The banks are financial institutions that have the ability to manage properly the money of customers who place their trust in them and at the same time, they can lend money to individuals or companies. There are currently several types of banks, one of them is the commercial bank , institutions that are mainly responsible for financial intermediation .
A commercial bank is a type of banking financial institution that has the primary function of serving as an intermediary between the supply and demand that occurs between the buyers and sellers of financial resources.
Characteristics of the commercial bank
Among the main characteristics of the commercial bank are the following:
- All commercial banks are regulated by the regulations in force in the country and by the Central Bank of the country .
- The amount of money that a bank of this type earns is determined by the differential between the interest paid on deposits and the interest earned on the loans it provides.
- The monies can be withdrawn from financial banks very easily .
- Its main source, however, is deposits .
- They function as universal banking operators .
- They provide all kinds of passive and active operation as long as it is permitted by law.
- Its operation is closely linked to the specific laws of banking activity that are in force in the country.
Many experts assure that the origin of banks as financial institutions is quite old and they were created since human organizations were founded. From the 4th century BC , public banks were created in the Greek towns, which were administered by officials specialized in the subject.
After the Great Depression occurred , the United States Congress required banking entities to carry out traditional activities and to leave the operation of the capital market to commercial banks.
The types of commercial banks are all those that function to help individuals and companies to obtain loans , to create checking and savings accounts , and in the microfinance of businesses through the granting of small credits.
Functions of the commercial bank
The main function of this type of bank is to be able to receive and subsequently channel the savings of customers and companies through a series of deposits , fixed terms and other banking operations . They are responsible for granting loans and credits to people who need some type of financing. They can also perform other types of functions such as tax collection and currency exchange .
The commercial bank also has the function of creating money as deposits are opened for customers and allows the disposition of checks to exceed the amount that has been deposited. It also functions as a mediator between clients who save and those who lend money, thus fulfilling a facilitating function for the economy . Finally, they are insurers for the different economic agents who come to deposit their money in cash as they ensure protection in terms of losses or theft .
What services does it offer
This type of institution also accepts deposits from its clients, provides checking account services , has the ability to grant loans and offer various financial services such as certificates of deposit and savings accounts to both companies and individuals. They also include money market accounts , business loans , mortgages, and vehicle loans in their services .
The operations carried out by a commercial bank can be divided into two large groups, the liabilities that include a series of operations through which funds can be raised from the public, granting some type of return, such as savings accounts and time deposits. and active ones , in which the bank can offer a product in exchange for charging interest, such as credit cards.
How it differs from an investment bank
Among its main differences we can mention that commercial banking does not usually suffer losses and therefore, they are very stable, on the other hand, commercial banking has a series of benefits that are more unstable since they will depend on the fluctuations that occur in the market.
Importance of the commercial bank
The main importance of commercial banks is that it is a type of institution that has the ability to correctly understand the way in which most of the economy works in companies and families and through this, it is possible that the surpluses that are generated by the saving agents reach the people who need financing .
Some examples of commercial bank are mentioned below:
- Santander Bank
- MCB Bank
- Punjab Bank
- Habib Bank
- Standard Charted Bank
- Bank of Bogota
- BBVA Bancomer