Bank

Loading the player...

What is a 'Bank'

A bank is a financial institution licensed as a receiver of deposits. There are two types of banks: commercial/retail banks and investment banks. In most countries, banks are regulated by the national government or central bank.

BREAKING DOWN 'Bank'

Commercial banks are mainly concerned with managing withdrawals and deposits as well as supplying short-term loans to individuals and small businesses. Consumers primarily use these banks for basic checking and savings accounts, certificates of deposit and sometimes for home mortgages. Investment banks focus on providing services such as underwriting and corporate reorganization to institutional clients.

While many banks have both a brick-and-mortar and online presence, some banks have only an online presence. Online-only banks often offer consumers higher interest rates and lower fees. Convenience, interest rates and fees are the driving factors in consumers' decisions of which bank to do business with. As an alternative to banks, consumers can opt to use a credit union.

RELATED TERMS
  1. Business Banking

    A company's financial dealings with an institution that provides ...
  2. Bank Reserve

    Bank reserves are the currency deposits which are not lent out ...
  3. State Bank

    A financial institution that has been chartered by a state to ...
  4. Bank Rate

    The interest rate at which a nation's central bank lends money ...
  5. Limited Service Bank

    Any type of banking business facility that is located separately ...
  6. Universal Banking

    A banking system in which banks provide a wide variety of financial ...
Related Articles
  1. Investing Basics

    Retail Banking Vs. Corporate Banking

    Retail banking is the visible face of banking to the general public. Corporate banking, also known as business banking, refers to the aspect of banking that deals with corporate customers.
  2. Investing Basics

    What is a Bank?

    A bank is a financial institution licensed to receive deposits or issue new securities to the public.
  3. Personal Finance

    The Banking System: Commercial Banking - Operations

    ByStephen D. Simpson, CFA Retail BankingRetail banking is the banking that almost every reader will find most familiar. Retail banking is the business of making consumer loans, mortgages and ...
  4. Personal Finance

    The Banking System: Conclusion

    ByStephen D. Simpson, CFA Banking systems have been with us for as long as people have been using money. Banks and other financial institutions provide security for individuals, businesses and ...
  5. Personal Finance

    The Banking System: Non-Bank Financial Institutions

    ByStephen D. Simpson, CFA Savings and LoansSavings and loan associations, also known as S&Ls or thrifts, resemble banks in many respects. Most consumers don't know the differences between ...
  6. Personal Finance

    The Pros And Cons Of Internet Banks

    Learn how internet banking services stack up against those of their brick-and-mortar peers.
  7. Investing

    Why Banks Don't Need Your Money to Make Loans

    Contrary to the story told in most economics textbooks, banks don't need your money to make loans, but they do want it to make those loans more profitable.
  8. Personal Finance

    What's a Commercial Bank?

    A commercial bank is a type of financial institution that accepts deposits, offers checking account services, makes business, personal and mortgage loans; and offers basic financial products ...
  9. Economics

    What is Fractional Reserve Banking?

    Fractional reserve banking is the banking system most countries use today.
  10. Personal Finance

    What Are Central Banks?

    They print money, they control inflation, and much, much more. All you need to know about central banks is here.
RELATED FAQS
  1. What is the difference between an investment and a retail bank?

    Learn the primary differences between retail banks and investment banks by examining the business activities, type of clients ... Read Answer >>
  2. How does investment banking differ from commercial banking?

    Discover how investment banking differs from commercial banking, the responsibilities of each and how the two can be combined ... Read Answer >>
  3. What are the major categories of financial institutions and what are their primary ...

    Understand the various types of financial institutions that exist in today's economy, and learn the purpose each serves in ... Read Answer >>
  4. What factors are the primary drivers of banks' share prices?

    Find out which factors are most important when determining the share price of banks and other lending institutions in the ... Read Answer >>
  5. What's the difference between investment banks and commercial banks?

    Understand the principal differences between investment banks and commercial banks, and the areas of banking services that ... Read Answer >>
  6. What is the average profit margin for a company in the banking sector?

    Learn what the average profit margin is for companies in the banking sector, along with other evaluation metrics often used ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center