BAF 316- Cooperative Banking

1.0 INTRODUCTION This unit will take a look at definition, characteristics and crises in the Political Economy of Banking. 2.0 OBJECTIVES By the end of this unit, you should be able to: i. Define political Economy of Banking ii. Identify the characteristics of Political Economy of Banking iii. Discuss Structure of Banking 3.0 MAIN CONTENT 3.1 MEANING OF POLITICAL ECONOMY OF BANKING The structure and regulation of a country’s financial markets and institutions are the focus of much policy attention for a number of economic and political reasons. Banks and other financial institutions encourage and collect savings that finance a 21 country’s economic growth. By allocating the savings to enterprises and monitoring the use of the funds, these institutions and markets play an integral part of the corporate governance system that ultimately affects the productivity of resources throughout the economy. Banks and other financial institutions also play a key role in transmitting the government’s monetary and credit policies to the rest of the economy. Parts of the financial sector are effectively regulated as means to provide subsidized credit or services to targeted groups (including the government itself) and to protect particular groups (from, for example, competition, hostile takeovers, or expropriation). Political economy is the interplay between economics, law and politics, and how institutions develop in different social and economic systems, such as capitalism, socialism and communism. Political economy analyzes how public policy is created and implemented. Political economy was the original term used for studying production and trade, and their relations with law, custom, and government, as well as with the distribution of national income and wealth. Political economy originated in moral philosophy. It was developed in the 18th century as the study of the economies of states, or polities, hence the term political economy.