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There are very many applications.

  • Banks get investors to save with them. Then, based on the probability that all those investors will not wish to withdraw their savings at the same time, the banks lend more money than they have. This gearing is based on statistics although it is also controlled by law (the Basel agreement).
  • Banks use statistical profiles to determine the risk of default for people and organisations who borrow from them.
  • Maintaining a stock of cash, to meet the needs of their daily transactions costs bank money. They could lend that money out and earn interest on it. So they want to keep the float as small a s possible while meeting all but exceptional needs. This is done through analysis of past trends.
  • Statistical techniques can be used to identify fraudulent behaviour. People are less imaginative than you would think!
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Q: What is the Importance of statistics to banking industry?
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