Banks

A bank is an institution that provides different types of financial services; this includes mainly taking deposits and offering credit. Currently, the term ‘bank’ refers to an institution that holds a banking license to conduct the most fundamental banking services, such as accepting deposits and making loans. For it to be profitable, the bank levies transaction fees on financial services and charges interest on the money it lends. A bank additionally facilitates money transactions such as wire transfers and cashiers checks, issuing credit and debit cards, maintaining ATMs, and storing valuables, particularly in a safe deposit box.

Banks’ activities can be characterized as retail banking, individual and small-business banking, and investment banking, relating to activities on the financial markets. Most banks, nowadays, are owned privately and work to earn profits. The government owns some non-profit banks. Central banks, as non-commercial bodies or government agencies, have to ensure that interest rates are under control with a sufficient money supply across the whole economy. In times of crisis, they are the last resort for lending money.

Commercial banks are different from investment banks and mostly deal with corporations or large businesses. The underserved markets or populations are catered to by community development banks. These are regulated banks that provide financial services and credit. The national postal systems run the Postal savings banks. Private banks manage the assets of high-net-worth individuals. Offshore banks are located in places like Switzerland or the Channel Islands, with low taxation and regulation. Savings banks, in general, accept savings deposits and issue mortgages. Investment banks are slightly different. They work with corporations by underwriting stock and bond issues as well as advising on mergers. Merchant banks refer to banks which provide capital to firms in the form of shares rather than loans. They are different from venture capital firms, and are averse to investing in new companies.

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