A commercial bank is a type of financial intermediary and a type of bank. A banker or bank is a Financial institution whose primary activity is to act as a payment agent for customers and to borrow and lend money The field of finance refers to the concepts of Time, Money and Risk and how they are interrelated In Economics, a financial market is a mechanism that allows people to easily buy and sell ( Trade) financial Securities (such as stocks and bonds There are two basic financial market participant categories Investor vs Corporate finance is an area of Finance dealing with the financial decisions Corporations make and the tools and analysis used to make these decisions Personal finance is the application of the principles of Finance to the monetary decisions of an individual or family unit Public finance is a field of economics concerned with paying for collective or governmental activities and with the administration and design of those activities Financial regulations are a form of Regulation or supervision which subjects Financial institutions to certain requirements restrictions and guidelines aiming to A central bank, reserve bank, or monetary authority is the entity responsible for the Monetary policy of a country or of a group of member states An advising bank (also known as a notifying bank advises a Beneficiary (exporter that a Letter of credit (L/C opened by an issuing bank for an In the United States, Community development banks (CDBs are Banks designed to serve residents and spur economic development in low- to moderate-income (LMI geographical In Finance, a custodian bank, or simply custodian, refers to a Financial institution responsible for safeguarding a firm's or individual's financial assets A depository bank ( US usage is a bank organized in the United States which provides all the stock transfer and agency services in connection with a Investment banks profit from companies and governments by raising money through issuing and selling Securities in the Capital markets (both equity and Islamic banking refers to a system of banking or banking activity that is consistent with Islamic law ( Sharia) principles and guided by Islamic economics In banking, a merchant bank is a financial institution primarily engaged in international finance and long-term loans for multinational corporations and governments A mutual savings bank is a Financial institution chartered through a state or federal government to provide a safe place for individuals to save and to Invest A mutual savings bank is a Financial institution chartered through a state or federal government to provide a safe place for individuals to save and to Invest The term national Bank has several meanings especially in Developing countries, a bank owned by the State an ordinary private An offshore bank is a Bank located outside the country of residence of the depositor typically in a low tax jurisdiction (or Tax haven) that provides financial Private banks are Banks that are not incorporated. A non-incorporated bank is owned by either an individual or a general partner(s with limited partner(s A savings bank is a Financial institution whose primary purpose is accepting Savings deposits Banking in Switzerland is characterized by stability privacy and protection of clients' assets and information Bank secrecy (or bank privacy) is a legal principle under which Banks are allowed to protect personal information about their customers through the use of Numbered A deposit account is a current account at a Banking institution that allows money to be deposited and withdrawn by the account holder with the transactions and resulting balance Money creation is the process by which Money is produced or issued A loan is a type of Debt. This article focuses exclusively on monetary loans although in practice any material object might be lent This is a list of Banks throughout the world Africa Central Bank Bank Government Bank of Canada (Central Bank Business Development Bank of Canada The "Big Six" Canada's Hong Kong maintains a three-tier system of deposit-taking institutions licensed banks restricted licence banks and deposit-taking companies This is a list of Banks with operations in Singapore. Location of incorporation is provided in brackets for foreign banks A financial intermediary is an Institution, firm or individual who mediates between two or more parties in a financial context A banker or bank is a Financial institution whose primary activity is to act as a payment agent for customers and to borrow and lend money After the Great Depression, the U. S. Congress required 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 primarily dealing with deposits and loans from corporations or large businesses.
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Possible meanings
Commercial bank has two possible meanings:
- Commercial bank is the term used for a normal bank to distinguish it from an investment bank.
This is what people normally call a "bank". The term "commercial" was used to distinguish it from an investment bank. Investment banks profit from companies and governments by raising money through issuing and selling Securities in the Capital markets (both equity and Since the two types of banks no longer have to be separate companies, some have used the term "commercial bank" to refer to banks which focus mainly on companies. In some English-speaking countries outside North America, the term "trading bank" was and is used to denote a commercial bank. During the great depression and after the stock market crash of 1929, the U. S. Congress passed the Glass-Steagal Act 1930 (Khambata 1996) requiring that commercial banks only engage in banking activities (accepting deposits and making loans, as well as other fee based services), whereas investment banks were limited to capital markets activities. This separation is no longer mandatory.
It raises funds by collecting deposits from businesses and consumers via checkable deposits, savings deposits, and time (or term) deposits. A deposit account is a current account at a Banking institution that allows money to be deposited and withdrawn by the account holder with the transactions and resulting balance A transactional account ( North America: checking account or chequing account, United Kingdom and some other countries current account Savings accounts are accounts maintained by retail Financial institutions that pay Interest but can not be used directly as Money (by for example A time deposit (also known as a term deposit, particularly in Canada Australia and New Zealand; a bond in the United Kingdom It makes loans to businesses and consumers. A loan is a type of Debt. This article focuses exclusively on monetary loans although in practice any material object might be lent It also buys corporate bonds and government bonds. A Corporate Bond is a bond issued by a Corporation. The term is usually applied to longer-term debt instruments generally with a maturity date falling at least a A government bond is a bond issued by a national government denominated in the country's own Currency. Its primary liabilities are deposits and primary assets are loans and bonds. In Business and Accounting, assets are everything owned by a person or company (all tangible and intangible property that can be converted into cash.
- Commercial banking can also refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses, as opposed to normal individual members of the public (retail banking). Retail banking refers to banking in which Banking institutions execute transactions directly with consumers rather than corporations or other banks
Origin of the word
The name bank derives from the Italian word banco "desk/bench", used during the Renaissance by Florentine bankers, who used to make their transactions above a desk covered by a green tablecloth. Italian ( or lingua italiana) is a Romance language spoken by about 63 million people as a First language, primarily in Italy. The Renaissance (from French Renaissance, meaning "rebirth" Italian: Rinascimento, from re- "again" and nascere Florence ( Italian: Firenze Florentia and Fiorenza) is the Capital City of the Italian region of Tuscany [1] However, there are traces of banking activity even in ancient times.
In fact, the word traces its origins back to the Ancient Roman Empire, where moneylenders would set up their stalls in the middle of enclosed courtyards called macella on a long bench called a bancu, from which the words banco and bank are derived. As a moneychanger, the merchant at the bancu did not so much invest money as merely convert the foreign currency into the only legal tender in Rome- that of the Imperial Mint. [2]
The role of commercial banks
Commercial banks engaged in the following activities:
- processing of payments by way of telegraphic transfer, EFTPOS, internet banking or other means
- issuing bank drafts and bank cheques
- accepting money on term deposit
- lending money by way of overdraft, installment loan or otherwise
- providing documentary and standby letter of credit, guarantees, performance bonds, securities underwriting commitments and other forms of off balance sheet exposures
- safekeeping of documents and other items in safe deposit boxes
- currency exchange
- sale, distribution or brokerage, with or without advice, of insurance, unit trusts and similar financial products as a “financial supermarket”
Types of loans granted by commercial banks
Secured loan
A secured loan is a loan in which the borrower pledges some asset (e. A cashier's check (also known as a cashier's cheque, bank check, official check, teller's check, bank draft or treasurer's check A cashier's check (also known as a cashier's cheque, bank check, official check, teller's check, bank draft or treasurer's check A time deposit (also known as a term deposit, particularly in Canada Australia and New Zealand; a bond in the United Kingdom An overdraft occurs when withdrawals from a Bank account exceed the available balance which gives the account a negative balance - a person can be said to have A letter of credit is a document issued mostly by a Financial institution, used primarily in Trade finance, which usually provides an irrevocable payment undertaking A performance bond is a Surety bond issued by an Insurance company or a Bank to guarantee satisfactory completion of a project by a contractor A safe deposit box (sometimes incorrectly called a safety deposit box) is a type of Safe usually located in groups inside a Bank vault or in the back of A currency is a unit of exchange, facilitating the transfer of Goods and/or services It is one form of Money, where money is A secured loan is a Loan in which the borrower pledges some asset (e g. a car or property) as collateral (i. In lending agreements collateral is a borrower's asset that is Forfeited to the lender if the borrower is insolvent—that is unable to pay back the principal and interest on e. , security) for the loan.
Mortgage loan
A mortgage loan is a very common type of debt instrument, used to purchase real estate. A mortgage loan is a Loan secured by Real property through the use of a Mortgage (a legal instrument Under this arrangement, the money is used to purchase property. Commercial banks, however, are given security - a lien on the title to the house - until the mortgage is paid off in full. In Law, a lien is a form of Security interest granted over an item of Property to secure the payment of a Debt or performance of some other If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it.
In the past, commercial banks have not been greatly interested in real estate loans and have placed only a relatively small percentage of their assets in mortgages. As their name implies, such financial institutions secured their earning primarily from commercial and consumer loans and left the major task of home financing to others. However, due to changes in banking laws and policies, commercial banks are increasingly active in home financing.
Changes in banking laws now allow commercial banks to make home mortgage loans on a more liberal basis than ever before. In acquiring mortgages on real estate, these institutions follow two main practices. First, some of the banks maintain active and well-organized departments whose primary function is to compete actively for real estate loans. In areas lacking specialized real estate financial institutions, these banks become the source for residential and farm mortgage loans. Second, the banks acquire mortgages by simply purchasing them from mortgage bankers or dealers.
In addition, dealer service companies, which were originally used to obtain car loans for permanent lenders such as commercial banks, wanted to broaden their activity beyond their local area. In recent years, however, such companies have concentrated on acquiring mobile home loans in volume for both commercial banks and savings and loan associations. Service companies obtain these loans from retail dealers, usually on a nonrecourse basis. Almost all bank/service company agreements contain a credit insurance policy that protects the lender if the consumer defaults.
Unsecured loan
Unsecured loans are monetary loans that are not secured against the borrowers assets (i. An unsecured loan is a Loan that is not backed by collateral. e. , no collateral is involved). These may be available from financial institutions under many different guises or marketing packages:
- credit card debt,
- personal loans,
- bank overdrafts
- credit facilities or lines of credit
- corporate bonds
References
- ^ de Albuquerque, Martim (1855). A credit card is part of a system of Payments named after the small Plastic card issued to users of the system An overdraft occurs when withdrawals from a Bank account exceed the available balance which gives the account a negative balance - a person can be said to have A Corporate Bond is a bond issued by a Corporation. The term is usually applied to longer-term debt instruments generally with a maturity date falling at least a Notes and Queries. London: George Bell, 431.
- ^ Matyszak, Philip (2007). Ancient Rome on Five Denarii a Day. New York: Thames & Hudson, 144. ISBN 050005147X.
See also
Further reading
- Brunner, Allan D. The Assets and Liabilities of Commercial Banks in the United States is a Federal Reserve Statistical Release. The Glass-Steagall Act of 1933 established the Federal Deposit Insurance Corporation (FDIC in the United States and included banking reforms some of which ; Decressin, Jörg; Hardy, Daniel C. L. ; Kudela, Beata (2004-06-21). "MMIV" redirects here For the Modest Mouse album see " Baron von Bullshit Rides Again " Events 524 - Godomar, King of the Burgundians defeats the Franks at the Battle of Vézeronce. "Germany's Three-Pillar Banking System: Cross-Country Perspectives in Europe". . International Monetary Fund Abstract
- Khambata, Dara (1996). The International Monetary Fund ( IMF) is an International organization that oversees the Global financial system by following the Macroeconomic The practice of multinational banking: macro-policy issues and key international concepts, 2nd, New York: Quorum Books, 320. ISBN 978-0899309712.
External links
- Tiwari, Rajnish und Buse, Stephan (2006): The German Banking Sector: Competition, Consolidation and Contentment, Hamburg University of Technology (TU Hamburg-Harburg)
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