Assignment Example | Topics and Well Written Essays - 750 words - 118

Assignment Example The banking system has played an important role in home mortgages due to their role that has grown in turn in home mortgages to securities. The chain involved in securitization starts with origination of mortgages and sold to one or more financial entities before they end up to mortgage loans that are sold to investors. The value of security obtain is related to value of mortgage loans that are used to back up security paid with interest. The backed up security is paid in interest and those that own homes pay the mortgage loans. The process and stages that shadow banking is involved leads to generation of finance. This makes the process essential in generation of finances. There are differences and similarities that occur in the banks. In similarity, both the banks are seen to perform credit intermediation. However, there are varied differences that occur in the banks. In convention al banks, there is occurrence under the same roof while in shadow banking, giving out of credits occurs through a chain of entities. This makes operation in shadow banking to be more complex than in conventional banks. Another difference that can be noted between the two banks is on the regulations that are involved in acquiring credit. Conventional banks are strictly regulated having access to central bank funding and deposit insurance schemes. In shadow banks, there is little or no regulation since they are not able to access funding from central banks. Shadow banking is also based on wholesale funding. The difference that the banks have on the source of funding also is brought out in conventional banking. Universal banking refers to the condition in which are allowed to give a variety of services to their customers. The banks are not just restricted to provision of services related to loans and savings but also involved in in other services such as investments. In baking category there is banking which considers different aspects.