Types of Banks

Study Notes

Retail Banks: Provide basic banking services to individuals and small businesses, such as checking and savings accounts, credit cards, and personal loans.
Commercial Banks: Offer services to large corporations, including cash management, trade finance, and syndicated loans.
Investment Banks: Focus on helping companies raise capital through IPOs, bond issuances, and mergers and acquisitions.
Central Banks: Regulate the money supply, set interest rates, and act as lenders of last resort to maintain financial stability.
Community Banks: Serve local communities, focusing on small business lending and community development.

Accepting Deposits: Banks accept money from customers and provide a safe place to store it.
Making Loans: Banks use deposited funds to make loans to other customers, earning interest on the borrowed amount.
Providing Payment Services: Banks facilitate transactions, such as checks, credit cards, and online payments.
Investing: Banks invest in securities, such as stocks and bonds, to generate income.

Fractional Reserve System: Banks hold a fraction of deposits as reserves, lending out the rest to maximize profits.
Full Reserve System: Banks hold 100% of deposits as reserves, limiting their ability to make loans.

Capital Requirements: Banks must maintain a minimum amount of capital to ensure solvency.
Liquidity Requirements: Banks must hold sufficient liquid assets to meet short-term obligations.
Reserve Requirements: Banks must hold a percentage of deposits as reserves.
Supervision and Regulation: Banks are subject to regular audits and oversight to ensure compliance with regulations.

Retail banks provide basic banking services to individuals and small businesses, including checking and savings accounts, credit cards, and personal loans.
Commercial banks offer services to large corporations, including cash management, trade finance, and syndicated loans.
Investment banks focus on helping companies raise capital through IPOs, bond issuances, and mergers and acquisitions.
Central banks regulate the money supply, set interest rates, and act as lenders of last resort to maintain financial stability.
Community banks serve local communities, focusing on small business lending and community development.

Banks accept deposits, providing a safe place to store money.
Banks use deposited funds to make loans to other customers, earning interest on the borrowed amount.
Banks facilitate transactions, such as checks, credit cards, and online payments, providing payment services.
Banks invest in securities, such as stocks and bonds, to generate income.

The fractional reserve system allows banks to hold a fraction of deposits as reserves, lending out the rest to maximize profits.
The full reserve system requires banks to hold 100% of deposits as reserves, limiting their ability to make loans.

Capital requirements dictate that banks maintain a minimum amount of capital to ensure solvency.
Liquidity requirements ensure banks hold sufficient liquid assets to meet short-term obligations.
Reserve requirements stipulate that banks hold a percentage of deposits as reserves.
Supervision and regulation subject banks to regular audits and oversight to ensure compliance with regulations.