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