For other uses, see Bank (disambiguation)
A bank is a place where money can be saved or loaned out from. Someone's money can be placed in the bank for safe keeping. Or the bank can give out loans to people for an agreement to pay the bank back at a later time, usually with interest. The people who run a bank are called bankers.
In most modern countries a bank controlled by the government but independent of the state administrators controls how much money appears at a time. Such a bank is called a national bank. A national bank ordinarily issues bills and/or coins. In some countries issuing money is the task of the government.
History[change | change source]
The word bank comes from an Italian word banco, meaning a bench, since Italian merchants in the Renaissance made deals to borrow and lend money between each others beside a bench. They placed the money on that bench.
In the 17th century, merchants started storing their gold with goldsmiths in London. The goldsmiths had their own vaults, and charged a fee for storing the merchant's gold. The goldsmiths eventually started loaning money using the gold left to them, and also paid interest on the gold.
Banking activities[change | change source]
A bank usually provides the following services:
- Checking account
- Savings account
- Money market account
- Certificate of deposit (CD)
- Individual retirement account (IRA)
- Credit card
- Debit card
- Mutual fund
- Personal loan
- Time deposits
- Automated teller machine
- Transactional account
Types of banks[change | change source]
- retail banking, dealing directly with individuals and small businesses;
- business banking, providing services to mid-market business;
- corporate banking, directed at large business entities;
- private banking, providing wealth management services to high net worth individuals and families;
- investment banking, relating to activities on the financial markets.
Retail banks[change | change source]
- Commercial banks: the term used for a normal bank to distinguish it from an investment bank.
- Community banks: locally operated financial institutions that empower employees to make local decisions to serve their customers and the partners.
- Community development banks: regulated banks that provide financial services and credit to under-served markets or populations.
- Land development banks: The special banks providing Long Term Loans are called Land Development Banks, in the short, LDB. The history of LDB is quite old. The first LDB was started at Jhang in Punjab in 1920. The main objective of the LDBs are to promote the development of land, agriculture and increase the agricultural production. The LDBs provide long-term finance to members directly through their branches.
- Credit unions or Co-operative Banks: not-for-profit cooperatives owned by the depositors and often offering rates more favorable than for-profit banks. Typically, membership is restricted to employees of a particular company, residents of a defined area, members of a certain union or religious organizations, and their immediate families.
- Postal savings banks: savings banks associated with national postal systems.
- Private banks: banks that manage the assets of rich people.
- Offshore banks: banks located in jurisdictions with low taxation and regulation. Many offshore banks are essentially private banks.
- Savings bank: focuses on accepting savings deposits and paying interest on deposists.
- Building societies and Landesbanks: institutions that conduct retail banking.
- Ethical banks: banks that prioritize the transparency of all operations and make only what they consider to be socially responsible investments.
- A Direct or Internet-Only bank is a banking operation without any physical bank branches, conceived and implemented wholly with networked computers.