| Banks' activities can be divided into retail | | | | their focus on retail banking: payments, |
| banking, dealing directly with individuals | | | | savings products, credits and insurances for |
| and small businesses; business banking, | | | | individuals or small and medium-sized |
| providing services to mid-market business; | | | | enterprises. Apart from this retail focus, |
| corporate banking, directed at large business | | | | they also differ from commercial banks by |
| entities; and investment banking, relating to | | | | their broadly decentralised distribution |
| activities on the financial markets. Most | | | | network, providing local and regional |
| banks are profit-making, private enterprises. | | | | outreach and by their socially responsible |
| However, some are owned by government, or are | | | | approach to business and society. |
| non-profits. | | | | |
| | | | Building societies and Landesbanks: conduct |
| Central banks are non-commercial bodies or | | | | retail banking. |
| government agencies often charged with | | | | |
| controlling interest rates and money supply | | | | Ethical banks: banks that prioritize the |
| across the whole economy. They generally | | | | transparency of all operations and make only |
| provide liquidity to the banking system and | | | | social-responsible investments. |
| act as Lender of last resort in event of a | | | | |
| crisis. | | | | Types of investment banks |
| | | | |
| Types of retail banks | | | | Investment banks "underwrite" (guarantee the |
| | | | sale of) stock and bond issues, trade for |
| Commercial bank: the term used for a normal | | | | their own accounts, make markets, and advise |
| bank to distinguish it from an investment | | | | corporations on capital markets activities |
| bank. After the Great Depression, the U.S. | | | | such as mergers and acquisitions. |
| Congress required that banks only engage in | | | | |
| banking activities, whereas investment banks | | | | Merchant banks were traditionally banks which |
| were limited to capital market activities. | | | | engaged in trade financing. The modern |
| Since the two no longer have to be under | | | | definition, however, refers to banks which |
| separate ownership, some use the term | | | | provide capital to firms in the form of |
| "commercial bank" to refer to a bank or a | | | | shares rather than loans. Unlike Venture |
| division of a bank that mostly deals with | | | | capital firms, they tend not to invest in new |
| deposits and loans from corporations or large | | | | companies. |
| businesses. | | | | |
| | | | Both combined |
| Community Banks: locally operated financial | | | | |
| institutions that empower employees to make | | | | Universal banks, more commonly known as a |
| local decisions to serve their customers and | | | | financial services company, engage in several |
| the partners | | | | of these activities. For example, First Bank |
| | | | (a very large bank) is involved in commercial |
| Community development banks: regulated banks | | | | and retail lending, and its subsidiaries in |
| that provide financial services and credit to | | | | tax-havens offer offshore banking services to |
| underserved markets or populations. | | | | customers in other countries. Other large |
| | | | financial institutions are similarly |
| Postal savings banks: savings banks | | | | diversified and engage in multiple |
| associated with national postal systems. | | | | activities. In Europe and Asia, big banks are |
| | | | very diversified groups that, among other |
| Private banks: manage the assets of high net | | | | services, also distribute insurance, hence |
| worth individuals. | | | | the term bancassurance. |
| | | | |
| Offshore banks: banks located in | | | | Other types of banks |
| jurisdictions with low taxation and | | | | |
| regulation. Many offshore banks are | | | | Islamic Banking |
| essentially private banks. | | | | |
| | | | Islamic banks adhere to the concepts of |
| Savings bank: in Europe, savings banks take | | | | Islamic law. Islamic banking revolves around |
| their roots in the 19th or sometimes even | | | | several well established concepts which are |
| 18th century. Their original objective was to | | | | based on Islamic canons. Since the concept of |
| provide easily accessible savings products to | | | | interest is forbidden in Islam, all banking |
| all strata of the population. In some | | | | activities must avoid interest. Instead of |
| countries, savings banks were created on | | | | interest, the bank earns profit (mark-up) and |
| public initiative, while in others socially | | | | fees on financing facilities that it extends |
| committed individuals created foundations to | | | | to the customers. Also, deposit makers earn a |
| put in place the necessary infrastructure. | | | | share of the bank’s profit as opposed |
| Nowadays, European savings banks have kept | | | | to a predetermined interest |