What is a bank?
A bank is a licensed andthat lends , accepts deposits and carries out other financial transactions for its clients.
There are three main types of bank:
- Investment banks
- Retail banks
Investment banks, sometimes called wholesale banks, provide financial services to other financial institutions and corporates, and occasionally to countries.
A key role is the issuance offor a , either through an or a secondary issue, in order to raise capital for expansion. Investment banks also provide loans, often for millions of dollars, to companies that prefer as a means to raise capital. This is also known as merchant banking.
Other tasks include providing investment advice to and broking on behalf of institutional, and acting as an intermediary where a client is engaged in mergers and acquisitions. Many investment banks have their own trading floor, where their staff can buy and sell securities on behalf of their clients. They also manage pension and other large .
Investment banks are usually regulated by the central bank of the country in which they operate and/or a specific regulatory authority.
Retail banks, also called commercial banks or "high street" banks, provide banking services to members of the public.
Examples of retail banking services:
- accepting salaries and wages into a current account
- acting as intermediary to pay bills through direct debits and standing orders
- providing cheque books, credit and debit cards
- providing cash withdrawal facilities
- managing savings
Many retail banks also offer a wide range of other financial services to their customers, such as insurance, pension funds,, overdrafts and broking investments in the . All these services, plus business loans, are also available to small and medium-sized businesses.
Regulation applies to retail banks, too. They are usually overseen by the appropriate regulatory authority, but the central bank may still set policy for them.
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For a trader,are often a better alternative to banks for facilitating trades and investments. The reasons are often lower and better specialisation and support of .
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