Commerical Banks Credit Unions Investment Banks

Banks differ in the services they provide and in how they are owned. Many financial experts use the word bank to refer only to a commercial bank. These experts believe that savings banks, savings and loan associations, and credit unions, are not true banks because they do not perform all the functions of commercials banks. Savings banks, savings and loan association, and credit unions are often called thrift institution, or simply thrifts, because their chief purpose is to encourage savings. Many countries also have institution called central banks, and some have investment banks. Although such institutions are called banks, they do not accept deposits or lend money to the general public.

Commercial banks: Are the most numerous banks in the United States. The nation has well over 11,000 banks, in which their combined total asset value exceeds more than 4 trillion. Commercial banks offer a full range of services, including checking and savings accounts, loans, and trust services. They primarily serve the needs of businesses but also offer their services to individuals. A commercial bank is owned by stockholders who buy shares in it. In return for investing in the banks stock, the stockholders expect the bank to pay them cash dividends from its profits

Savings and loan associations: Are the second largest group of deposit institutions in the United States. There are bout 2200 savings and loans, as they are known. They have total assets of about 1 trillion plus. Savings and loans are established to help people to purchase homes. Through the years they have been the chief source of home mortgages. Traditionally, they loaned money to businesses only for real estate, construction. But today, savings’ and loan association offer a variety of services for individuals and businesses, including NOW accounts, checking accounts, money market accounts, IRA’s, and business loans. In the past, almost all savings and loans were owned and operated by their depositors. But today, almost half are owned and operated by stockholders.

Savings banks: These are most commonly found in the northeast. The United States has about 500 savings banks, with assets well close to 400 billion. Savings banks were created in the early 1880’s as charitable institutions to provide a safe place for poor working people to save for retirement. Almost all saving banks were mutual savings banks, which are run by a board of trustees who elect their own successors.

Credit unions: Are an important type of savings institutions in the United States. There are about 15,000 credit unions, and their asset total well near 350 billion. Most credit unions are formed by people with a common bond. For example, they may work for the same company or belong to the same church. The members pool their savings. When one of the members needs money, he or she may borrow from the credit union, often at a lower rate of interest than from another financial institution.

Central banks: These are mostly found in countries as government agencies, which perform many financial services for the national government. Their chief responsibility is to regulate banking and to control the nation’s money supply. The money supply is the total quantity of money in the country, including cash and bank deposits.

Investment banks: They purchase newly issued stocks and bonds from corporations and governments. These banks then resell the securities to individual investors in smaller quantities. An investment bank makes a profit by selling securities at a higher price than what is paid for them. Most banks in the United States once did such buying and selling, but now only specialised investment and a few large commercial banks do so.