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  • Sugar

    Sugar is the generic name for sweet-tasting, soluble carbohydrates, many of which are used in food. Simple sugars, also called monosaccharides, include glucosefructose, and galactose. Compound sugars, also called disaccharides or double sugars, are molecules made of two bonded monosaccharides; common examples are sucrose (glucose + fructose), lactose (glucose + galactose), and maltose (two molecules of glucose). White sugar is a refined form of sucrose. In the body, compound sugars are hydrolysed into simple sugars.

    Longer chains of monosaccharides (>2) are not regarded as sugars and are called oligosaccharides or polysaccharidesStarch is a glucose polymer found in plants, the most abundant source of energy in human food. Some other chemical substances, such as ethylene glycolglycerol and sugar alcohols, may have a sweet taste but are not classified as sugar.

    Sugars are found in the tissues of most plants. Honey and fruits are abundant natural sources of simple sugars. Sucrose is especially concentrated in sugarcane and sugar beet, making them ideal for efficient commercial extraction to make refined sugar. In 2016, the combined world production of those two crops was about two billion tonnes. Maltose may be produced by malting grain. Lactose is the only sugar that cannot be extracted from plants. It can only be found in milk, including human breast milk, and in some dairy products. A cheap source of sugar is corn syrup, industrially produced by converting corn starch into sugars, such as maltose, fructose and glucose.

    Sucrose is used in prepared foods (e.g., cookies and cakes), is sometimes added to commercially available ultra-processed food and beverages, and is sometimes used as a sweetener for foods (e.g., toast and cereal) and beverages (e.g., coffee and tea). The average person consumes about 24 kilograms (53 pounds) of sugar each year. North and South Americans consume up to 50 kg (110 lb), and Africans consume under 20 kg (44 lb).[1]

    As free sugar consumption grew in the latter part of the 20th century, researchers began to examine whether a diet high in free sugar, especially refined sugar, was damaging to human health. In 2015, the World Health Organization strongly recommended that adults and children reduce their intake of free sugars to less than 10% of their total energy intake and encouraged a reduction to below 5%.[2] In general, high sugar consumption damages human health more than it provides nutritional benefit and is associated with a risk of cardiometabolic and other health detriments.[3]

    Etymology

    [edit]

    The etymology of sugar reflects the commodity’s spread. From Sanskrit śarkarā, meaning “ground or candied sugar”, came Persian shakar and Arabic sukkar. The Arabic word was borrowed in Medieval Latin as succarum, whence came the 12th century French sucre and the English sugar. Sugar was introduced into Europe by the Arabs in Sicily and Spain.[4]

    The English word jaggery, a coarse brown sugar made from date palm sap or sugarcane juice, has a similar etymological origin: Portuguese jágara from the Malayalam cakkarā, which is from the Sanskrit śarkarā.[5]

    History

    [edit]

    Main article: History of sugar

    Ancient world to Renaissance

    [edit]

    Sugar cane plantation

    Asia

    [edit]

    Sugar has been produced in the Indian subcontinent[6] for thousands of years. Sugarcane cultivation spread from there into China via the Khyber Pass and caravan routes.[7] It was not plentiful or cheap in early times, and in most parts of the world, honey was more often used for sweetening.[8] Originally, people chewed raw sugarcane to extract its sweetness. Even after refined sugarcane became more widely available during the European colonial era,[9] palm sugar was preferred in Java and other sugar producing parts of southeast Asia, and along with coconut sugar, is still used locally to make desserts today.[10][11]

    Sugarcane is native of tropical areas such as the Indian subcontinent (South Asia) and Southeast Asia.[6][12] Different species seem to have originated from different locations; Saccharum barberi originated in India, and S. edule and S. officinarum came from New Guinea.[12][13] One of the earliest historical references to sugarcane is in Chinese manuscripts dating to the 8th century BCE, which state that the use of sugarcane originated in India.[14]

    In the tradition of Indian medicine (āyurveda), sugarcane is known by the name Ikṣu, and sugarcane juice is known as Phāṇita. Its varieties, synonyms and characteristics are defined in nighaṇṭus such as the Bhāvaprakāśa (1.6.23, group of sugarcanes).[15]

    Sugar remained relatively unimportant until around 350 AD when the Indians discovered methods of turning sugarcane juice into granulated crystals that were easier to store and transport. It was then considered as ‘sweet spice’ and Indian traders started trading sugar outside India.[16] The Greek physician Pedanius Dioscorides attested to the method in his 1st century CE medical treatise De Materia Medica:

    There is a kind of coalesced honey called sakcharon [i.e. sugar] found in reeds in India and Eudaimon Arabia similar in consistency to salt and brittle enough to be broken between the teeth like salt,

    — Pedanius Dioscorides, Materia Medica, Book II[17][18]

    In the local Indian language, these crystals were called khanda (Devanagari: खण्ड, Khaṇḍa), which is the source of the word candy.[19] Indian sailors, who carried clarified butter and sugar as supplies, introduced knowledge of sugar along the various trade routes they travelled.[20] Traveling Buddhist monks took sugar crystallization methods to China.[21] During the reign of Harsha (r. 606–647) in North India, Indian envoys in Tang China taught methods of cultivating sugarcane after Emperor Taizong of Tang (r. 626–649) made known his interest in sugar. China established its first sugarcane plantations in the seventh century.[22] Chinese documents confirm at least two missions to India, initiated in 647 CE, to obtain technology for sugar refining.[23]

    Europe

    [edit]

    Two elaborate sugar triomfi of goddesses for a dinner given by the Earl of Castlemaine, British ambassador in Rome, 1687

    Nearchus, admiral of Alexander the Great, knew of sugar during the year 325 BC because of his participation in the campaign of India led by Alexander (ArrianAnabasis).[24][25] In addition to the Greek physician Pedanius Dioscorides, the Roman Pliny the Elder also described sugar in his 1st century CE Natural History: “Sugar is made in Arabia as well, but Indian sugar is better. It is a kind of honey found in cane, white as gum, and it crunches between the teeth. It comes in lumps the size of a hazelnut. Sugar is used only for medical purposes.[26] Crusaders brought sugar back to Europe after their campaigns in the Holy Land, where they encountered caravans carrying “sweet salt”. Early in the 12th century, the Republic of Venice acquired some villages near Tyre and set up estates to produce sugar for export to Europe. It supplemented the use of honey, which had previously been the only available sweetener.[27] Crusade chronicler William of Tyre, writing in the late 12th century, described sugar as “very necessary for the use and health of mankind”.[28] In the 15th century, Venice was the chief sugar refining and distribution center in Europe.[14]

    There was a drastic change in the mid-15th century, when Madeira and the Canary Islands were settled from Europe and sugar introduced there.[29][30] After this an “all-consuming passion for sugar … swept through society” as it became far more easily available, though initially still very expensive.[31] By 1492, Madeira was producing over 1,400,000 kilograms (3,000,000 lb) of sugar annually.[32] Genoa, one of the centers of distribution, became known for candied fruit, while Venice specialized in pastries, sweets (candies), and sugar sculptures. Sugar was considered to have “valuable medicinal properties” as a “warm” food under prevailing categories, being “helpful to the stomach, to cure cold diseases, and sooth lung complaints”.[33]

    A feast given in Tours in 1457 by Gaston de Foix, which is “probably the best and most complete account we have of a late medieval banquet” includes the first mention of sugar sculptures, as the final food brought in was “a heraldic menagerie sculpted in sugar: lions, stags, monkeys … each holding in paw or beak the arms of the Hungarian king“.[34] Other recorded grand feasts in the decades following included similar pieces.[35] Originally the sculptures seem to have been eaten in the meal, but later they become merely table decorations, the most elaborate called trionfi. Several significant sculptors are known to have produced them; in some cases their preliminary drawings survive. Early ones were in brown sugar, partly cast in molds, with the final touches carved. They continued to be used until at least the Coronation Banquet for Edward VII of the United Kingdom in 1903; among other sculptures every guest was given a sugar crown to take away.[36]

    Modern history

    [edit]

    See also: Triangular trade

    Sugar cane; demand for sugar contributed to creating colonial systems in areas where cultivation of sugar cane was profitable.

    Hacienda La Fortuna. A sugar mill complex in Puerto Rico, painted by Francisco Oller in 1885, Brooklyn Museum

    In August 1492, Christopher Columbus collected sugar cane samples in La Gomera in the Canary Islands, and introduced it to the New World.[37] The cuttings were planted and the first sugar-cane harvest in Hispaniola took place in 1501. Many sugar mills had been constructed in Cuba and Jamaica by the 1520s.[38] The Portuguese took sugar cane to Brazil. By 1540, there were 800 cane-sugar mills in Santa Catarina Island and another 2,000 on the north coast of Brazil, Demarara, and Surinam. It took until 1600 for Brazilian sugar production to exceed that of São Tomé, which was the main center of sugar production in sixteenth century.[30]

    German chemists Andreas Sigismund Marggraf (left) and Franz Karl Achard (right) both laid the foundation of the modern sugar industry.

    Sugar was a luxury in Europe until the early 19th century, when it became more widely available, due to the rise of beet sugar in Prussia, and later in France under Napoleon.[39] Beet sugar was a German invention, since, in 1747, Andreas Sigismund Marggraf announced the discovery of sugar in beets and devised a method using alcohol to extract it.[40] Marggraf’s student, Franz Karl Achard, devised an economical industrial method to extract the sugar in its pure form in the late 18th century.[41][42] Achard first produced beet sugar in 1783 in Kaulsdorf, and in 1801, the world’s first beet sugar production facility was established in CunernSilesia (then part of Prussia, now Poland).[43] The works of Marggraf and Achard were the starting point for the sugar industry in Europe,[44] and for the modern sugar industry in general, since sugar was no longer a luxury product and a product almost only produced in warmer climates.[45]

    Sugar became highly popular and by the 19th century, was found in every household. This evolution of taste and demand for sugar as an essential food ingredient resulted in major economic and social changes.[46] Demand drove, in part, the colonization of tropical islands and areas where labor-intensive sugarcane plantations and sugar manufacturing facilities could be successful.[46] World consumption increased more than 100 times from 1850 to 2000, led by Britain, where it increased from about 2 pounds per head per year in 1650 to 90 pounds by the early 20th century. In the late 18th century Britain consumed about half the sugar which reached Europe.[47]

    After slavery was abolished, the demand for workers in European colonies in the Caribbean was filled by indentured laborers from the Indian subcontinent.[48][49][50] Millions of enslaved or indentured laborers were brought to various European colonies in the Americas, Africa and Asia (as a result of demand in Europe for among other commodities, sugar), influencing the ethnic mixture of numerous nations around the globe.[51][52][53]

    Sugar also led to some industrialization of areas where sugar cane was grown. For example, in the 1790s Lieutenant J. Paterson, of the Bengal Presidency promoted to the British parliament the idea that sugar cane could grow in British India, where it had started, with many advantages and at less expense than in the West Indies. As a result, sugar factories were established in Bihar in eastern India.[54][55] During the Napoleonic Wars, sugar-beet production increased in continental Europe because of the difficulty of importing sugar when shipping was subject to blockade. By 1880 the sugar beet was the main source of sugar in Europe. It was also cultivated in Lincolnshire and other parts of England, although the United Kingdom continued to import the main part of its sugar from its colonies.[56]

    Until the late nineteenth century, sugar was purchased in loaves, which had to be cut using implements called sugar nips.[57] In later years, granulated sugar was more usually sold in bags. Sugar cubes were produced in the nineteenth century. The first inventor of a process to produce sugar in cube form was Jakob Christof Rad, director of a sugar refinery in Dačice. In 1841, he produced the first sugar cube in the world.[58] He began sugar-cube production after being granted a five-year patent for the process on 23 January 1843. Henry Tate of Tate & Lyle was another early manufacturer of sugar cubes at his refineries in Liverpool and London. Tate purchased a patent for sugar-cube manufacture from German Eugen Langen, who in 1872 had invented a different method of processing of sugar cubes.[59]

    Sugar was rationed during World War I, though it was said that “No previous war in history has been fought so largely on sugar and so little on alcohol”,[60] and more sharply during World War II.[61][62][63][64][65] Rationing led to the development and use of various artificial sweeteners.[61][66]

    Chemistry

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    Sucrose: a disaccharide of glucose (left) and fructose (right)

    Scientifically, sugar loosely refers to a number of carbohydrates, such as monosaccharidesdisaccharides, or oligosaccharides. Monosaccharides are also called “simple sugars”, the most important being glucose. Most monosaccharides have a formula that conforms to C
    nH
    2nO
    n with n between 3 and 7 (deoxyribose being an exception). Glucose has the molecular formula C
    6H
    12O
    6. The names of typical sugars end with –ose, as in “glucose” and “fructose“. Sometimes such words may also refer to any types of carbohydrates soluble in water. The acyclic mono- and disaccharides contain either aldehyde groups or ketone groups. These carbon-oxygen double bonds (C=O) are the reactive centers. All saccharides with more than one ring in their structure result from two or more monosaccharides joined by glycosidic bonds with the resultant loss of a molecule of water (H
    2O) per bond.[67]

    Monosaccharides in a closed-chain form can form glycosidic bonds with other monosaccharides, creating disaccharides (such as sucrose) and polysaccharides (such as starch or cellulose). Enzymes must hydrolyze or otherwise break these glycosidic bonds before such compounds become metabolized. After digestion and absorption the principal monosaccharides present in the blood and internal tissues include glucose, fructose, and galactose. Many pentoses and hexoses can form ring structures. In these closed-chain forms, the aldehyde or ketone group remains non-free, so many of the reactions typical of these groups cannot occur. Glucose in solution exists mostly in the ring form at equilibrium, with less than 0.1% of the molecules in the open-chain form.[67]

    Natural polymers

    [edit]

    Biopolymers of sugars are common in nature. Through photosynthesis, plants produce glyceraldehyde-3-phosphate (G3P), a phosphated 3-carbon sugar that is used by the cell to make monosaccharides such as glucose (C
    6H
    12O
    6) or (as in cane and beet) sucrose (C
    12H
    22O
    11). Monosaccharides may be further converted into structural polysaccharides such as cellulose and pectin for cell wall construction or into energy reserves in the form of storage polysaccharides such as starch or inulin. Starch, consisting of two different polymers of glucose, is a readily degradable form of chemical energy stored by cells, and can be converted to other types of energy.[67] Another polymer of glucose is cellulose, which is a linear chain composed of several hundred or thousand glucose units. It is used by plants as a structural component in their cell walls. Humans can digest cellulose only to a very limited extent, though ruminants can do so with the help of symbiotic bacteria in their gut.[68] DNA and RNA are built up of the monosaccharides deoxyribose and ribose, respectively. Deoxyribose has the formula C
    5H
    10O
    4 and ribose the formula C
    5H
    10O
    5.[69]

    Flammability and heat response

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    Magnification of grains of refined sucrose, the most common free sugar

    Because sugars burn easily when exposed to flame, the handling of sugars risks dust explosion. The risk of explosion is higher when the sugar has been milled to superfine texture, such as for use in chewing gum.[70] The 2008 Georgia sugar refinery explosion, which killed 14 people and injured 36, and destroyed most of the refinery, was caused by the ignition of sugar dust.[71]

    In its culinary use, exposing sugar to heat causes caramelization. As the process occurs, volatile chemicals such as diacetyl are released, producing the characteristic caramel flavor.[72]

    Types

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    Monosaccharides

    [edit]

    Fructose, galactose, and glucose are all simple sugars, monosaccharides, with the general formula C6H12O6. They have five hydroxyl groups (−OH) and a carbonyl group (C=O) and are cyclic when dissolved in water. They each exist as several isomers with dextro- and laevo-rotatory forms that cause polarized light to diverge to the right or the left.[73]

    • Fructose, or fruit sugar, occurs naturally in fruits, some root vegetables, cane sugar and honey and is the sweetest of the sugars. It is one of the components of sucrose or table sugar. It is used as a high-fructose syrup, which is manufactured from hydrolyzed corn starch that has been processed to yield corn syrup, with enzymes then added to convert part of the glucose into fructose.[74]
    • Galactose generally does not occur in the free state but is a constituent with glucose of the disaccharide lactose or milk sugar. It is less sweet than glucose. It is a component of the antigens found on the surface of red blood cells that determine blood groups.[75]
    • Glucose occurs naturally in fruits and plant juices and is the primary product of photosynthesisStarch is converted into glucose during digestion, and glucose is the form of sugar that is transported around the bodies of animals in the bloodstream. Although in principle there are two enantiomers of glucose (mirror images one of the other), naturally occurring glucose is D-glucose. This is also called dextrose, or grape sugar because drying grape juice produces crystals of dextrose that can be sieved from the other components.[76] Glucose syrup is a liquid form of glucose that is widely used in the manufacture of foodstuffs. It can be manufactured from starch by enzymatic hydrolysis.[77] For example, corn syrup, which is produced commercially by breaking down maize starch, is one common source of purified dextrose.[78] However, dextrose is naturally present in many unprocessed, whole foods, including honey and fruits such as grapes.[79]

    Disaccharides

    [edit]

    Lactose, maltose, and sucrose are all compound sugars, disaccharides, with the general formula C12H22O11. They are formed by the combination of two monosaccharide molecules with the exclusion of a molecule of water.[73]

    • Lactose is the naturally occurring sugar found in milk. A molecule of lactose is formed by the combination of a molecule of galactose with a molecule of glucose. It is broken down when consumed into its constituent parts by the enzyme lactase during digestion. Children have this enzyme but some adults no longer form it and they are unable to digest lactose.[80]
    • Maltose is formed during the germination of certain grains, the most notable being barley, which is converted into malt, the source of the sugar’s name. A molecule of maltose is formed by the combination of two molecules of glucose. It is less sweet than glucose, fructose or sucrose.[73] It is formed in the body during the digestion of starch by the enzyme amylase and is itself broken down during digestion by the enzyme maltase.[81]
    • Sucrose is found in the stems of sugarcane and roots of sugar beet. It also occurs naturally alongside fructose and glucose in other plants, in particular fruits and some roots such as carrots. The different proportions of sugars found in these foods determines the range of sweetness experienced when eating them.[73] A molecule of sucrose is formed by the combination of a molecule of glucose with a molecule of fructose. After being eaten, sucrose is split into its constituent parts during digestion by a number of enzymes known as sucrases.[82]

    Sources

    [edit]

    The sugar contents of common fruits and vegetables are presented in Table 1.

    Food itemTotal
    carbohydrateA
    including
    dietary fiber
    Total
    sugars
    Free
    fructose
    Free
    glucose
    SucroseFructose/
    (Fructose+Glucose)
    ratioB
    Sucrose
    as a % of
    total sugars
    Fruits       
    Apple13.810.45.92.42.10.6720
    Apricot11.19.20.92.45.90.4264
    Banana22.812.24.95.02.40.520
    Fig, dried63.947.922.924.80.90.481.9
    Grapes18.115.58.17.20.20.531
    Navel orange12.58.52.252.04.30.5151
    Peach9.58.41.52.04.80.4757
    Pear15.59.86.22.80.80.678
    Pineapple13.19.92.11.76.00.5261
    Plum11.49.93.15.11.60.4016
    Strawberry7.684.892.4411.990.470.5510
    Vegetables       
    Beet, red9.66.80.10.16.50.5096
    Carrot9.64.70.60.63.60.5077
    Corn, sweet19.06.21.93.40.90.3815
    Red pepper, sweet6.04.22.31.90.00.550
    Onion, sweet7.65.02.02.30.70.4714
    Sweet potato20.14.20.71.02.50.4760
    Yam27.90.5trtrtrnatr
    Sugar cane13–180.2–1.00.2–1.011–160.50high
    Sugar beet17–180.1–0.50.1–0.516–170.50high

    ^A The carbohydrate figure is calculated in the USDA database and does not always correspond to the sum of the sugars, the starch, and the dietary fiber.[why?]^B The fructose to fructose plus glucose ratio is calculated by including the fructose and glucose coming from the sucrose.

    Production

    [edit]

    See also: List of sugars

    Due to rising demand, sugar production in general increased some 14% over the period 2009 to 2018.[84] The largest importers were China, Indonesia, and the United States.[84]

    Sugar

    [edit]

    In 2022–2023 world production of sugar was 186 million tonnes, and in 2023–2024 an estimated 194 million tonnes — a surplus of 5 million tonnes, according to Ragus.[85]

    Sugarcane

    [edit]

    Sugarcane production – 2022
    CountryMillions of tonnes
     Brazil724.4
     India439.4
     China103.4
     Thailand92.1
    World1,922.1
    Source: FAO[86]

    Sugar cane accounted for around 21% of the global crop production over the 2000–2021 period. The Americas was the leading region in the production of sugar cane (52% of the world total).[87] Global production of sugarcane in 2022 was 1.9 billion tonnes, with Brazil producing 38% of the world total and India 23% (table).

    Sugarcane is any of several species, or their hybrids, of giant grasses in the genus Saccharum in the family Poaceae. They have been cultivated in tropical climates in the Indian subcontinent and Southeast Asia over centuries for the sucrose found in their stems.[6]

    World production of raw sugar, main producers[88]

    Sugar cane requires a frost-free climate with sufficient rainfall during the growing season to make full use of the plant’s substantial growth potential. The crop is harvested mechanically or by hand, chopped into lengths and conveyed rapidly to the processing plant (commonly known as a sugar mill) where it is either milled and the juice extracted with water or extracted by diffusion.[89] The juice is clarified with lime and heated to destroy enzymes. The resulting thin syrup is concentrated in a series of evaporators, after which further water is removed. The resulting supersaturated solution is seeded with sugar crystals, facilitating crystal formation and drying.[89] Molasses is a by-product of the process and the fiber from the stems, known as bagasse,[89] is burned to provide energy for the sugar extraction process. The crystals of raw sugar have a sticky brown coating and either can be used as they are, can be bleached by sulfur dioxide, or can be treated in a carbonatation process to produce a whiter product.[89] About 2,500 litres (660 US gal) of irrigation water is needed for every one kilogram (2.2 pounds) of sugar produced.[90]

    Sugar beet

    [edit]

    Sugar beet production – 2022
    CountryMillions of tonnes
     Russia48.9
     France31.5
     United States29.6
     Germany28.2
    World260
    Source: FAO[86]

    In 2022, global production of sugar beets was 260 million tonnes, led by Russia with 18.8% of the world total (table).

    Sugar beet became a major source of sugar in the 19th century when methods for extracting the sugar became available. It is a biennial plant,[91] a cultivated variety of Beta vulgaris in the family Amaranthaceae, the tuberous root of which contains a high proportion of sucrose. It is cultivated as a root crop in temperate regions with adequate rainfall and requires a fertile soil. The crop is harvested mechanically in the autumn and the crown of leaves and excess soil removed. The roots do not deteriorate rapidly and may be left in the field for some weeks before being transported to the processing plant where the crop is washed and sliced, and the sugar extracted by diffusion.[92] Milk of lime is added to the raw juice with calcium carbonate. After water is evaporated by boiling the syrup under a vacuum, the syrup is cooled and seeded with sugar crystals. The white sugar that crystallizes can be separated in a centrifuge and dried, requiring no further refining.[92]

    Refining

    [edit]

    See also: Sugar refineryNon-centrifugal cane sugar, and White sugar

    Refined sugar is made from raw sugar that has undergone a refining process to remove the molasses.[93][94] Raw sugar is sucrose which is extracted from sugarcane or sugar beet. While raw sugar can be consumed, the refining process removes unwanted tastes and results in refined sugar or white sugar.[95][96]

    The sugar may be transported in bulk to the country where it will be used and the refining process often takes place there. The first stage is known as affination and involves immersing the sugar crystals in a concentrated syrup that softens and removes the sticky brown coating without dissolving them. The crystals are then separated from the liquor and dissolved in water. The resulting syrup is treated either by a carbonatation or by a phosphatation process. Both involve the precipitation of a fine solid in the syrup and when this is filtered out, many of the impurities are removed at the same time. Removal of color is achieved by using either a granular activated carbon or an ion-exchange resin. The sugar syrup is concentrated by boiling and then cooled and seeded with sugar crystals, causing the sugar to crystallize out. The liquor is spun off in a centrifuge and the white crystals are dried in hot air and ready to be packaged or used. The surplus liquor is made into refiners’ molasses.[97]

    The International Commission for Uniform Methods of Sugar Analysis sets standards for the measurement of the purity of refined sugar, known as ICUMSA numbers; lower numbers indicate a higher level of purity in the refined sugar.[98]

    Refined sugar is widely used for industrial needs for higher quality. Refined sugar is purer (ICUMSA below 300) than raw sugar (ICUMSA over 1,500).[99] The level of purity associated with the colors of sugar, expressed by standard number ICUMSA, the smaller ICUMSA numbers indicate the higher purity of sugar.[99]

    Forms and uses

    [edit]

    Crystal size

    [edit]

    See also: Rock candySucrose, and Powdered sugar

    Misri crystals

    Rock candy coloured with green dye

    • Coarse-grain sugar, also known as sanding sugar, composed of reflective crystals with grain size of about 1 to 3 mm, similar to kitchen salt. Used atop baked products and candies, it will not dissolve when subjected to heat and moisture.[100]
    • Granulated sugar (about 0.6 mm crystals), also known as table sugar or regular sugar, is used at the table, to sprinkle on foods and to sweeten hot drinks (coffee and tea), and in home baking to add sweetness and texture to baked products (cookies and cakes) and desserts (pudding and ice cream). It is also used as a preservative to prevent micro-organisms from growing and perishable food from spoiling, as in candied fruits, jams, and marmalades.[101]
    • Milled sugars such as powdered sugar (icing sugar) are ground to a fine powder. They are used for dusting foods and in baking and confectionery.[102][100]
    • Screened sugars such as caster sugar are crystalline products separated according to the size of the grains. They are used for decorative table sugars, for blending in dry mixes and in baking and confectionery.[102]

    Shapes

    [edit]

    “Lump sugar” redirects here. For the South Korean film, see Lump Sugar.

    Sugar cubes
    • Cube sugar (sometimes called sugar lumps) are white or brown granulated sugars lightly steamed and pressed together in block shape. They are used to sweeten drinks.[102]
    • Sugarloaf was the usual cone-form in which refined sugar was produced and sold until the late 19th century.[103]

    Brown sugars

    [edit]

    Main article: Brown sugar

    Brown sugar examples: Muscovado (top), dark brown (left), light brown (right)

    Brown sugars are granulated sugars, either containing residual molasses, or with the grains deliberately coated with molasses to produce a light- or dark-colored sugar such as muscovado and turbinado. They are used in baked goods, confectionery, and toffees.[102] Their darkness is due to the amount of molasses they contain. They may be classified based on their darkness or country of origin.[100]

    Liquid sugars

    [edit]

    A jar of honey with a dipper and a biscuit
    • Syrups are thick, viscous liquids consisting primarily of a solution of sugar in water. They are used in the food processing of a wide range of products including beverages, hard candyice cream, and jams.[102]
      • Inverted sugar syrup, commonly known as invert syrup or invert sugar, is a mixture of two simple sugars—glucose and fructose—that is made by heating granulated sugar in water. It is used in breads, cakes, and beverages for adjusting sweetness, aiding moisture retention and avoiding crystallization of sugars.[102]
    • Molasses and treacle are obtained by removing sugar from sugarcane or sugar beet juice, as a byproduct of sugar production. They may be blended with the above-mentioned syrups to enhance sweetness and used in a range of baked goods and confectionery including toffees and licorice.[102]
    • In winemakingfruit sugars are converted into alcohol by a fermentation process. If the must formed by pressing the fruit has a low sugar content, additional sugar may be added to raise the alcohol content of the wine in a process called chaptalization. In the production of sweet wines, fermentation may be halted before it has run its full course, leaving behind some residual sugar that gives the wine its sweet taste.[104]

    Other sweeteners

    [edit]

    See also: Saccharin

    • Low-calorie sweeteners are often made of maltodextrin with added sweeteners. Maltodextrin is an easily digestible synthetic polysaccharide consisting of short chains of three or more glucose molecules and is made by the partial hydrolysis of starch.[105] Strictly, maltodextrin is not classified as sugar as it contains more than two glucose molecules, although its structure is similar to maltose, a molecule composed of two joined glucose molecules.
    • Polyols are sugar alcohols and are used in chewing gums where a sweet flavor is required that lasts for a prolonged time in the mouth.[106]

    Consumption

    [edit]

    Worldwide sugar provides 10% of the daily calories (based on a 2000 kcal diet).[107] In 1750, the average Briton got 72 calories a day from sugar. In 1913, this had risen to 395. In 2015, sugar still provided around 14% of the calories in British diets.[108] According to one source, per capita consumption of sugar in 2016 was highest in the United States, followed by Germany and the Netherlands.[109]

    Nutrition and flavor

    [edit]

    Nutritional value per 100 g (3.5 oz)
    Energy1,576 kJ (377 kcal)
    Carbohydrates97.33 g
    Sugars96.21 g
    Dietary fiber0 g
    Fat0 g
    Protein0 g
    showVitamins and minerals
    Other constituentsQuantity
    Water1.77 g
    Full link to USDA database entry
    Percentages estimated using US recommendations for adults,[110] except for potassium, which is estimated based on expert recommendation from the National Academies.[111]
    Nutritional value per 100 g (3.5 oz)
    Energy1,619 kJ (387 kcal)
    Carbohydrates99.98 g
    Sugars99.91 g
    Dietary fiber0 g
    Fat0 g
    Protein0 g
    showVitamins and minerals
    Other constituentsQuantity
    Water0.03 g
    Full link to USDA database entry
    Percentages estimated using US recommendations for adults,[110] except for potassium, which is estimated based on expert recommendation from the National Academies.[111]

    Brown and white granulated sugar are 97% to nearly 100% carbohydrates, respectively, with less than 2% water, and no dietary fiber, protein or fat (table). Brown sugar contains a moderate amount of iron (15% of the Reference Daily Intake in a 100 gram amount, see table), but a typical serving of 4 grams (one teaspoon), would provide 15 calories and a negligible amount of iron or any other nutrient.[112] Because brown sugar contains 5–10% molasses reintroduced during processing, its value to some consumers is a richer flavor than white sugar.[113]

    Health effects

    [edit]

    General

    [edit]

    High sugar consumption damages human health more than it provides nutritional benefit, and in particular is associated with a risk of cardiometabolic health detriments.[3]

    Sugar industry funding and health information

    [edit]

    Main article: Sugar marketing § Influence on health information and guidelines

    Sugar refiners and manufacturers of sugary foods and drinks have sought to influence medical research and public health recommendations,[114][115] with substantial and largely clandestine spending documented from the 1960s to 2016.[116][117][118][119] The results of research on the health effects of sugary food and drink differ significantly, depending on whether the researcher has financial ties to the food and drink industry.[120][121][122] A 2013 medical review concluded that “unhealthy commodity industries should have no role in the formation of national or international NCD [non-communicable disease] policy”.[123] Similar efforts to steer coverage of sugar-related health information have been made in popular media, including news media and social media.[124][125][126]

    Obesity and metabolic syndrome

    [edit]

    Main article: Diet and obesity § Sugar consumption

    A 2003 technical report by the World Health Organization (WHO) provides evidence that high intake of sugary drinks (including fruit juice) increases the risk of obesity by adding to overall energy intake.[127] By itself, sugar is doubtfully a factor causing obesity and metabolic syndrome.[128] Meta-analysis showed that excessive consumption of sugar-sweetened beverages increased the risk of developing type 2 diabetes and metabolic syndrome – including weight gain[129] and obesity – in adults and children.[130][131]

    Cancer

    [edit]

    Sugar consumption does not directly cause cancer.[132][133][134] Cancer Council Australia have stated that “there is no evidence that consuming sugar makes cancer cells grow faster or cause cancer”.[132] There is an indirect relationship between sugar consumption and obesity-related cancers through increased risk of excess body weight.[134][132][135]

    The American Institute for Cancer Research and World Cancer Research Fund recommend that people limit sugar consumption.[136][137]

    There is a popular misconception that cancer can be treated by reducing sugar and carbohydrate intake to supposedly “starve” tumours. In reality, the health of people with cancer is best served by maintaining a healthy diet.[138]

    Cognition

    [edit]

    Despite some studies suggesting that sugar consumption causes hyperactivity, the quality of evidence is low[139] and it is generally accepted within the scientific community that the notion of children’s ‘sugar rush’ is a myth.[140][141] A 2019 meta-analysis found that sugar consumption does not improve mood, but can lower alertness and increase fatigue within an hour of consumption.[142] One review of low-quality studies of children consuming high amounts of energy drinks showed association with higher rates of unhealthy behaviors, including smoking and excessive alcohol use, and with hyperactivity and insomnia, although such effects could not be specifically attributed to sugar over other components of those drinks such as caffeine.[143]

    Tooth decay

    [edit]

    The WHO, Action on Sugar and the Scientific Advisory Committee on Nutrition (SACN) consider free sugars an essential dietary factor in the development of dental caries.[144][145][146] WHO have stated that “dental caries can be prevented by avoiding dietary free sugars”.[144]

    A review of human studies showed that the incidence of caries is lower when sugar intake is less than 10% of total energy consumed.[147] Sugar-sweetened beverage consumption is associated with an increased risk of tooth decay.[148]

    Nutritional displacement

    [edit]

    The “empty calories” argument states that a diet high in added (or ‘free’) sugars will reduce consumption of foods that contain essential nutrients.[149] This nutrient displacement occurs if sugar makes up more than 25% of daily energy intake,[150] a proportion associated with poor diet quality and risk of obesity.[151] Displacement may occur at lower levels of consumption.[150]

    [edit]

    The WHO recommends that both adults and children reduce the intake of free sugars to less than 10% of total energy intake, and suggests a reduction to below 5%. “Free sugars” include monosaccharides and disaccharides added to foods, and sugars found in fruit juice and concentrates, as well as in honey and syrups. According to the WHO, “[t]hese recommendations were based on the totality of available evidence reviewed regarding the relationship between free sugars intake and body weight (low and moderate quality evidence) and dental caries (very low and moderate quality evidence).”[2]

    On 20 May 2016, the U.S. Food and Drug Administration announced changes to the Nutrition Facts panel displayed on all foods, to be effective by July 2018. New to the panel is a requirement to list “added sugars” by weight and as a percent of Daily Value (DV). For vitamins and minerals, the intent of DVs is to indicate how much should be consumed. For added sugars, the guidance is that 100% DV should not be exceeded. 100% DV is defined as 50 grams. For a person consuming 2000 calories a day, 50 grams is equal to 200 calories and thus 10% of total calories—the same guidance as the WHO.[152] To put this in context, most 12-US-fluid-ounce (355 ml) cans of soda contain 39 grams of sugar. In the United States, a government survey on food consumption in 2013–2014 reported that, for men and women aged 20 and older, the average total sugar intakes—naturally occurring in foods and added—were, respectively, 125 and 99 g/day.[153]

    Measurements

    [edit]

    Various culinary sugars have different densities due to differences in particle size and inclusion of moisture. The “Engineering Resources – Bulk Density Chart” published in Powder and Bulk gives values for bulk densities:[154]

    • Beet sugar 0.80 g/mL
    • Dextrose sugar 0.62 g/mL ( = 620 kg/m^3)
    • Granulated sugar 0.70 g/mL
    • Powdered sugar 0.56 g/mL

    Society and culture

    [edit]

    Manufacturers of sugary products, such as soft drinks and candy, and the Sugar Research Foundation have been accused of trying to influence consumers and medical associations in the 1960s and 1970s by creating doubt about the potential health hazards of sucrose overconsumption, while promoting saturated fat as the main dietary risk factor in cardiovascular diseases.[116] In 2016, the criticism led to recommendations that diet policymakers emphasize the need for high-quality research that accounts for multiple biomarkers on development of cardiovascular diseases.[116]

    Originally, no sugar was white; anthropologist Sidney Mintz writes that white likely became understood as the ideal after groups who associated the color white with purity transferred their value to sugar.[155] In India, sugar frequently appears in religious observances. For ritual purity, such sugar cannot be white.

  • Bank

    bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans, mobilizing saver surplus to deficit spenders.[1] Lending activities can be directly performed by the bank or indirectly through capital markets.[2]

    Whereas banks play an important role in financial stability and the economy of a country, most jurisdictions exercise a high degree of regulation over banks. Most countries have institutionalized a system known as fractional-reserve banking, under which banks hold liquid assets equal to only a portion of their current liabilities.[3] In addition to other regulations intended to ensure liquidity, banks are generally subject to minimum capital requirements based on an international set of capital standards, the Basel Accords.[4]

    Banking in its modern sense evolved in the fourteenth century in the prosperous cities of Renaissance Italy but, in many ways, functioned as a continuation of ideas and concepts of credit and lending that had their roots in the ancient world. In the history of banking, a number of banking dynasties – notably, the Medicis, the Pazzi, the Fuggers, the Welsers, the Berenbergs, and the Rothschilds – have played a central role over many centuries. The oldest existing retail bank is Banca Monte dei Paschi di Siena (founded in 1472), while the oldest existing merchant bank is Berenberg Bank (founded in 1590).

    History

    [edit]

    This section needs expansion with: history after the 19th century. You can help by adding to it(August 2020)

    Main article: History of banking

    This 15th-century painting depicts money-dealers at a banca (bench) during the Cleansing of the Temple.

    Banking as an archaic activity (or quasi-banking[5][6]) is thought to have begun as early as the end of the 4th millennium BCE,[7] to the 3rd millennia BCE.[8][9]

    Medieval

    [edit]

    The present era of banking can be traced to wealthy medieval Renaissance Italian city-states, whose elite families such as the Bardi and Peruzzi dominated banking in 14th-century Florence before establishing branches in many other parts of Europe.[10] Giovanni di Bicci de’ Medici set up one of the most famous Italian banks, the Medici Bank, in 1397.[11] The Republic of Genoa founded the earliest-known state deposit bank, and Banco di San Giorgio (Bank of St. George), in 1407 at Genoa, Italy.[12]

    Early modern

    [edit]

    Sealing of the Bank of England Charter (1694), by Lady Jane Lindsay, 1905.

    Fractional reserve banking and the issue of banknotes emerged in the 17th and 18th centuries. Merchants started to store their gold with the goldsmiths of London, who possessed private vaults, and who charged a fee for that service. In exchange for each deposit of precious metal, the goldsmiths issued receipts certifying the quantity and purity of the metal they held as a bailee; these receipts could not be assigned, only the original depositor could collect the stored goods.

    Gradually the goldsmiths began to lend money out on behalf of the depositor, and promissory notes, which evolved into banknotes, were issued for money deposited as a loan to the goldsmith. Thus, by the 19th century, we find in ordinary cases of deposits, of money with banking corporations, or bankers, the transaction amounts to a mere loan, or mutuum, and the bank is to restore, not the same money, but an equivalent sum, whenever it is demanded[13] and money, when paid into a bank, ceases altogether to be the money of the principal (see Parker v. Marchant, 1 Phillips 360); it is then the money of the banker, who is bound to return an equivalent, by paying a similar sum to that deposited with him, when he is asked for it. [14] The goldsmith paid interest on deposits. Since the promissory notes were payable on demand, and the advances (loans) to the goldsmith’s customers were repayable over a longer time-period, this was an early form of fractional reserve banking. The promissory notes developed into an assignable instrument which could circulate as a safe and convenient form of money[15] backed by the goldsmith’s promise to pay,[16][need quotation to verify] allowing goldsmiths to advance loans with little risk of default.[17][need quotation to verify] Thus the goldsmiths of London became the forerunners of banking by creating new money based on credit.

    Interior of the Helsinki Branch of the Vyborg-Bank [fi] in the 1910s

    The Bank of England originated the permanent issue of banknotes in 1695.[18] The Royal Bank of Scotland established the first overdraft facility in 1728.[19] By the beginning of the 19th century Lubbock’s Bank had established a bankers’ clearing house in London to allow multiple banks to clear transactions. The Rothschilds pioneered international finance on a large scale,[20][21] financing the purchase of shares in the Suez canal for the British government in 1875.[22][need quotation to verify]

    Etymology

    [edit]

    The word bank was taken into Middle English from Middle French banque, from Old Italian banco, meaning “table”, from Old High German banc, bank “bench, counter”. Benches were used as makeshift desks or exchange counters during the Renaissance by Florentine bankers, who used to make their transactions atop desks covered by green tablecloths.[23][24]

    Definition

    [edit]

    The definition of a bank varies from country to country. See the relevant country pages for more information.

    Under English common law, a banker is defined as a person who carries on the business of banking by conducting current accounts for their customers, paying checks drawn on them as well as collecting them for their customers.[25]

    Banco de Venezuela in Coro.
    Branch of Nepal Bank in Pokhara, Western Nepal.

    In most common law jurisdictions there is a Bills of Exchange Act that codifies the law in relation to negotiable instruments, including checks, and this Act contains a statutory definition of the term bankerbanker includes a body of persons, whether incorporated or not, who carry on the business of banking’ (Section 2, Interpretation). Although this definition seems circular, it is actually functional, because it ensures that the legal basis for bank transactions such as checks does not depend on how the bank is structured or regulated.

    The business of banking is in many common law countries not defined by statute but by common law, the definition above. In other English common law jurisdictions there are statutory definitions of the business of banking or banking business. When looking at these definitions it is important to keep in mind that they are defining the business of banking for the purposes of the legislation, and not necessarily in general. In particular, most of the definitions are from legislation that has the purpose of regulating and supervising banks rather than regulating the actual business of banking. However, in many cases, the statutory definition closely mirrors the common law one. Examples of statutory definitions:

    • “banking business” means the business of receiving money on current or deposit account, paying and collecting checks drawn by or paid in by customers, the making of advances to customers, and includes such other business as the Authority may prescribe for the purposes of this Act; (Banking Act (Singapore), Section 2, Interpretation).
    • “banking business” means the business of either or both of the following:
    1. receiving from the general public money on current, deposit, savings or other similar account repayable on demand or within less than [3 months] … or with a period of call or notice of less than that period;
    2. paying or collecting checks drawn by or paid in by customers.[26]

    Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale), direct credit, direct debit and internet banking, the check has lost its primacy in most banking systems as a payment instrument. This has led legal theorists to suggest that the check based definition should be broadened to include financial institutions that conduct current accounts for customers and enable customers to pay and be paid by third parties, even if they do not pay and collect checks .[27]

    Standard business

    [edit]

    Large door to an old bank vault.

    Banks act as payment agents by conducting checking or current accounts for customers, paying checks drawn by customers in the bank, and collecting checks deposited to customers’ current accounts. Banks also enable customer payments via other payment methods such as Automated Clearing House (ACH), Wire transfers or telegraphic transferEFTPOS, and automated teller machines (ATMs).

    Banks borrow money by accepting funds deposited on current accounts, by accepting term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current accounts, by making installment loans, and by investing in marketable debt securities and other forms of money lending.

    Banks provide different payment services, and a bank account is considered indispensable by most businesses and individuals. Nonbanks that provide payment services such as remittance companies are normally not considered as an adequate substitute for a bank account.

    Banks issue new money when they make loans. In contemporary banking systems, regulators set a minimum level of reserve funds that banks must hold against the deposit liabilities created by the funding of these loans, in order to ensure that the banks can meet demands for payment of such deposits. These reserves can be acquired through the acceptance of new deposits, sale of other assets, or borrowing from other banks including the central bank.[28]

    Range of activities

    [edit]

    Activities undertaken by banks include personal bankingcorporate bankinginvestment bankingprivate bankingtransaction bankinginsuranceconsumer financetrade finance and other related.

    Channels

    [edit]

    An American bank in Maryland.

    Banks offer many different channels to access their banking and other services:

    • Branch, in-person banking in a retail location
    • Automated teller machine banking adjacent to or remote from the bank
    • Bank by mail: Most banks accept check deposits via mail and use mail to communicate to their customers
    • Online banking over the Internet to perform multiple types of transactions
    • Mobile banking is using one’s mobile phone to conduct banking transactions
    • Telephone banking allows customers to conduct transactions over the telephone with an automated attendant, or when requested, with a telephone operator
    • Video banking performs banking transactions or professional banking consultations via a remote video and audio connection. Video banking can be performed via purpose built banking transaction machines (similar to an Automated teller machine) or via a video conference enabled bank branch clarification
    • Relationship manager, mostly for private banking or business banking, who visits customers at their homes or businesses
    • Direct Selling Agent, who works for the bank based on a contract, whose main job is to increase the customer base for the bank

    Business models

    [edit]

    A bank can generate revenue in a variety of different ways including interest, transaction fees and financial advice. Traditionally, the most significant method is via charging interest on the capital it lends out to customers.[29] The bank profits from the difference between the level of interest it pays for deposits and other sources of funds, and the level of interest it charges in its lending activities.

    This difference is referred to as the spread between the cost of funds and the loan interest rate. Historically, profitability from lending activities has been cyclical and dependent on the needs and strengths of loan customers and the stage of the economic cycle. Fees and financial advice constitute a more stable revenue stream and banks have therefore placed more emphasis on these revenue lines to smooth their financial performance.

    In the past 20 years, American banks have taken many measures to ensure that they remain profitable while responding to increasingly changing market conditions.

    • First, this includes the Gramm–Leach–Bliley Act, which allows banks again to merge with investment and insurance houses. Merging banking, investment, and insurance functions allows traditional banks to respond to increasing consumer demands for “one-stop shopping” by enabling cross-selling of products (which, the banks hope, will also increase profitability).
    • Second, they have expanded the use of risk-based pricing from business lending to consumer lending, which means charging higher interest rates to those customers that are considered to be a higher credit risk and thus increased chance of default on loans. This helps to offset the losses from bad loans, lowers the price of loans to those who have better credit histories, and offers credit products to high risk customers who would otherwise be denied credit.
    • Third, they have sought to increase the methods of payment processing available to the general public and business clients. These products include debit cards, prepaid cards, smart cards, and credit cards. They make it easier for consumers to conveniently make transactions and smooth their consumption over time (in some countries with underdeveloped financial systems, it is still common to deal strictly in cash, including carrying suitcases filled with cash to purchase a home).

    However, with the convenience of easy credit, there is also an increased risk that consumers will mismanage their financial resources and accumulate excessive debt. Banks make money from card products through interest charges and fees charged to credit and debit card holders, and transaction fees to retailers[30] who accept the bank’s cards for payments.

    This helps in making a profit and facilitates economic development as a whole.[31]

    Recently, as banks have been faced with pressure from fintechs, new and additional business models have been suggested such as freemium, monetization of data, white-labeling of banking and payment applications, or the cross-selling of complementary products.[32]

    Products

    [edit]

    A former building society, now a modern retail bank in LeedsWest Yorkshire.
    An interior of a branch of National Westminster Bank on Castle Street, Liverpool

    Retail

    [edit]

    Business (or commercial/investment) banking

    [edit]

    Capital and risk

    [edit]

    Specific banking frameworks
    Market risk
    FRTBInternal models approach (IMA)Standardized approach (market risk)
    Credit risk
    Internal ratings-based approach (IRB)Foundation IRB (F-IRB)Advanced IRB (A-IRB)Standardized approach (credit risk)
    Counterparty credit risk
    Current exposure method (CEM)Standardised method (SM)Standardized approach (counterparty credit risk) (SA-CCR)
    Operational risk
    Advanced measurement approach (AMA)Basic indicator approachStandardized approach (operational risk)Standardised measurement approach (SMA)
    vte

    Further information: Financial risk management § Banking

    See also: Finance § Risk managementInvestment banking § Risk management, and Treasury management § Banks

    Banks face a number of risks in order to conduct their business, and how well these risks are managed and understood is a key driver behind profitability, and how much capital a bank is required to hold. Bank capital consists principally of equityretained earnings and subordinated debt.

    Some of the main risks faced by banks include:

    • Credit risk: risk of loss arising from a borrower who does not make payments as promised.[33]
    • Liquidity risk: risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit).
    • Market risk: risk that the value of a portfolio, either an investment portfolio or a trading portfolio, will decrease due to the change in value of the market risk factors.
    • Operational risk: risk arising from the execution of a company’s business functions.
    • Reputational risk: a type of risk related to the trustworthiness of the business.
    • Macroeconomic risk: risks related to the aggregate economy the bank is operating in.[34]

    The capital requirement is a bank regulation, which sets a framework within which a bank or depository institution must manage its balance sheet. The categorization of assets and capital is highly standardized so that it can be risk weighted.

    After the financial crisis of 2007–2008, regulators force banks to issue Contingent convertible bonds (CoCos). These are hybrid capital securities that absorb losses in accordance with their contractual terms when the capital of the issuing bank falls below a certain level. Then debt is reduced and bank capitalization gets a boost. Owing to their capacity to absorb losses, CoCos have the potential to satisfy regulatory capital requirement.[35][36]

    Banks in the economy

    [edit]

    SEB main building in TallinnEstonia

    See also: Financial system

    Economic functions

    [edit]

    The economic functions of banks include:

    1. Issue of money, in the form of banknotes and current accounts subject to check or payment at the customer’s order. These claims on banks can act as money because they are negotiable or repayable on demand, and hence valued at par. They are effectively transferable by mere delivery, in the case of banknotes, or by drawing a check that the payee may bank or cash.
    2. Netting and settlement of payments – banks act as both collection and paying agents for customers, participating in interbank clearing and settlement systems to collect, present, be presented with, and pay payment instruments. This enables banks to economize on reserves held for settlement of payments since inward and outward payments offset each other. It also enables the offsetting of payment flows between geographical areas, reducing the cost of settlement between them.
    3. Credit quality improvement – banks lend money to ordinary commercial and personal borrowers (ordinary credit quality), but are high quality borrowers. The improvement comes from diversification of the bank’s assets and capital which provides a buffer to absorb losses without defaulting on its obligations. However, banknotes and deposits are generally unsecured; if the bank gets into difficulty and pledges assets as security, to raise the funding it needs to continue to operate, this puts the note holders and depositors in an economically subordinated position.
    4. Asset–liability mismatch/Maturity transformation – banks borrow more on demand debt and short term debt, but provide more long-term loans. In other words, they borrow short and lend long. With a stronger credit quality than most other borrowers, banks can do this by aggregating issues (e.g. accepting deposits and issuing banknotes) and redemptions (e.g. withdrawals and redemption of banknotes), maintaining reserves of cash, investing in marketable securities that can be readily converted to cash if needed, and raising replacement funding as needed from various sources (e.g. wholesale cash markets and securities markets).
    5. Money creation/destruction – whenever a bank gives out a loan in a fractional-reserve banking system, a new sum of money is created and conversely, whenever the principal on that loan is repaid money is destroyed.

    Bank crisis

    [edit]

    OTP Bank in Prešov (Slovakia)

    Banks are susceptible to many forms of risk which have triggered occasional systemic crises.[37] These include liquidity risk (where many depositors may request withdrawals in excess of available funds), credit risk (the chance that those who owe money to the bank will not repay it), and interest rate risk (the possibility that the bank will become unprofitable, if rising interest rates force it to pay relatively more on its deposits than it receives on its loans).

    Banking crises have developed many times throughout history when one or more risks have emerged for the banking sector as a whole. Prominent examples include the bank run that occurred during the Great Depression, the U.S. Savings and Loan crisis in the 1980s and early 1990s, the Japanese banking crisis during the 1990s, and the sub-prime mortgage crisis in the 2000s.

    The 2023 global banking crisis is the latest of these crises: In March 2023, liquidity shortages and bank insolvencies led to three bank failures in the United States, and within two weeks, several of the world’s largest banks failed or were shut down by regulators

    Size of global banking industry

    [edit]

    Assets of the largest 1,000 banks in the world grew by 6.8% in the 2008–2009 financial year to a record US$96.4 trillion while profits declined by 85% to US$115 billion. Growth in assets in adverse market conditions was largely a result of recapitalization. EU banks held the largest share of the total, 56% in 2008–2009, down from 61% in the previous year. Asian banks’ share increased from 12% to 14% during the year, while the share of US banks increased from 11% to 13%. Fee revenue generated by global investment in banking totaled US$66.3 billion in 2009, up 12% on the previous year.[38]

    The United States has the most banks in the world in terms of institutions (5,330 as of 2015) and possibly branches (81,607 as of 2015).[39] This is an indicator of the geography and regulatory structure of the US, resulting in a large number of small to medium-sized institutions in its banking system. As of November 2009, China’s top four banks have in excess of 67,000 branches (ICBC:18000+, BOC:12000+, CCB:13000+, ABC:24000+) with an additional 140 smaller banks with an undetermined number of branches. Japan had 129 banks and 12,000 branches. In 2004, Germany, France, and Italy each had more than 30,000 branches – more than double the 15,000 branches in the United Kingdom.[38]

    Mergers and acquisitions

    [edit]

    Between 1985 and 2018 banks engaged in around 28,798 mergers or acquisitions, either as the acquirer or the target company. The overall known value of these deals cumulates to around 5,169 bil. USD.[40] In terms of value, there have been two major waves (1999 and 2007) which both peaked at around 460 bil. USD followed by a steep decline (−82% from 2007 until 2018).

    Here is a list of the largest deals in history in terms of value with participation from at least one bank:

    Date announcedAcquiring institutionTarget institutionValue of
    transaction
    ($ millions)
    NameMid[clarification needed]
    industry
    NationNameMid industryNation
    2007-04-25RFS Holdings BVOther financialsNetherlandsABN-AMRO Holding N.V.BanksNetherlands98,189.19
    1998-04-06Travelers Group IncInsuranceUnited StatesCiticorpBanksUnited States72,558.18
    2014-09-29UBS AGBanksSwitzerlandUBS AG[clarification needed]BanksSwitzerland65,891.51
    1998-04-13NationsBank Corp, Charlotte, North CarolinaBanksUnited StatesBankAmerica CorpBanksUnited States61,633.40
    2004-01-14JPMorgan Chase & CoBanksUnited StatesBank One Corp, Chicago, IllinoisBanksUnited States58,663.15
    2003-10-27Bank of America CorpBanksUnited StatesFleetBoston Financial Corp, MassachusettsBanksUnited States49,260.63
    2008-09-14Bank of America CorpBanksUnited StatesMerrill Lynch & Co IncBrokerageUnited States48,766.15
    1999-10-13Sumitomo Bank LtdBanksJapanSakura Bank LtdBanksJapan45,494.36
    2009-02-26HM TreasuryNational agencyUnited KingdomRoyal Bank of Scotland GroupBanksUnited Kingdom41,878.65
    2005-02-18Mitsubishi Tokyo Financial GroupBanksJapanUFJ Holdings IncBanksJapan41,431.03

    Regulation

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    Main article: Banking regulation

    See also: Basel II

    Currently, commercial banks are regulated in most jurisdictions by government entities and require a special bank license to operate.

    Basel Framework
    International regulatory standards for banks
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    Usually, the definition of the business of banking for the purposes of regulation is extended to include acceptance of deposits, even if they are not repayable to the customer’s order – although money lending, by itself, is generally not included in the definition.

    Unlike most other regulated industries, the regulator is typically also a participant in the market, being either publicly or privately governed central bank. Central banks also typically have a monopoly on the business of issuing banknotes. However, in some countries, this is not the case. In the UK, for example, the Financial Services Authority licenses banks, and some commercial banks (such as the Bank of Scotland) issue their own banknotes in addition to those issued by the Bank of England, the UK government’s central bank.

    Global headquarters of the Bank for International Settlements in Basel

    Banking law is based on a contractual analysis of the relationship between the bank (defined above) and the customer – defined as any entity for which the bank agrees to conduct an account.

    The law implies rights and obligations into this relationship as follows:

    • The bank account balance is the financial position between the bank and the customer: when the account is in credit, the bank owes the balance to the customer; when the account is overdrawn, the customer owes the balance to the bank.
    • The bank agrees to pay the customer’s checks up to the amount standing to the credit of the customer’s account, plus any agreed overdraft limit.
    • The bank may not pay from the customer’s account without a mandate from the customer, e.g. a check drawn by the customer.
    • The bank agrees to promptly collect the checks deposited to the customer’s account as the customer’s agent and to credit the proceeds to the customer’s account.
    • And, the bank has a right to combine the customer’s accounts since each account is just an aspect of the same credit relationship.
    • The bank has a lien on checks deposited to the customer’s account, to the extent that the customer is indebted to the bank.
    • The bank must not disclose details of transactions through the customer’s account – unless the customer consents, there is a public duty to disclose, the bank’s interests require it, or the law demands it.
    • The bank must not close a customer’s account without reasonable notice, since checks are outstanding in the ordinary course of business for several days.

    These implied contractual terms may be modified by express agreement between the customer and the bank. The statutes and regulations in force within a particular jurisdiction may also modify the above terms or create new rights, obligations, or limitations relevant to the bank-customer relationship.

    Some types of financial institutions, such as building societies and credit unions, may be partly or wholly exempt from bank license requirements, and therefore regulated under separate rules.

    The requirements for the issue of a bank license vary between jurisdictions but typically include:

    • Minimum capital
    • Minimum capital ratio
    • ‘Fit and Proper’ requirements for the bank’s controllers, owners, directors, or senior officers
    • Approval of the bank’s business plan as being sufficiently prudent and plausible.

    Different types of banking

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    An illustration of Northern National Bank as advertized in a 1921 book highlighting the opportunities available in Toledo, Ohio

    Banks’ activities can be divided into:

    Most banks are profitmaking private enterprises. However, some are owned by the government, or are nonprofits.

    Types of banks

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    National Bank of the Republic, Salt Lake City 1908
    The BANK of GreenlandNuuk
    An office of Nordea bank in MariehamnÅland
    ATM Al-Rajhi Bank
    National Copper Bank, Salt Lake City 1911
    • Commercial banks: the term used for a normal bank to distinguish it from an investment bank. After the Great Depression, the U.S. Congress required that banks only engage in banking activities, whereas investment banks were limited to capital market activities. Since the two no longer have to be under separate ownership, some use the term “commercial bank” to refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses.
    • Community banks: locally operated financial institutions that empower employees to make local decisions to serve their customers and partners.
    • Community development banks: regulated banks that provide financial services and credit to under-served markets or populations.
    • Land development banks: The special banks providing long-term loans are called land development banks (LDB). The history of LDB is quite old. The first LDB was started at Jhang in Punjab in 1920. The main objective of the LDBs is to promote the development of land, agriculture and increase the agricultural production. The LDBs provide long-term finance to members directly through their branches.[41]
    • Credit unions or co-operative banks: not-for-profit cooperatives owned by the depositors and often offering rates more favorable than for-profit banks. Typically, membership is restricted to employees of a particular company, residents of a defined area, members of a certain union or religious organizations, and their immediate families.
    • Postal savings banks: savings banks associated with national postal systems.
    • Private banks: banks that manage the assets of high-net-worth individuals. Historically a minimum of US$1 million was required to open an account, however, over the last years, many private banks have lowered their entry hurdles to US$350,000 for private investors.[42]
    • Offshore banks: banks located in jurisdictions with low taxation and regulation. Many offshore banks are essentially private banks.
    • Savings banks: in Europe, savings banks took their roots in the 19th or sometimes even in the 18th century. Their original objective was to provide easily accessible savings products to all strata of the population. In some countries, savings banks were created on public initiative; in others, socially committed individuals created foundations to put in place the necessary infrastructure. Nowadays, European savings banks have kept their focus on retail banking: payments, savings products, credits, and insurances for individuals or small and medium-sized enterprises. Apart from this retail focus, they also differ from commercial banks by their broadly decentralized distribution network, providing local and regional outreach – and by their socially responsible approach to business and society.
    • Ethical banks: banks that prioritize the transparency of all operations and make only what they consider to be socially responsible investments.
    • direct or internet-only bank is a banking operation without any physical bank branches. Transactions are usually accomplished using ATMs and electronic transfers and direct deposits through an online interface.

    Types of investment banks

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    Combination banks

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    Banco do Brasil office in São Paulo, Brazil, the bank is the largest financial institution in Brazil and Latin America.
    • Universal banks, more commonly known as financial services companies, engage in several of these activities. These big banks are very diversified groups that, among other services, also distribute insurance – hence the term bancassurance, a portmanteau word combining “banque or bank” and “assurance”, signifying that both banking and insurance are provided by the same corporate entity.

    Other types of banks

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    • Central banks are normally government-owned and charged with quasi-regulatory responsibilities, such as supervising commercial banks, or controlling the cash interest rate. They generally provide liquidity to the banking system and act as the lender of last resort in event of a crisis.
    • Islamic banks adhere to the concepts of Islamic law. This form of banking revolves around several well-established principles based on Islamic laws. All banking activities must avoid interest, a concept that is forbidden in Islam. Instead, the bank earns profit (markup) and fees on the financing facilities that it extends to customers.

    Challenges within the banking industry

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    United States

    [edit]

    Main article: Banking in the United States

    Citibank, The People’s Trust Company Building, BrooklynNew York City.

    The United States banking industry is one of the most heavily regulated and guarded in the world,[43] with multiple specialized and focused regulators. All banks with FDIC-insured deposits have the Federal Deposit Insurance Corporation (FDIC) as a regulator. However, for soundness examinations (i.e., whether a bank is operating in a sound manner), the Federal Reserve is the primary federal regulator for Fed-member state banks; the Office of the Comptroller of the Currency (OCC) is the primary federal regulator for national banks. State non-member banks are examined by the state agencies as well as the FDIC.[44]: 236  National banks have one primary regulator – the OCC.

    Each regulatory agency has its own set of rules and regulations to which banks and thrifts must adhere. The Federal Financial Institutions Examination Council (FFIEC) was established in 1979 as a formal inter-agency body empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions. Although the FFIEC has resulted in a greater degree of regulatory consistency between the agencies, the rules and regulations are constantly changing.

    In addition to changing regulations, changes in the industry have led to consolidations within the Federal Reserve, FDIC, OTS, and OCC. Offices have been closed, supervisory regions have been merged, staff levels have been reduced and budgets have been cut. The remaining regulators face an increased burden with an increased workload and more banks per regulator. While banks struggle to keep up with the changes in the regulatory environment, regulators struggle to manage their workload and effectively regulate their banks. The impact of these changes is that banks are receiving less hands-on assessment by the regulators, less time spent with each institution, and the potential for more problems slipping through the cracks, potentially resulting in an overall increase in bank failures across the United States.

    The changing economic environment has a significant impact on banks and thrifts as they struggle to effectively manage their interest rate spread in the face of low rates on loans, rate competition for deposits and the general market changes, industry trends and economic fluctuations. It has been a challenge for banks to effectively set their growth strategies with the recent economic market. A rising interest rate environment may seem to help financial institutions, but the effect of the changes on consumers and businesses is not predictable and the challenge remains for banks to grow and effectively manage the spread to generate a return to their shareholders.

    The management of the banks’ asset portfolios also remains a challenge in today’s economic environment. Loans are a bank’s primary asset category and when loan quality becomes suspect, the foundation of a bank is shaken to the core. While always an issue for banks, declining asset quality has become a big problem for financial institutions.

    Safra National Bank, New York

    There are several reasons for this, one of which is the lax attitude some banks have adopted because of the years of “good times.” The potential for this is exacerbated by the reduction in the regulatory oversight of banks and in some cases depth of management. Problems are more likely to go undetected, resulting in a significant impact on the bank when they are discovered. In addition, banks, like any business, struggle to cut costs and have consequently eliminated certain expenses, such as adequate employee training programs.

    Banks also face a host of other challenges such as aging ownership groups. Across the country, many banks’ management teams and boards of directors are aging. Banks also face ongoing pressure from shareholders, both public and private, to achieve earnings and growth projections. Regulators place added pressure on banks to manage the various categories of risk. Banking is also an extremely competitive industry. Competing in the financial services industry has become tougher with the entrance of such players as insurance agencies, credit unions, check cashing services, credit card companies, etc.

    As a reaction, banks have developed their activities in financial instruments, through financial market operations such as brokerage and have become big players in such activities.

    Another major challenge is the aging infrastructure, also called legacy IT. Backend systems were built decades ago and are incompatible with new applications. Fixing bugs and creating interfaces costs huge sums, as knowledgeable programmers become scarce.[45]

    Loan activities of banks

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    To be able to provide home buyers and builders with the funds needed, banks must compete for deposits. The phenomenon of disintermediation had to dollars moving from savings accounts and into direct market instruments such as U.S. Department of Treasury obligations, agency securities, and corporate debt. One of the greatest factors in recent years in the movement of deposits was the tremendous growth of money market funds whose higher interest rates attracted consumer deposits.[46]

    To compete for deposits, US savings institutions offer many different types of plans:[46]

    • Passbook or ordinary deposit accounts  – permit any amount to be added to or withdrawn from the account at any time.
    • NOW and Super NOW accounts  – function like checking accounts but earn interest. A minimum balance may be required on Super NOW accounts.
    • Money market accounts  – carry a monthly limit of preauthorized transfers to other accounts or persons and may require a minimum or average balance.
    • Certificate accounts  – subject to loss of some or all interest on withdrawals before maturity.
    • Notice accounts  – the equivalent of certificate accounts with an indefinite term. Savers agree to notify the institution a specified time before withdrawal.
    • Individual retirement accounts (IRAs) and Keogh plans  – a form of retirement savings in which the funds deposited and interest earned are exempt from income tax until after withdrawal.
    • Checking accounts  – offered by some institutions under definite restrictions.
    • All withdrawals and deposits are completely the sole decision and responsibility of the account owner unless the parent or guardian is required to do otherwise for legal reasons.
    • Club accounts and other savings accounts  – designed to help people save regularly to meet certain goals.

    Types of accounts

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    Suburban bank branch

    Bank statements are accounting records produced by banks under the various accounting standards of the world. Under GAAP there are two kinds of accounts: debit and credit. Credit accounts are Revenue, Equity and Liabilities. Debit Accounts are Assets and Expenses. The bank credits a credit account to increase its balance, and debits a credit account to decrease its balance.[47]

    The customer debits his or her savings/bank (asset) in his ledger when making a deposit (and the account is normally in debit), while the customer credits a credit card (liability) account in his ledger every time he spends money (and the account is normally in credit). When the customer reads his bank statement, the statement will show a credit to the account for deposits, and debits for withdrawals of funds. The customer with a positive balance will see this balance reflected as a credit balance on the bank statement. If the customer is overdrawn, he will have a negative balance, reflected as a debit balance on the bank statement.

    Brokered deposits

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    One source of deposits for banks is deposit brokers who deposit large sums of money on behalf of investors through trust corporations. This money will generally go to the banks which offer the most favorable terms, often better than those offered local depositors. It is possible for a bank to engage in business with no local deposits at all, all funds being brokered deposits. Accepting a significant quantity of such deposits, or “hot money” as it is sometimes called, puts a bank in a difficult and sometimes risky position, as the funds must be lent or invested in a way that yields a return sufficient to pay the high interest being paid on the brokered deposits. This may result in risky decisions and even in eventual failure of the bank. Banks which failed during 2008 and 2009 in the United States during the global financial crisis had, on average, four times more brokered deposits as a percent of their deposits than the average bank. Such deposits, combined with risky real estate investments, factored into the savings and loan crisis of the 1980s. Regulation of brokered deposits is opposed by banks on the grounds that the practice can be a source of external funding to growing communities with insufficient local deposits.[48] There are different types of accounts: saving, recurring and current accounts.

    Custodial accounts

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    Custodial accounts are accounts in which assets are held for a third party. For example, businesses that accept custody of funds for clients prior to their conversion, return, or transfer may have a custodial account at a bank for these purposes.

    Globalization

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    In modern times there have been huge reductions to the barriers of global competition in the banking industry. Increases in telecommunications and other financial technologies, such as Bloomberg, have allowed banks to extend their reach all over the world since they no longer have to be near customers to manage both their finances and their risk. The growth in cross-border activities has also increased the demand for banks that can provide various services across borders to different nationalities. Despite these reductions in barriers and growth in cross-border activities, the banking industry is nowhere near as globalized as some other industries. In the US, for instance, very few banks even worry about the Riegle–Neal Act, which promotes more efficient interstate banking. In the vast majority of nations around the globe, the market share for foreign owned banks is currently less than a tenth of all market shares for banks in a particular nation. One reason the banking industry has not been fully globalized is that it is more convenient to have local banks provide loans to small businesses and individuals. On the other hand, for large corporations, it is not as important in what nation the bank is in since the corporation’s financial information is available around the globe.[49]

    There have been two significant attempts to overcome the industry’s traditional focus on competing at the national level rather than the international level. In the 1980s, Citigroup and HSBC both began to develop large networks of retail bank branches in numerous countries around the world, in order to become global consumer banking brands. But in 2021, Citigroup initiated an exit from retail banking outside of its core U.S. market,[50] while in 2022, HSBC initiated an exit from the U.S. retail market (except for its wealth management business)[51] and then in 2023 put its retail operations in a dozen other countries under review for sale or closure.[52] According to Wells Fargo, both banks were operating on the assumption that globalization would lead to the rise of large numbers of consumers who would regularly travel across borders for both work and play, but that “global consumer customer never materialized”