Type of Banking

Commercial Banks
Commercial or retail Banks are businesses that trade in money. They receive and hold deposits, pay money according to customers’ instructions, lend money, offer investment advice, exchange foreign currencies, and so on. They make a profit from the difference (known as a spread or a margin) between the interest rates they pay to lenders or depositors and those they charge to borrowers. Banks also create credit, because the money to they lend, from their deposits, is generally spent (either on goods or services, or to settle debts), and in this way transferred to another bank account –often by way of a bank transfer or a cheque (check) rather than the use of notes or coins – from where it can be lent to another borrower, and so on. When lending money, bankers have to find a balance between yield and risk, and between liquidity and different maturities.


Source: English for Business Studies. Student´s books
Second edition Cambridge University press
Ian Mackenzie 2002 Cambridge; United Kingdom