Commercial Bank

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DEFINITION of 'Commercial Bank'

A financial institution that provides services, such as accepting deposits, giving business loans and auto loans, mortgage lending, and basic investment products like savings accounts and certificates of deposit. The traditional commercial bank is a brick and mortar institution with tellers, safe deposit boxes, vaults and ATMs. However, some commercial banks do not have any physical branches and require consumers to complete all transactions by phone or Internet. In exchange, they generally pay higher interest rates on investments and deposits, and charge lower fees.

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BREAKING DOWN 'Commercial Bank'

Commercial banking activities are different than those of investment banking, which include underwriting, acting as an intermediary between an issuer of securities and the investing public, facilitating mergers and other corporate reorganizations, and also acting as a broker for institutional clients. Some commercial banks, such as Citibank and JPMorgan Chase, also have investment banking divisions, while others, such as Ally, operate strictly on the commercial side of the business.

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RELATED FAQS
  1. How does investment banking differ from commercial banking?

    Investment banking and commercial banking are two primary segments of the banking industry. Investment banks facilitate the ... Read Full Answer >>
  2. What's the difference between investment banks and commercial banks?

    Investment banking and commercial banking are two divisions of the banking industry that provide substantially different ... Read Full Answer >>
  3. How do commercial banks make money?

    Commercial banks make money by providing loans and earning interest income from those loans. Customer deposits, such as checking ... Read Full Answer >>
  4. What are the main reasons an investor should consider an allocation to the banking ...

    Financial sector performance is very closely tied to the performance of other industries yet it balances investment by providing ... Read Full Answer >>
  5. Why do commercial banks borrow from the Federal Reserve?

    Commercial banks borrow from the Federal Reserve primarily to meet reserve requirements when their cash on hand is low before ... Read Full Answer >>
  6. What role does a correspondent bank play in an international transaction?

    A correspondent bank is most typically used in international buy, sell or money transfer transactions to facilitate foreign ... Read Full Answer >>

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