Commercial bank – definition and meaning
A Commercial Bank is a financial institution that provides deposit, current, and saving accounts. A current account is the same as a checking account. A commercial bank serves individuals, organizations, and businesses. It also lends money. In the United Kingdom, people also call it a high street bank.
The term may be ambiguous. Some people say a commercial bank is a bank’s division that just deals with companies.
Commercial banks make money by taking short-term deposits and turning those funds into bigger, long-term maturity loans. This process, which transforms their assets, generates income. In other words, they make a profit by taking people’s money and lending it.
Commercial banks contrast with investment banks. Investment banks’ main businesses include securities trading, asset management, mergers & acquisition advisory, and securities underwriting. Aside from central banks, there are two main types of banks: investment and commercial banks.
The term ‘investment bank’ means the same as ‘merchant bank.’
Many large commercial banks also have investment banking divisions. However, retail banking makes up the bulk of their operations.
According to the Central Bank of The Bahamas:
“A commercial bank is a bank whose main functions are to accept demand deposits and to make loans, thereby facilitating the transfer of funds in the economy.”
“Typically, commercial banks make loans to business firms, private individuals, and government related entities.”
Commercial bank – main function
The main function of a commercial bank is to accept deposits. In fact, without getting deposits, it cannot make loans and investments.
We deposit their money in banks because we want to keep it safe. We also want to earn interest. Furthermore, we need easy access to our money through ATMs, checks (UK: cheques), and payment cards.
Banks offer different types of accounts to suit the needs of customers. Below are some examples:
– Fixed Deposits: the customer deposits a lump sum for a set period.
– Savings Deposits: ideal for customers wishing to build up small savings. The bank pays higher interest rates than in checking accounts. However, interest rates are lower than in fixed deposits.
– Current Deposits (Checking Accounts): customers can pay in and take out money whenever they like. The bank does not usually pay interest. In fact, the bank may even charge a small fee.
These accounts usually have an overdraft facility for customers who qualify.
– Recurring Deposits: the customer deposits a fixed amount every month for a set period. The bank pays interest. At the end of the period, the customer can either withdraw the money or renew for another term.
Commercial banks also process payments, issue checks, provide cards, and lend money. They deal in foreign exchange transactions, issue traveler’s checks, and offer safety deposit boxes.
Some commercial banks may give investment advice and offer brokering insurance contracts.
Investment vs. commercial bank
It is getting progressively harder to tell commercial banks from investment banks. From 1933 to 1999, thanks to the Glass-Steagall Act (the US only), it was quite easy.
If you took deposits and lent money, you were a commercial bank. On the other hand, if you helped businesses issue shares, you were an investment bank.
By the end of the 1990s, it became progressively more difficult to enforce Glass-Steagall. In fact, it eventually became impossible.
Today, we have to look at where the bulk of a bank’s activities are to determine what type of bank it is. In other words: “How does it make most of its money?’
In 2012, JP Morgan Chase was the lead underwriter in Facebook’s IPO. IPO stands for initial public offering. IPOs are investment banking activities. However, JP Morgan Chase is a commercial bank.
Modern commercial banks are increasingly embracing digital banking services, offering online and mobile platforms for customers to manage their finances conveniently.
Additionally, they are leveraging fintech partnerships to integrate advanced features like automated investing and real-time payments into their service portfolios.
Understanding “Commercial Bank” in Context
To enhance your grasp of financial discussions, it’s beneficial to see how the term “commercial bank” is employed in various sentences. Here are some real-world examples that illustrate the diverse situations in which the term is applicable:
- “The commercial bank offered competitive interest rates on business loans, enticing local entrepreneurs to finance their expansions.”
- “When I started my first job, I opened a savings account with a leading commercial bank to manage my earnings efficiently.”
- “The commercial bank’s mortgage advisor guided us through the home-buying process, making what seemed complex quite straightforward.”
- “Due to its robust cybersecurity measures, the commercial bank was entrusted by numerous customers to safeguard their financial assets.”
- “After the merger, the commercial bank expanded its operations, offering a wider range of services to both individuals and corporations.”
- “The community relied on the local commercial bank to sponsor and support various social initiatives and charity events.”
- “In response to the economic downturn, the commercial bank implemented new policies to provide relief to borrowers facing financial hardship.”
Video – What is a Commercial Bank?
This educational video, from our sister channel on YouTube – Marketing Business Network, explains what a ‘Commercial Bank’ is using simple and easy-to-understand language and examples.
Benki ya kibiashara <unk> ufafanuzi na maana Benki ya kibiashara ni taasisi ya kifedha ambayo hutoa amana, sasa, na akaunti za akiba. Akaunti ya sasa ni sawa na akaunti ya kuangalia. Benki ya kibiashara hutumikia watu binafsi, mashirika, na biashara. Pia hutoa mkopo wa pesa. Katika Uingereza, watu pia huita benki ya barabara kuu. Huenda neno hilo likawa lisiloeleweka. Watu wengine wanasema benki ya kibiashara ni mgawanyiko wa benki ambayo hushughulika tu na makampuni. Benki za kibiashara hufanya pesa kwa kuchukua amana za muda mfupi na kugeuza fedha hizo kuwa mikopo mikubwa zaidi ya muda mrefu. Utaratibu huu, ambao hubadilisha mali zao, hutokeza mapato. Kwa maneno mengine, wao hufanya faida kwa kuchukua pesa za watu na kuzipa mkopo. Benki za kibiashara zinatofautiana na benki za uwekezaji. Benki za uwekezaji biashara kuu ni pamoja na biashara ya dhamana, usimamizi wa mali, kuunganishwa na ununuzi ushauri, na dhamana underwriting. Mbali na benki kuu, kuna aina kuu mbili za benki: uwekezaji na benki za kibiashara. Neno "banki ya uwekezaji" ina maana sawa na "banki ya biashara". Benki nyingi kubwa za kibiashara pia zina idara za benki za uwekezaji. Hata hivyo, benki ya rejareja hufanyiza sehemu kubwa ya shughuli zao. "Kwa mujibu wa Benki Kuu ya Bahamas, ""benki ya kibiashara ni benki ambayo kazi kuu ni kukubali amana za mahitaji na kutoa mikopo, hivyo kuwezesha uhamisho wa fedha katika uchumi.""Benki za kibiashara kwa kawaida kutoa mikopo kwa makampuni ya biashara, watu binafsi, na serikali kuhusiana na mashirika." Kwa kweli, bila kupata amana, haiwezi kufanya mikopo na uwekezaji. Tunaweka pesa zao katika benki kwa sababu tunataka kuzihifadhi salama. Pia tunataka kupata riba. Kwa kuongezea, tunahitaji kupata pesa zetu kwa urahisi kupitia ATM, hundi (UK: hundi), na kadi za malipo. Benki hutoa aina tofauti za akaunti ili kukidhi mahitaji ya wateja. Chini ni baadhi ya mifano: <unk> Amana ya kudumu: mteja deposits kiasi cha mara moja kwa ajili ya kipindi maalum.  Amana za akiba: bora kwa wateja wanaotaka kujenga akiba ndogo. Benki hulipa viwango vya riba vya juu kuliko katika akaunti za hundi. Hata hivyo, viwango vya riba ni chini kuliko katika amana za kudumu.  Mawekezo ya sasa (Makaunti ya kuangalia): wateja wanaweza kulipa na kutoa fedha wakati wowote wanapotaka. Kwa kawaida benki hailipi riba. Kwa kweli, benki yaweza hata kulipa ada ndogo. Akaunti hizi kwa kawaida kuwa na kituo cha overdraft kwa wateja ambao wanastahili.  Amana ya mara kwa mara: mteja ameweka kiasi maalum kila mwezi kwa kipindi maalum. Benki hulipa riba. Mwishoni mwa kipindi hicho, mteja anaweza ama kuondoa pesa au upya kwa muhula mwingine. Benki za kibiashara pia husindika malipo, hutoa hundi, hutoa kadi, na kukopesha pesa. Wao hushughulika na shughuli za kubadilishana fedha za kigeni, hutoa hundi za kusafiri, na hutoa masanduku ya amana. Baadhi ya benki za kibiashara zinaweza kutoa ushauri wa uwekezaji na kutoa mikataba ya bima ya uwakilishi. Uwekezaji dhidi ya benki ya kibiashara Inakuwa vigumu zaidi na zaidi kusema benki za kibiashara kutoka benki za uwekezaji. Tangu mwaka 1933 hadi 1999, sheria ya Glass-Steagall iliwawezesha watu wengi kuamua kuhusu jinsi ya kufanya kazi. Kama wewe alichukua amana na kukopa fedha, wewe walikuwa benki ya kibiashara. Kwa upande mwingine, kama wewe alisaidia biashara kutoa hisa, wewe walikuwa benki ya uwekezaji. Katika miaka ya 1990, sheria ya Glass-Steagall ilizidi kuwa ngumu kutekelezwa. Kwa kweli, hatimaye ikawa vigumu. Leo, tunapaswa kuangalia ambapo sehemu kubwa ya shughuli za benki ni kuamua ni aina gani ya benki ni. "Kwa maneno mengine, ""JPMorgan Chase"" ni kampuni ya kwanza ya fedha ya Marekani kuanzisha kampuni ya Facebook." IPO ni kifupi cha kutoa hisa kwa umma kwa mara ya kwanza. IPO ni shughuli za benki za uwekezaji. Hata hivyo, JP Morgan Chase ni benki ya kibiashara. Benki za kibiashara za kisasa zinazidi kukumbatia huduma za benki za dijiti, zikitoa majukwaa ya mtandaoni na ya rununu kwa wateja kusimamia fedha zao kwa urahisi. Kwa kuongezea, wanafanya ushirikiano wa fintech kuunganisha huduma za hali ya juu kama uwekezaji wa moja kwa moja na malipo ya wakati halisi katika kwingineko zao za huduma. Kuelewa "Benki ya Biashara" katika Muktadha Ili kuboresha ufahamu wako wa majadiliano ya kifedha, ni muhimu kuona jinsi neno "benki ya kibiashara" linatumiwa katika sentensi mbalimbali. "Hii ni mfano wa ""mfano wa biashara"" ambao unatoa mfano wa biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara ya biashara." Video hii ya elimu, kutoka kwa kituo chetu dada kwenye YouTube <unk> Marketing Business Network, inaelezea nini <unk>Benki ya Biashara<unk> inatumia lugha rahisi na rahisi kuelewa na mifano.