| A bank is a business which provides | | | | interest it charges in its lending |
| financial services, usually for profit. | | | | activities. This difference is referred |
| A commercial bank accepts deposits from | | | | to as the spread between the cost of |
| customers and in turn makes loans based | | | | funds and the loan interest rate. |
| on those deposits. Traditional banking | | | | Historically, profitability from lending |
| services include receiving deposits of | | | | activities has been cyclic and dependent |
| money, lending money and processing | | | | on the needs and strengths of loan |
| transactions. Some banks (called Banks | | | | customers. In recent history, investors |
| of issue) issue banknotes as legal | | | | have demanded a more stable revenue |
| tender. Many banks offer ancillary | | | | stream and banks have therefore placed |
| financial services to make additional | | | | more emphasis on transaction fees, |
| profit; for example: selling insurance | | | | primarily loan fees but also including |
| products, investment products or stock | | | | service charges on array of deposit |
| broking. | | | | activities and ancillary services |
| Currently in most jurisdictions | | | | (international banking, foreign |
| commercial banks are regulated and | | | | exchange, insurance, investments, wire |
| require permission to operate. | | | | transfers, etc.). However, lending |
| Operational authority is granted by bank | | | | activities still provide the bulk of a |
| regulatory authorities and provide | | | | commercial bank's income. |
| rights to conduct the most fundamental | | | | The name bank derives from the Italian |
| banking services such as accepting | | | | word banco, desk, used during the |
| deposits and making loans. A commercial | | | | Renaissance by Florentines bankers, who |
| bank is usually defined as an | | | | used to make their transactions above a |
| institution that both accepts deposits | | | | desk covered by a green tablecloth |
| and makes loans; there are also | | | | Services typically offered by banks |
| financial institutions that provide | | | | Although the basic type of services |
| selected banking services without | | | | offered by a bank depends upon the type |
| meeting the legal definition of a bank | | | | of bank and the country, services |
| (see banking institutions). | | | | provided usually include: |
| Banks have a long history, and have | | | | * Taking deposits from their customers |
| influenced economies and politics for | | | | and issuing checking and savings |
| centuries. In history, the primary | | | | accounts to individuals and businesses |
| purpose of a bank was to provide | | | | * Extending loans to individuals and |
| liquidity to trading companies. Banks | | | | businesses |
| advanced funds to allow businesses to | | | | * Cashing cheques |
| purchase inventory, and collected those | | | | * Facilitating money transactions such |
| funds back with interest when the goods | | | | as wire transfers and cashiers checks |
| were sold. For centuries, the banking | | | | * Issuing credit cards, ATM cards, and |
| industry only dealt with businesses, not | | | | debit cards |
| consumers. Commercial lending today is a | | | | * Storing valuables, particularly in a |
| very intense activity, with banks | | | | safe deposit box |
| carefully analysing the financial | | | | * Cashing and distributing bank rolls |
| condition of its business clients to | | | | * Consumer & commercial financial |
| determine the level of risk in each loan | | | | advisory services |
| transaction. Banking services have | | | | * Pension & retirement planning |
| expanded to include services directed at | | | | Financial transactions can be performed |
| individuals and risk in these much | | | | through many different channels: |
| smaller transactions are pooled. | | | | * Branch |
| A bank generates a profit from the | | | | * ATM |
| differential between what level of | | | | * Mail |
| interest it pays for deposits and other | | | | * Telephone banking |
| sources of funds, and what level of | | | | * Online banking |