Commercial banks are financial institutions that accept deposits from their customers, then use those deposits to make loans for individuals and businesses. In addition to these activities, commercial banks offer a wide variety of financial services, including checking accounts, credit and debit cards, and savings accounts. Commercial banks are owned by shareholders and function for the purpose of generating profits. Examples of commercial banks include Bank of America, JP Morgan Chase and Wells Fargo.
Objectives of Commercial Banks
The objectives of commercial banks are two-fold; to offer a wide variety of services to individual and business customers, and to collect payments including fees, charges and interest on the products and services provided to customers for the purpose of generating profits for shareholders. Commercial banks typically offer a robust suite of services in an attempt to be able to serve all the financial needs of each customer. This results in the opportunity to maximize revenues from each customer. For example, a customer who has checking and saving accounts, loans, and credit cards for personal and business use at one bank generates revenues through numerous channels. Revenues can be increased further if the customer also buys stocks and bonds through a bank’s brokerage arm.
The Importance of Commercial Banks
Commercial banks play a critical role in the country’s financial system by providing liquidity through the creation of loans, access to money on deposit and the availability of revolving debt using credit cards. Access to money enables businesses to grow, consumers to make purchases of goods and services, and jobs to be created. This liquidity, combined with the expedited, simple and efficient transfer of money for a wide range of financial transactions, is an essential factor in a healthy economy.
Posted by Kush Pandey
4 years, 10 months ago
