The Role of Commercial Banks
Commercial banks engage in the following activities:
- processing of payments by way of telegraphic transfer, EFTPOS, internet banking, or other means
- issuing bank drafts and bank cheques
- accepting money on term deposit
- lending money by overdraft, installment loan, or other means
- providing documentary and standby letter of credit, guarantees, performance bonds, securities underwriting commitments and other forms of off balance sheet exposures
- safekeeping of documents and other items in safe deposit boxes
- sales, distribution or brokerage, with or without advice, of: insurance, unit trusts and similar financial products as a “financial supermarket”
- cash management and treasury
- merchant banking and private equity financing
- traditionally, large commercial banks also underwrite bonds, and make markets in currency, interest rates, and credit-related securities, but today large commercial banks usually have an investment bank arm that is involved in the mentioned activities.
Read more about this topic: Commercial Bank
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