Types and Functions of Banks in the Eu Economy

Abstract

The notion of a universal bank has always been prominent since the 1989 reform of the banking system, both in relation to the doctrine and legislation. A universal bank is thought of as a bank empowered to perform all banking operations, which is unlimited territorially and in terms of its scope. It can act autonomously and on equal terms with other entities on the capital market. In other words, this is a bank which is licensed to perform any banking operation and is not restricted by the kind of performed services. It can also freely operate on the monetary and capital markets.

Due to the two-tier structure of the banking system in Poland, the most fundamental division is that between the Polish National Bank as the central bank and commercial banks. There are also investment, special, and cooperative banks. Legally, banks can be divided according to the following criteria: organisational-legal form, location of the head office, and the head office of the bank founders.

Additionally, a criterion related to the nature of capital ownership can be introduced, and therefore one can distinguish: state, communal, private, foreign, or mixed-capital banks.

The functions of a bank as a broker on the financial market are connected with money exchange, reception of deposits, provision of credits, and transport of money.

In the economy of the European Union there is no predetermined bank model, nor are there types of banks thus determined. Therefore, the member states can freely shape their legislation, which determines the typological division of banks and their functions in the economy of the state. Every member country of the EU, including Poland, there are multiple commercial banks which function as universal, investment, special, and cooperative banks. Significantly, there are central banks on top of the two-tier banking structure of every individual country.