Types of banks

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