Slide 4 of 26
Our Working Group concluded that it was necessary to use the term “banking” in a generic and functional sense without any relation to the formal designations and classifications of particular entities under applicable laws. For our purposes, a bank, a savings bank, a savings and loan association, a trust company, a credit union, a building and loan society, a small loan company, etc., are all involved in “banking.” Further, securities brokerage firms, mutual funds, pension plans, credit card issuers, and other entities that are not traditionally labeled as “banks” are functionally involved in “banking” to the extent that they take deposits, transfer funds to third parties, or make loans (as they in fact routinely do.) Nor did we exclude functions from the concept of “banking” because they are performed by governmental institutions and quasi-governmental institutions rather than by purely private institutions, or because they are performed on a secondary market level rather than a primary market level. A quasi-governmental entity that funds loans that are essentially brokered to it through the secondary market by primary market lenders is performing a “banking” function, just as much as a traditional privately owned bank in the primary market. Indeed, since such a governmental loan system is quite likely in developed countries to be highly automated and conducted largely electronically, it is even more directly related to the issues addressed through this Project.