Few Common Types of Banks Based on the Financial Services They Offer

By: Nicole Carlos

Sure, here are a few common types of banks based on the financial services they offer:

1. Commercial banks: Commercial banks are financial institutions that provide a wide range of banking services to individuals and businesses, such as checking and savings accounts, loans, and credit cards. These banks make money by lending out the deposits that they receive from customers.
2. Investment banks: Investment banks specialize in providing financial services to corporations, governments, and other large organizations. These services may include underwriting and issuing securities, providing financial advice and guidance on mergers and acquisitions, and trading securities.
3. Central banks: Central banks are government-owned banks that act as a regulator for the banking system in their respective countries. They implement monetary policy, issue currency, and act as a lender of last resort to commercial banks.
4. Savings banks: Savings banks are financial institutions that primarily accept deposits from customers and use those deposits to make loans to borrowers. These banks may be organized as mutually owned cooperatives or as publicly traded corporations.
5. Credit unions: Credit unions are financial institutions that are owned and controlled by their members, who are also their customers. Credit unions offer a range of financial services, including checking and savings accounts, loans, and credit cards, to their members.

Commercial banks

Commercial banks are financial institutions that provide a wide range of banking services to individuals and businesses, such as checking and savings accounts, loans, and credit cards. These banks make money by lending out the deposits that they receive from customers. Some of the specific services offered by commercial banks may include:

• Accepting deposits: Commercial banks allow customers to deposit money into accounts such as checking accounts, savings accounts, and certificates of deposit (CDs). Deposits may be made in person, by mail, or electronically through online banking or mobile banking apps.
• Making loans: Commercial banks lend money to individuals and businesses in the form of mortgages, car loans, personal loans, and business loans. Banks may use their own funds to make loans or may borrow money from other financial institutions to lend to their customers.
• Providing credit cards: Commercial banks may issue credit cards to their customers, allowing them to borrow money for purchases and to pay for goods and services on credit. Banks may also offer debit cards, which are linked to a customer’s checking or savings account and allow them to make purchases or withdraw cash from their account.
• Offering online and mobile banking services: Commercial banks may offer online and mobile banking services that allow customers to access their accounts, make payments, transfer money, and view account balances and transaction history from their computers or mobile devices.
• Providing investment and wealth management services: Many commercial banks also offer investment and wealth management services to help their customers manage and grow their financial assets. These services may include providing financial advice, offering a variety of investment products such as mutual funds and brokerage services, and managing trusts and estates.

Investment banks

Investment banks are financial institutions that specialize in providing financial services to corporations, governments, and other large organizations. These banks typically focus on activities such as underwriting and issuing securities, providing financial advice and guidance on mergers and acquisitions, and trading securities. Some of the specific services offered by investment banks may include:

• Underwriting: Investment banks help corporations and governments raise capital by underwriting and issuing securities such as stocks and bonds. This process involves evaluating the issuer’s financial health and risk profile, determining the appropriate price and terms for the securities, and then selling the securities to investors.
• Mergers and acquisitions (M&A) advisory: Investment banks provide financial advice and assistance to corporations and other organizations that are considering buying or selling businesses or assets. This may include valuing the businesses or assets, identifying potential buyers or sellers, and negotiating the terms of the transaction.
• Trading: Investment banks may also engage in trading securities on behalf of their clients or for their own account. This may include buying and selling stocks, bonds, currencies, and other financial instruments.
• Structuring financial products: Investment banks may create complex financial products such as derivatives, which are financial instruments whose value is derived from the value of an underlying asset. Investment banks may also structure and sell asset-backed securities, which are securities that are backed by a pool of assets such as mortgages or consumer loans.
• Providing market insights and research: Investment banks may also provide market insights and research to their clients, helping them to make informed investment decisions.

Central banks

Central banks are government-owned banks that act as a regulator for the banking system in their respective countries. They implement monetary policy, issue currency, and act as a lender of last resort to commercial banks. Some of the specific responsibilities of central banks may include:

• Implementing monetary policy: Central banks use a variety of tools to influence the supply of money in the economy and to achieve their policy goals, such as controlling interest rates and regulating the amount of money that commercial banks can lend.
• Issuing currency: Central banks are responsible for issuing and regulating the supply of currency in their respective countries. This may involve printing physical currency, such as paper bills and coins, as well as managing the supply of digital currency.
• Acting as a lender of last resort: Central banks may provide loans to commercial banks to help them meet their short-term funding needs, particularly in times of financial crisis. This helps to stabilize the banking system and prevent a credit crunch.
• Regulating the banking system: Central banks may also regulate the banking system to ensure that it is safe and stable. This may involve setting rules and standards for banks to follow, conducting inspections and audits, and taking enforcement action against banks that fail to comply with regulations.
• Providing financial services to the government: Central banks may also provide financial services to the government, such as managing the government’s debt and serving as a banker to the government.

Savings banks

Savings banks are financial institutions that primarily accept deposits from customers and use those deposits to make loans to borrowers. These banks may be organized as mutually owned cooperatives or as publicly traded corporations. Some of the specific services offered by savings banks may include:

• Accepting deposits: Savings banks allow customers to deposit money into accounts such as savings accounts, certificates of deposit (CDs), and money market accounts. Deposits may be made in person, by mail, or electronically through online banking or mobile banking apps.
• Making loans: Savings banks lend money to individuals and businesses in the form of mortgages, home equity loans, personal loans, and business loans. Savings banks may use the deposits they have received from customers to make these loans.
• Offering online and mobile banking services: Savings banks may offer online and mobile banking services that allow customers to access their accounts, make payments, transfer money, and view account balances and transaction history from their computers or mobile devices.
• Providing investment and wealth management services: Some savings banks also offer investment and wealth management services to help their customers manage and grow their financial assets. These services may include providing financial advice, offering a variety of investment products such as mutual funds and brokerage services, and managing trusts and estates.
• Offering insurance products: Some savings banks may also offer insurance products such as life insurance, health insurance, and property and casualty insurance to their customers.

Credit unions

Credit unions are financial institutions that are owned and controlled by their members, who are also their customers. Credit unions offer a range of financial services, including checking and savings accounts, loans, and credit cards, to their members. Some of the specific services offered by credit unions may include:

• Accepting deposits: Credit unions allow members to deposit money into accounts such as checking accounts, savings accounts, and certificates of deposit (CDs). Deposits may be made in person, by mail, or electronically through online banking or mobile banking apps.
• Making loans: Credit unions lend money to their members in the form of mortgages, car loans, personal loans, and business loans. Credit unions may use the deposits they have received from their members to make these loans.
• Providing credit cards: Credit unions may issue credit cards to their members, allowing them to borrow money for purchases and to pay for goods and services on credit. Credit unions may also offer debit cards, which are linked to a member’s checking or savings account and allow them to make purchases or withdraw cash from their account.
• Offering online and mobile banking services: Credit unions may offer online and mobile banking services that allow members to access their accounts, make payments, transfer money, and view account balances and transaction history from their computers or mobile devices.
• Providing investment and wealth management services: Some credit unions also offer investment and wealth management services to help their members manage and grow their financial assets. These services may include providing financial advice, offering a variety of investment products such as mutual funds and brokerage services, and managing trusts and estates.