What is commercial Bank?

What Does commercial Bank Mean

The banks , according to one of the meanings of the term, is the set of banks and bankers . The concept is used to name the entities dedicated to facilitating financing .

Commercial is that belonging to or relating to commerce or merchants . The adjective is also used in reference to what is easily accepted in a certain market.
The notion of commercial banking is linked to banks that act as universal operators and that can offer all the services and passive and active operations that are allowed by law . The commercial bank, therefore, is a type of bank , like the investment bank or the mortgage bank .

The main function of commercial banking is to mediate between the supply and demand of financial resources . These banks can receive savings from individuals and companies (in deposits, fixed terms, etc.) and grant loans and credits. Receiving resources is a passive operation, while borrowing money is an active operation.
The operation of commercial banking is subject to the specific laws of each country and the regulations of each Central Bank . It is common for these commercial banks to provide other services, such as the exchange of bills and coins, the rental of safes or the collection of taxes.
When talking about commercial banking, inevitably reference is made to the so-called investment banking. These are two terms with points in common but different at the same time because while the first we have already seen the functions it has, the second has as main tasks undertaking mergers, taking different companies to the stock market, issuing bonds, proceeding to the sale of divisions between companies and even to carry out trading operations or create takeover bids.
Taking into account all these nuances, we can establish a series of characteristics that allow us to better understand the difference between one and the other:

• Commercial banking is very difficult to enter a loss situation, hence its profits are very stable.

• Investment banking, for its part, has benefits that are much more unstable since they depend on market fluctuations. In this way, in good times it achieves that those are higher than those of commercial banks but in times of crisis they decrease more than those of the other.

• We could establish that commercial banking has its origins in the Middle Ages, since it was at that time that the first people began to emerge who no longer wanted to keep the money they had at home.

• There are very few entities in the world that can be considered as pure investment banks. Specifically, experts agree that the only one that could currently be classified as such is Goldman Sachs, which exists in the United States.

The distinction between commercial banking and investment banking emerged after the Great Depression , when the US Congress required banks to only carry out traditional banking activities, leaving capital market operations to so-called investment banks.

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