Understanding Bank Accounts: A Comprehensive Guide

Posted on Aug 29, 2024 in Economy

Liability Operations of Banks

Banking operations are classified into three main groups:

Passive Operations

These operations provide funds to banks, typically held in checking and savings accounts, time deposits, and certificates of deposit. They are included in the liabilities of the bank’s balance sheet.

• Current Accounts (Checking Accounts)
• Savings Accounts
• Time Deposits
• Certificates of Deposit

Credit Operations (Concessions)

These are credit transactions of money or availability provided by banks to their clients. They are listed on the assets side of the balance sheet.

• Credits
• Loans
• Discount Effects
• Endorsements

Service Operations

These are additional benefits linked to active and passive operations, for which institutions typically charge a commission.

• Mediation: Transfers, money orders, foreign currency trading, etc.
• Custody: Deposits of securities, cash, etc.
• Services: Reports, hire, rents, taxes, debiting of bills, accounting, administrative operations, statistics, account opening, etc.

Opening a Bank Account

Any person or entity can open a savings or current account. No one can force a bank to open an account. Individuals must have full legal capacity, typically being over 18 years old and in full possession of their faculties.

The Process of Opening a Bank Account

1. Application: This should include personal data, address, and marital status. If the account is joint, all authorized holders must sign.
2. Registration: This verifies the correctness of any operation and signatures.
3. Verification of Documents: Documents are registered in the commercial market, specifying what each registered member can do.
4. Initial Deposit: The client provides an initial amount of money to open the account and begin the business relationship with the bank.
5. Documentation Delivery: The bank provides the client with the application form, conditions, and fee schedules.

Types of Accounts

• Individual Accounts: Issued in the name of one person, the sole owner of the account.
• Joint Accounts (Indistinct): Opened on behalf of two or more persons who can access funds independently with a single signature.
• Joint Accounts (Joint): Require the signatures of all owners to dispose of the funds.

Operation of Bank Accounts

Bank account formats are typically divided into three main parts: Debit, Credit, and Balance.

• Credits: Payments credited to the client’s account.
• Debits: Charges or debits against the client’s account.
• Deposits: Cash deliveries made by the holder to be immediately credited to their account, including checks, transfers, etc.
• Withdrawals: Payments or arrangements made by the owner, such as checks against their account, transfer orders, etc.

Banks often allow clients to perform operations that result in a negative balance, known as an overdraft or being “in the red.”

Calculating the Balance

• The balance is calculated and recorded for each transaction.
• The initial deposit is the first balance.
• Successive balances are determined by adding to or subtracting from the previous balance.

Account Code

The account code identifies any bank account where money is deposited. Its structure is:

• Entity (4 digits)
• Office (4 digits)
• DC (2 digits)
• Account Number (10 digits)

Cancellation or Closing the Account

This refers to the discontinuation of the relationship between the bank and the client.

The Check

A check is a document containing an unconditional order from its maker (the current account holder who signs the check) to a bank to pay the holder (the person who possesses the check) a specific sum of money.

The main function of a check is to serve as a means of payment, avoiding the physical movement of money.

Requirements of a Check

• Essential Requirements
• Functional Requirements

Classes of Checks

1. Bearer Check: Can be cashed or deposited into an account by anyone who presents it.
2. Order Check: Can only be cashed by the person to whom it is issued or deposited into their account with proper identification and signature on the back.
3. Crossed Check: The holder of a crossed check can only cash it if they are a customer of the bank. Non-customers must deposit it into their account.
4. Certified Check: The bank certifies that the issuer has sufficient funds, which are retained to guarantee payment.
5. Check-Stop: Issued by the same bank and rarely used; requested by the client when they don’t have their checkbook and need to withdraw funds from their checking account.

Savings Accounts and Current Accounts