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Bank

Hi, We have created this website to provide all banks information of US Banks. So before we go to the main point, We should have clear ideas about the bank. So I will tell you what I know about the bank.

What is Bank?

A Bank is an established and authorised financial institution which receives deposits from the public, make loans, pay interest, clear checks, and provide other financial services to its customers. Banks also provide financial services, such as wealth management, currency exchange, and safe deposit boxes.

Kinds of Bank:

There are two types of banks:
1. Commercial/retail banks
2. Investment banks.

In most countries, banks are regulated by the national government or central bank.

What is Commercial or Retail banks?

The commercial bank is a financial institution that accepts deposits, offers checking account services, makes loans, and offers financial products like certificates of deposit (CDs) and savings accounts to individuals and small businesses. A commercial bank is where most people do their banking, as opposed to an investment bank.

The main money making source of a Commercial bank by providing loans and earning interest income from those loans. The types of loans a commercial bank can issue vary and may include mortgages, auto loans, business loans, and personal loans.

Customer deposits money, such as savings accounts, checking accounts, money market accounts, and CDs, provide banks with the capital to make loans. Customers deposit money into there accounts effectively to get interest, lend money from the bank for business. However, the interest rate paid by the bank on money they borrow is less than the rate charged on money they lend.

How does a Commercial Bank Works?

Earning money is totally depending for a commercial bank is determined by the spread between the interest it pays on deposits and the interest it earns on loans it issues, which is known as net interest income.

Most of the customers are looking for a commercial bank for investments, As for example, savings accounts and CDs, attractive because they are insured by the Federal Deposit Insurance Corp. (FDIC), Customers also looking for such a way that money can be easily withdrawn and commercial banks provides the easiest way for money withdraw system. Although, these investments traditionally pay very low interest rates compared with mutual funds and other investment products. In some cases, commercial bank deposits pay no interest, As for example we can say – checking account deposits.

The commercial bank also works for fractional reserve banking system. commercial banks are permitted to create money by allowing multiple claims to assets on deposit in a fractional reserve banking system. Banks create credit that did not previously exist when they make loans. This is sometimes called the money multiplier effect. There is a limit to the amount of credit lending institutions can create this way. Banks are legally required to keep a certain minimum percentage of all deposit claims as liquid cash. This is called the reserve ratio.

What is Investment bank?

According to the Oxford Dictionary, Investment is the action or process of investing money for profit.” and Bank A is financial establishment that uses money deposited by customers for investment, pays it out when required, makes loans at interest, and exchanges currency.

So Investment Bank is A bank that purchases large holdings of newly issued shares and resells them to investors.

According to Wikipedia, Investment banking is a specific division of banking related to the creation of capital for other companies, governments and other entities.

Understanding Investment Banking

We have seen that many large investment banking systems are affiliated with or subsidiaries of larger banking institutions. And many have become household names, the largest being Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America Merrill Lynch and Deutsche Bank.

Investment banks assist in large, complicated financial transactions. They may provide advice on how much a company is worth and how best to structure a deal if the investment banker’s client is considering an acquisition, merger or sale. It may also include the issuing of securities as a means of raising money for the client groups, and creating the documentation for the Securities and Exchange Commission necessary for a company to go public.

The Role of Investment Bankers

Generally, Invest bank help them who help corporations, governments and other groups plan and manage large projects, or productive project and business. Therefore, Investment bank also employ investment bankers who help corporations, governments and other large groups plan and manage large projects, saving their client time and money by identifying risks associated with the project before the client moves forward. In theory, investment bankers are experts in their field who have their finger on the pulse of the current investing climate, so businesses and institutions turn to investment banks for advice on how best to plan their development, as investment bankers can tailor their recommendations to the present state of economic affairs.

Actually, An investment bank works or serve as middlemen between a company and investors when the company wants to issue stock or bonds. The investment bank helps with pricing financial instruments to maximize revenue and navigating regulatory requirements. Often, when a company holds its initial public offering, an investment bank will buy all or much of that company’s shares directly from the company. Subsequently, as a proxy for the company holding the initial public offering (IPO), the investment bank will sell the shares on the market. This makes things much easier for the company itself, as they effectively contract out the IPO to the investment bank.

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