II 3 A COMMERCIAL BANK TOWARDS THE
DEFINITION
II 3 1 DEFINITION
A commercial bank is a type of financial intermediary and a type
of a bank. Commercial banking is also known as business banking. It is a bank
that provides checking accounts, savings accounts, and money market accounts
and that accepts time deposits. After the Great Depression, the U.S. Congress
required that banks engage only in banking activities, whereas investment banks
were limited to capital market activities. As the two no longer have to be
under separate ownership under U.S. law, some use the term "commercial bank" to
refer to a bank or a division of a bank primarily dealing with deposits and
loans from corporations or large businesses. In some other jurisdictions, the
strict separation of investment and commercial banking never applied.
Commercial banking may also be seen as distinct from retail banking, which
involves the provision of financial services direct to consumers. Many banks
offer both commercial and retail banking services
(www.wikipedia/commercialbank).
Commercial bank is the term used for a normal bank to distinguish
it from an investment bank. This is what people normally call a "bank". It
raises funds by collecting deposits from businesses and consumers via checkable
deposits, savings deposits, and time (or term) deposits. It grants loans to
businesses and consumers. It also buys corporate bonds and government bonds.
Its primary liabilities are deposits and primary assets are loans and bonds.
Commercial banking can also refer to a bank or a division of a
bank that mostly deals with deposits and loans from corporations or large
businesses, as opposed to normal individual members of the public (retail
banking)(www.wikipedia/commercialbank).
II
3 2 THE ROLE OF COMMERCIAL BANKS
Commercial banks engage in the following activities:
· Processing of payments by way of telegraphic transfer,
EFTPOS, internet banking, or other means issuing bank drafts and bank cheques
accepting money on term deposit
· Lending money by overdraft, installment loan, or other
means providing documentary and standby letter of credit, guarantees,
performance bonds, securities underwriting commitments and other forms of off
balance sheet exposures safekeeping of documents and other items in safe
deposit boxes sale, distribution or brokerage, with or without advice, of
insurance, unit trusts and similar financial products as a «financial
supermarket» traditionally, large commercial banks also underwrite bonds,
and make markets in currency, interest rates, and credit-related securities,
but today large commercial banks usually have an investment bank arm that is
involved in the mentioned activities(www.wikipedia/commercialbank).
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