and thus have total income of approx 280600cr but the total expenses stand at 279000cr approx over different expenditure heads, thus the net profit stands at somewhere 860cr approx. Income, expenses and profits are near about same every year over last three years but increasing gradually.

In this statement analysis SBI is earning interest of approximately of Rs.242800cr and is increasing every year. Their profit jumped to 10% and other income is Decreased approximately around 17.5%. Even though their incomes increased, along with it their expenses increased with more than 20000cr every year.

The profitability ratio in Net profit margin in 2017, 2018 and 2019 was 8.77, -4.63 and 23 respectively. It made a loss in previous year but recovered and made profit this year r and because of their increases in profit margin their sales as well as their revenue increases and thus, their stock price increases and people get interest in buying their stocks as they see their profits and are convinced to take risks. In the segment of public banking SBI stock is worth buying with target of approx. Rs and a loss stop on approx Rs. SBI is one of the top banks who still are positive contributors to Nifty.

Comparison between Kotak Mahindra Bank and SBI

Subsequent to dissecting benefit and misfortune explanation of the two banks, plainly individuals are more towards putting resources into private bank as opposed to public bank. The EPS of Kotak Mahindra Bank is in positive 25.59 while SBI is in 0.97, in the current year. Despite the fact that both the banks pay rates practically same to representatives, Kotak Mahindra Bank is in benefit while SBI giving piece more compensation than Kotak bank to workers they are still in misfortune.

Kotak Mahindra Bank gives profit payout of 2.1% where SBI bank doesn’t give profits at such a fast rate. . In general the net overall revenue of SBI bank is low while Kotak Mahindra Bank has positive 24% edge. This can be a result of further developed innovation just as less enthusiasm on credits with better profit; individuals are keen on private banking and not open banking. The same number of realize they probably won’t get any cash if private bank is sold at this point they are happy to go for broke and not having any desire to put resources into public bank.

Public banks should think of progressively innovative plans to draw in individuals all together that they put resources into open managing an account with giving them more advantages.

Along these lines there is a tremendous distinction among private and public bank, as open bank is tied up with government and subsequently has certain limitations and needs to work in like manner yet private bank has their very own say by the way they need to run bank despite the fact that they need to adhere to certain principles of government.

History Of Money And Banking

Money is any item or verifiable record that is generally accepted as payment of goods and services and repayment of debt such as taxes, in a particular country Banking in the other hand is an industry that handles cash, credit and other financial transactions as it is defined in Wikipedia.

This essay will help us understand the history of money and banking. Money has close relationship with banking because money is the basis of banking. All banks do operate on money; they may be loaning out or accepting deposit of money.

Money came into existence about 3000 years ago and started as a result of trading activities around the world whereas banking was started with the need of satisfying the market by providing loans. Money can be in form of shells, metal coins or a piece of paper with an historical image. Before money had started to be used, people used to trade in exchanging of goods and services for other goods or service and this was called barter trade. The barter trade was hard to carry out at all times because not all the people could agree at a certain quantity of a commodity to be exchanged with the other and this necessitated the other means of exchange. As a result of such disagreement, commodity money was used. The goods which were commonly used as a means of exchange were salt, cattle, cowrie shells and also animal skins. Cowrie shells were among the items which were used as money for a long time because it was stainless and milk-white. However, those goods were still inconvenient because they were not easy to transport and others were also perishable and could be a disadvantage to traders. Such inconveniences further led some people decided to shape the material into coins because it was not easy for one to carry the items in his/her pocket. Lydia (now western Turkey) became the first region to accept minted coins as currency. The coins were made from the mixture of gold and silver. These currency was very important because it made trading activity more efficient. The values of the coins depended on the materials which were used to make them. Gold coins were most expensive followed by silver. However, the use of coins in Lydia brought competition from China where they advanced and used paper money in 700 B.C and that served as the first paper money to be used in the world. Later in the 16th century, the Europeans adopted the paper currency which was signed by the Governor; it was first used in Canada. It was called as I Owe You (IOUs). It further spread to America in 1862.Thereafter money use spread to the rest of the world and this increased the international trade among different continents. The Europeans spread the use of paper money to their colonies.

Banking on the other hand started a long time ago in Babylon at around 1,800 BC. It started whereby the moneylenders not only accepted deposits and also gave loans to people in the ancient Greece and Rome but also changed money. Banking had become famous in Rome and Greece because they were the monopolies and the owners of the bank immersed a lot of wealth as a result. The famous family of Fugger’s became very famous in Augsburg because they were the thriving bankers from Germany in the 16th century.

Banking industry continued to thrive into England more even as the goldsmiths were being looked upon by people for safety of their wealth. The goldsmiths used to issue written papers indicating the date they would pay the beholder which was convenient to carry around. In 1694, the Bank of England was formed to loan out the money to the government in case they needed especially during the times of wars. The government could sometimes borrow from wealthy individuals in the country. The formation of bank of England opened way for other smaller banks to be formed although they were not allowed to issue their own notes unlike the bank of England. The small banks were formed in different regions in England and which facilitated the issuance first travelers’ cheque.

However, there was bank crisis in 1793, 1814- 1816 and in 1825 which was because people lost their trust in their banking industries and had to withdraw their money from their bank accounts. As time went by, a lot of laws governing banks in England were formulated and some resulted in very many banks with many shareholders to form outside London. Many other small banks moreover merged with the large banks.

Several banks were later formed as a result of increased trade because the money and banking had become efficient to several traders. Some of the family banking-merchants which were formed as a result of favorable conditions and dominance of England sea shipping are Rothschild and Baring families. They emerged in the 18th century.

International banks started ends forth to be formed after the family merchants’ banks in England and there it shifted to China where a draft bank called Rishenchang was formed in 1823. This draft bank got favorable conditions from the Qing dynasty in China which was a nationwide financial system. These draft banks were situated in Russia, Mongolia and Japan to coordinate international trade effectively.

In the 19th century, several governments started to form central banks which could regulate several banking activities.US Federal Reserve was formed in 1913 which was reinstated by the US Congress by passing the Federal Reserve Act in 1913. Some other countries thereafter followed USA are Australia (1920), Colombia (1923), Mexico and Chile (1925), Canada and New Zealand in 1934. Brazil became the last country to form a central bank among the independent nations. African countries later followed the European countries in forming central banks. Central banks have been helping in formulating several securities and laws that help in banking system. All of the commercial banks do work under the rules and regulations put by the central banks. Moreover international banks such as International Monetary Funds and World Bank were formed by international organizations to help by lending the money to member countries and also funding several important projects. Several banking institutions has also adopted mobile banking which is up-to-date application in banking.

A Critical Evaluation of the Competition Laws on the Zambian Banking Sector

1.1 Introduction

The liberal policies in 1991 under the Movement for Multiparty Democracy (MMD) provided a platform for a competitive economy for Zambia which runs on a market economy. This type of economy thrives on the principle of demand and supply with respect to the market. The market is a factor instrument in the determination inter alia prices of goods and services. If any country is to see socio-economic development, the concept of competition becomes a factor, and further the need for regulations to promote competition. Among the major Acts that grace this area of the law is the Competition Act No. 24 of 2010 and Financial and Banking Services Act No. 7 of 2017. These laws are enacted not only to prevent the anti-competitive practices in the country but also generally to promote competition. It goes without saying that the attention given to competition is due to the many advantages that comes with it in relation to the growth of an economy among them innovation, quality goods and services, the lowering of prices, economies of scale, competitive advantage, etc. Competition affects all sectors and the banking sector has not been left out.

The paper critically evaluates the impact or influence that competition laws have on the banking sector with a special bias to bank charges being one of the issues in contention in Zambia. The legal and policy framework among other things will be test to ensure answers to the many questions.

1.2 Research Background

1.2.1 History

For over 20 years until the early 1990s, Zambia was predominantly using interventionist economic policies which entailed extensive government ownership and administrative controls over markets, including financial and banking markets. Interventionist policies, combined with a steep fall in the external terms of trade, which led to economic decline, and a major programme of market oriented economic reforms was adopted in the early 1990s that included financial sector reforms.

The financial system in the mid-1960s was dominated by foreign commercial banks mainly serving the credit needs of foreign and expatriate businesses. The general purpose of financial policies after 1968 was to enable government to exert greater control over the financial system and to ensure that credit allocation was more supportive of the government’s overall economic strategy. Financial policies consisted of three main parts; nationalization of foreign financial institutions, establishment of government owned banks, development of financial institutions, administrative controls over interest rates and to a limited extent, loan allocation.

ZANACO was established by the government in 1969. Its aim included the provision of credit to Zambians and the extension of bank branches into the rural areas. The government, however, soon realized that ZANACO would be unable to expand rapidly enough to meet the expectations placed on it, and in 1971 announced plans to nationalize all the foreign financial institutions, including the commercial banks.

The objective of nationalization was to control the ’commanding heights’ of the economy and to prevent capital flight. Most of the non-banking financial institutions were nationalized and amalgamated to form financial parastatals such as the State Insurance Corporation and Zambia National Building Society (ZNBS). But with one exception (the Nederland Bank) the banks were not nationalized because the foreign banks threatened to withdraw their expatriate management and the Zambian government was not confident that it could manage the banks without them.

Several other banks and non-banking financial institutions were set up by the government to serve various purposes. For instance, the Indo-Zambia Bank was established in 1984 as a joint venture between the government and three state owned Indian banks, and in 1987 the Zambia Export and Import Bank was founded to supply trade finance. Development finance institutions were set up to provide concessional and long-term finance to priority sectors with funds mobilized from the government or external sources. These included; the Zambia Agricultural Development Bank and Agricultural Finance Company, which were amalgamated to form the Lima Bank in 1987, and the Development Bank of Zambia.

The third part of the government’s financial policies consisted of the imposition of administrative controls over financial institutions. With the exception of interest rates however, direct administrative controls over resource allocation in the banking system were not extensively employed by the government as there were no detailed sectorial credit guidelines. The government attempted to channel more credit towards Zambians by requiring banks to seek permission from Bank of Zambia (BOZ) before lending to foreign companies and by imposing lower maximum gearing ratios on foreign borrowers than Zambian borrowers. This failed to induce a major expansion of lending to private sector Zambians, and in an attempt to rectify this, the government established a credit guarantee scheme for small scale industries in 1987.

In the beginning of the mid-1960s, the deposit and lending rates of the commercial banks were controlled by the Bank of Zambia which maintained a policy of low interest rates in order to minimize borrowing costs. Until 1984, commercial bank deposit rates were held within a range of 3.5 percent and 8.5 percent and lending rates between 7 percent and 13 percent. In addition, a preferential rate was stipulated for agricultural lending from 1978. Nominal rates were generally held below the rate of inflation, which averaged 10 per cent during the 1970s and 20 percent between 1980 and 1984.

The Zambian private sector first entered the banking industry in 1984 when Meridien Bank, was founded. By mid-1995 there were around 13 banks owned by local private sector investors operating in Zambia. Most of these banks began operating during the first half of the 1990s. At a time when most sectors of the economy were suffering from recession, the banking sector experienced remarkable growth.

The first local banks in Zambia were established during a period when financial policies were not particularly conducive to private sector investment in banking. Interest rates were tightly controlled, together with high reserve requirements, depressed profit margins, and bank licenses were very difficult to obtain, apparently because of political considerations rather than any stringency in the legal requirements of the Banking Act. Nevertheless opportunities did exist to exploit the gaps left in banking markets by the inefficient provision of services and the conservative orientation of the established public sector and foreign banks, as was demonstrated by the rapid growth of the economy. Some local investors were able to obtain banking licenses, including Andrew Sardonnis who founded Meridien. Four more banks were set up in the second half of the 1980s, including Finance Bank in 1987 and Capital Bank in 1989.

After the Movement for Multiparty Democracy (MMD) took over power at the 1991 elections it became much easier to obtain a banking license. Furthermore, inflation had reduced the real value of the minimum capital requirement to around $300,000 in 1991, and little more than $50,000 by the end of the following year. Hence the entry requirements into the banking industry were substantially reduced and this allowed around nine new banks to be set up by local private investors, and to commence operations between 1991 and 1995.

The primary motivation for the establishment of most of these banks was the large profits to be earned from foreign exchange dealing, and from investing borrowed money in treasury bills, rather than from conventional lending activities. The liberalization of foreign exchange markets beginning in 1990 and extended in 1992 allowed the banks to deal in foreign exchange and fund external trade. The large government domestic borrowing requirement combined with the introduction of market determined interest rates led to very high Treasury bill interest rates; 91-day Treasury bill yields rose to 182 percent in June 1993 after the Treasury bill auction was introduced. The extent to which the local banks relied on treasury operations to generate their earnings is indicated by the fact that government securities were among the largest component of the asset portfolios of almost all of the local banks (and some of the foreign banks as well) between 1992 and 1993.

1.2.1 The Current Situation

On the 18th May 2018, the date when the Banking and Financial Services Commencement Order Statutory Instrument No. 38 of 2018 was signed, brought into effect the Banking and Financial Services Act No.7 of 2017 reinforcing competition in the Banking Sector. This has been continued from the previous law and new enhancements has been made. The endorsement of the statutory instrument was to bring to an end of the Banking and Financial Services Act of 1994.

Similar to the old banking code, the new banking code prohibits financial service providers from engaging in collusive conduct in relation to interest rate levied on deposits; the interest rate or charge levied on credit facilities; the amount charged on financial service provided; the provision of, or refusal to provide banking or financial services to a person and the division of markets by allocating customers.

Anti-competitive conduct is a criminal offence and a financial service provider found guilty is liable to a fine not exceeding three hundred thousand penalty units or to imprisonment for a term not exceeding three years, or to both. And of course the prohibition of collusive conduct does not mean that financial service providers cannot collaboratively work together. Hence the new banking code has continued exempting the following activities from the definition of collusive conduct;

1. The syndication or agreement for the provision of banking or financial services to a person by two or more financial service providers;
2. The underwriting or distribution of security by a bank or financial institution or a group of persons, including a financial service provider
3. The exchange of statistics or audit information,
4. The development and use of systems, forms, methods, procedures and standards,
5. The use of common facilities, joint research and the development.

The above listed are the situations where financial service providers are allowed to work together. On the other hand, the Act of 2017 provides that a financial service provider shall not engage in anti-competitive practices and that a financial service provider that enters into any agreement or makes a decision or engages into a concerted practice whose objective or effect is to prevent, restrict or distort competition to an appreciable extent in the financial sector shall be considered to have engaged in an unsafe or unsound practice.

However, anti-competitive behavior unfortunately does not permit the market forces to operate and dictate the prices. Consumers are affected when competition among suppliers are eliminated and further reduces competitiveness, thereby negatively impacting on the overall performance of a country’s economy.

1.3 Statement of the Problem

Competition Law is a law that promotes or seeks to maintain market competition by regulating anti-competitive conduct of companies. The Competition and Consumer Protection Act of 2010 and the Banking and Financial Services Act No. 7 of 2017 are important for the regulation of anti-competition in the Zambian banking sector provided by section 42 of the CCPA. This is because it compels the suppliers of goods and services to offer the least possible price or the best possible service for the going price.

However, with respect to the banking sector, this seems to be a legal paradox as Zambia has seen an increase in bank charges despite having provisions of section 8 of the CCPA prohibiting anti-competitive practice, agreement or decision for the setting of prices. Similarly, BFSA spells out anti-competitive activities and consumer protection in the financial sector under Section 101 (1) by prohibiting collusion between financial institutions in deciding prices of bank products and services. It does seem as though this sector lacks the efficacy of the law regulating competition in Zambia and this tends to bring concerns as to whether the competition law has an impact on the banking sector. This is because it has reached the extent of government proposing an intervention through the Minister of Finance, Hon. Margaret Mwanakatwe last year in 2018 for a uniform bank charge for all banks in Zambia. And in the bid of regulating the bank charges in Zambia, this step has received negative response from the Bank Association of Zambia as a violation of the set competition laws.

Hence, the main purpose of this study is to critically evaluate the law as relating to the banking sector in Zambia.

1.4 Research Objectives

1.4.1 General Objectives

Competition is healthy in a nations’ economy that desires to better the lives of its people and the wealth. The paper will generally focus on the impact and influence of competition laws on the banking sector.

1.4.2 Specific Objectives

1. To examine the laws that address competition in the banking sector.
2. To establish the effectiveness of these competition laws in the banking sector.
3. To establish the extent to which competition laws are applicable in Zambia.

1.5 Research Questions

1. What legal and policy framework addresses competition law in the banking sector in Zambia?
2. How effective is the law that addresses competition law in the banking industry in Zambia?
3. To what extent is the competition law applicable to the banks in Zambia?

1.6 Significance of Study

This study is premised on the idea that competition is necessary for the growth of the banking sector and the economy at large. This study is important as it necessitates changes in the law that will provide for uniform bank transaction charges for all banks in Zambia combating against the exorbitant bank transaction charges. Not only does this study provide answers to the many question that we may have but the research also adds to the body of knowledge in areas of how competition laws influences the banking industry. The details of this study will inculcate in-depth knowledge and understanding of competition and its relevance to the banking sector.

This study will further enhance literature as it highlights pertinent and salient features of the Banking and Financial Services Act No.7 of 2017 with respect to competition and banking practices and its relevance to the growth of the banking sector and the economy at large.

1.7 Scope of the study

This research is aimed at analyzing whether competition law has effectively impacted on the banking sector. The Banking and Financial Services Act No.7 of 2017 is the legal framework adopted to regulate the banking and financial service providers alongside the Competition Act of 2010 which provides against anti-competitive practices but does not regulate bank charges on withdrawals. The emergence of more financial institutions was meant to create competitiveness with respect to quality and pricing of goods and services provided by the banking sector.

1.8 Limitation of the study

The problems encountered during this research bare;

1. Finance: Financial constraints for the cost of transport, internet services and other materials required for the project.
2. Time: Time was very difficult to allocate with other work and school programs
3. Ignorance: Some personnel from some of the banking industry had little knowledge about competition in the banking industry.
4. Skepticism: Some personnel show little interest and mistrust with researcher in relation to the subject matter.

1.9 Summary of Chapters

Chapter One

This chapter will commence with introduction, the background, and statement of the problem, research objectives and the significance of study. Chapter 1 of this paper states the impact or influence that competition laws have on the banking sector with a special bias to bank charges being one of the issues in contention in Zambia. The legal and policy framework among other things will be test to ensure answers to the many questions.

Chapter Two

This chapter contains Literature review and theoretical framework. The works of other scholars in this area will be analyzed in the pursuit to analyze the gap. It will briefly compare between the legal scholars who have propounded on the above subject. In making comparison between legal scholars, a broader perspective is taken into consideration as it also considers other factors affecting competition in the banking industry with an emphasis on the current consumer exploitation by banks.

Chapter Three

Methodology The research ultimately will use qualitative and quantitative methods. In addition to a questionnaire, interviews will be conducted. This chapter specifically looks at the research methodology which takes a scientific or systematic approach that will lead to verification the facts aforementioned in this research. This chapter aims at analyzing the research methodology used in this study, it explains the sample selection and also further aims to describe the procedure used in designing the research mechanisms and method of data collection. In this chapter, the results of the data analysis are presented. The data was collected and respectively processed in response to the problem posed in chapter one of this research. The findings in this chapter aims to provide an explanation of the procedures used to analyze the data and potential bias and limitations.

Chapter Four

DATA analysis. This chapter analyses the data to get to the answers of some of the concerns that are borne in the mind of the researcher. After gathering of sufficient information, a resolve is made in this chapter in comparison with the information gathered. A combination of the proponents and a critique and discussion.

Chapter Five

This chapter contains general Conclusion and Recommendations are given in relation with the research topic to provide as solutions to the given problem. Finally, a conclusion will be made and commendations made.

What are Ethics and their Importance in Global Banking and Business Today?

Ethics is a meaning that can change from one person to another. What could be ethic for one individual could not be for others. Ethics is a moral principle that rules over an individual’s behavior or judgment. Basically, ethics is about a person’s judgement about right or wrong, how they evaluate the decisions, and how they can react in a determine moment. Ethics is a very complicated subject because people think in different ways in different scenarios.

Usually, ethics in business is rule by a code which individuals most follow. Ethics in business is how you act in a determine deal, and how you represent your organization or your company. Ethics in business can have a positive or negative impact in the businesses core value. Ethics is very important in the global banking industry because the ethic of the bank can be affected in the trust of customers and more importantly the reputation of the bank itself, since no one would like to be in business with a bank that has a record of not being ethical and not keeping their promises.

This case is about the Security and Exchange Commission (SEC) finding guilty Petrobras Brazileiro S.A. an oil company control by the Brazilian Government, of filing erroneous financial statements that lead U.S investors to invest in the company. This case also involved how the company was involved in one the biggest bribery scandals in Latin America. “Their executives were accepting payments from contractors to inflate the cost of Petrobras’ infrastructure projects by billions of dollars. The companies executing those projects paid billions in kickbacks to the Petrobras executives, who shared the illegal payments with Brazilian politicians who helped them obtain their high-level positions at Petrobras.”(‘Petrobras Reaches Settlement with SEC for Misleading Investors’ 2018). When Petrobras got those payments, they recorded them as money used to buy more assets resulting in around $2.5 billion overstatement of assets. The SEC fined Petrobras with around $1.8 billion in penalties.

There were some people involved in this case. To begin, Petrobras, the executives’ team and the politicians that were bribed. In the other hand, we have the Security and Exchange Commission (SEC) who was the agency who charged the Brazilian company. Also, the prosecutor in this case were Spencer Bendell, Lance Jasper, Rhoda Chang, and Maria Rodriguez. The Federal Bureau of Investigation (FBI), the Brazilian Federal Prosecution Service, the Brazilian Federal Police , and the Brazil’s Comissao de Valores Mobiliarios were also part of the investigation. All of them, being key players to arrive to the final sentence. I would like to mention that this case of bribery is part of a bigger case that end up with the former president of Brazil Luis Inacio Lula Da Silva in jail, more specifically, with a 12 years sentence.

Investment Essay

Introduction

In the dynamic and ever-evolving landscape of personal finance, one principle stands tall as a beacon of hope for individuals seeking financial prosperity – investments. Just as the ancient sages wisely planted seeds for a bountiful harvest, the modern investor sows seeds of wealth to reap a future of abundance. Investments, a cornerstone of financial planning, have the potential to transform one’s financial standing from ordinary to extraordinary. This essay delves into the significance of investments, shedding light on their role as a catalyst for wealth accumulation, financial security, and growth. As we embark on this journey into the realm of financial prowess, we will explore the multiple dimensions of investments, unearthing the advantages and disadvantages that come hand in hand with this potent financial instrument.

Importance of Investing

Investing is not merely a financial activity; it is an essential cornerstone for building a secure and prosperous future. By allocating funds wisely into various investment avenues, individuals and businesses can unlock a plethora of unique benefits that go beyond monetary gains. One crucial aspect of investing is the potential to beat inflation, allowing investors to preserve and grow their purchasing power over time. Additionally, investing empowers individuals to accomplish their long-term financial goals, whether it be saving for retirement, funding education, or realizing a dream project. Moreover, investing fosters economic growth and stability by channeling capital into productive ventures, driving innovation, and creating job opportunities. As we delve deeper into the world of investments, it becomes evident that its significance reaches far beyond the realm of finance.

One of the most remarkable advantages of investing lies in its ability to combat the detrimental effects of inflation. Over time, the purchasing power of money erodes due to rising prices of goods and services. By diligently investing in assets such as stocks, bonds, real estate, or precious metals, individuals can potentially outpace inflation and ensure that their wealth does not diminish in value. This not only safeguards their financial standing but also provides a solid foundation for future growth and financial freedom.

Furthermore, investing is a powerful tool for turning dreams into reality. Whether it’s saving for retirement, purchasing a home, or funding a child’s education, investing strategically and consistently can accelerate the achievement of these long-term goals. With the compounding effect, even modest contributions can grow significantly over time. This compounding effect allows investments to snowball, multiplying the initial capital and generating substantial returns. Thus, investing empowers individuals to realize their aspirations and secure their future, instilling a sense of confidence and stability in their lives.

Beyond individual benefits, investing plays a pivotal role in driving economic progress. By allocating capital to productive enterprises, investors fuel innovation, research, and development. This infusion of funds nurtures entrepreneurship and allows businesses to expand, which, in turn, creates job opportunities and boosts economic growth. A thriving investment ecosystem fosters a cycle of prosperity, wherein successful businesses and investments reinvest their profits, further stimulating the economy. Ultimately, a robust and sustainable economy benefits society at large, elevating the overall standard of living and promoting a more prosperous and equitable world.

Disadvantages of Investments

While investments offer the potential for financial growth and security, they also come with unique disadvantages that investors should be aware of. One significant disadvantage is the inherent risk associated with many investment vehicles. The value of investments can fluctuate due to market volatility, economic downturns, or company-specific issues. As a result, investors may experience significant losses or even lose their entire investment. This risk can be especially pronounced for high-risk, high-reward investment options such as individual stocks or speculative assets, making it essential for investors to carefully assess their risk tolerance and diversify their portfolios.

Another disadvantage of investments lies in the lack of immediate liquidity. Unlike keeping cash in a savings account, where funds can be easily accessed, certain investments may require time to sell or convert into cash. For instance, real estate investments may take months or even years to sell at a desirable price. This lack of liquidity can be problematic during emergencies or sudden financial needs, potentially forcing investors to sell their assets at unfavorable prices or incur penalties. Striking a balance between investments with varying degrees of liquidity is crucial to ensure adequate financial flexibility.

Investing also entails a level of complexity and expertise that can be overwhelming for some individuals. Not all investors have the time or knowledge to thoroughly research and understand the intricacies of different investment opportunities. Making uninformed or hasty investment decisions can lead to suboptimal outcomes or even substantial financial losses. Additionally, investment markets and regulations can be subject to change, requiring constant monitoring and adjustments to one’s investment strategy. The need for ongoing education and awareness can be a challenge for investors who are already juggling multiple responsibilities, making it essential to seek professional advice or choose simpler investment options when necessary.

Financial and Economic Meaning of Investment

Investment, in the realm of finance and economics, signifies the strategic allocation of financial resources into assets or projects with the aim of generating future returns or benefits. It entails foregoing immediate consumption in favor of potential long-term gains. Diverse forms of investments, such as stocks, bonds, real estate, and business ventures, offer opportunities for wealth accumulation, income generation, and risk diversification. An essential concept in modern economies, investment plays a pivotal role in stimulating economic growth, fostering innovation, and enhancing overall prosperity. By facilitating capital formation and encouraging productive endeavors, investment fuels economic progress and shapes the trajectory of societies worldwide.

Conclusion

In conclusion, embracing the path of investment opens a world of opportunities, financial growth, and wealth accumulation. By diversifying portfolios, staying informed about market trends, and exercising patience, investors can navigate the volatile waters of the financial landscape with confidence. The journey of investment requires both strategic planning and an adaptable mindset, allowing individuals to harness the power of compounding returns and make their money work for them. While risks are inherent, they are outweighed by the potential for substantial rewards. Ultimately, adopting a disciplined and informed approach to investment can pave the way to a secure and prosperous future.