Characteristics of Commercial banks by gcneophil9



There are various types of financial institutions serving myriad purposes, and a commercial
bank is a financial intermediary offering basic banking services. These include taking up time
deposits, providing savings accounts, transactional accounts, etc.

A commercial bank derives income through collection of deposits from its clients on time
deposits (also known as time deposits), checkable deposits and savings deposits.These types
of financial institutions typically advance loans to business entities and other clients, and also
engage in the acquisition of government bonds and corporate bonds.

One of the core activities of commercial banks involves providing customers with mortgage
loans. This is done in an arrangement where the bank receives security in the form of a lien on
the title of a property until such time the loan is fully liquidated. And as can be expected, in the
event that the debtor reneges on his obligation, the bank is legally entitled to repossess the
property and dispose it, to recoup its funds.

Commercial banks have only started to intensify their involvement in home financing due to
changes in policies and laws governing their activities. Otherwise, they previously focused on
commercial and consumer loans, while other financial institutions covered the mortgages

With changes in the banking laws and policies, commercial banks found themselves with more
fertile ground on which to freely expand their services. And to fully capitalize on the rich
mortgages market, these institutions often establish dedicated departments focusing in the area
of real estate loans.

The basic services offered by commercial banks are wide ranging, and they include:

    - safekeeping their customer's documents and other items in safe deposit boxes
    - distribution, sale or brokerage of unit trusts, insurance,and other financial products
    - treasury services
    - private equity financing and merchant banking

    - underwriting bonds, and other investment related services in credit-related securities, etc.
    - handling telegraphic transfer, EFTPOS, internet banking, etc.
    - issuing bank checks as well as bank drafts

    - taking up funds on term deposit
    - lending funds via installment loans, overdraft, credit card debt, personal loans and other
credit facilities
    - rendering performance bonds, securities underwriting obligations, letter of credit,
guarantees, including other off balance sheet exposures

The term commercial bank is often used in relation to a bank or a division of a bank
administering deposits as well as loans derived from large business entities. Commercial
banking can be regarded as distinguishable from retail banking, which directly renders financial
services to customers. A number of financial institutions provide both commercial and retail
banking services.

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