Banks are the institutional bodies that play varied role in maintaining the economic stature in a country. Thus, distinctive kinds of banks are required to cater to the complexities of its operation. In this context, classify and explain the different types of banks.
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Answer:
There are several different kinds of banks including retail banks, commercial or corporate banks, and investment banks. In most countries, banks are regulated by the national government or central bank.
Retail banks deal specifically with retail consumers, though some global financial services companies contain both retail and commercial banking divisions. These banks offer services to the general public and are also called personal or general banking institutions. Retail banks provide services such as checking and savings accounts, loan and mortgage services, financing for automobiles, and short-term loans like overdraft protection. Examples of retail banks include TD Bank and Citibank.
Commercial or corporate banks provide specialty services to their business clients from small business owners to large, corporate entities. Along with day-to-day business banking, these banks also provide their clients with other things such as credit services, cash management, commercial real estate services, employer services, and trade finance. JPMorgan Chase and Bank of America are two popular examples of commercial banks, though both have large retail banking divisions as well.
Investment banks focus on providing corporate clients with complex services and financial transactions such as underwriting and assisting with merger and acquisition (M&A) activity. As such, they are known primarily as financial intermediaries in most of these transactions. Clients commonly range from large corporations, other financial institutions, pension funds, governments, and hedge funds. Morgan Stanley and Goldman Sachs are examples of U.S. investment banks
Unlike the banks listed above, central banks are not market-based and don't deal directly with the general public. Instead, they are primarily responsible for currency stability, controlling inflation and monetary policy, and overseeing a country's money supply. They also regulate the capital and reserve requirements of member banks. Some of the world's major central banks include the U.S. Federal Reserve Bank, the European Central Bank, the Bank of England, the Bank of Japan, the Swiss National Bank, and the People’s Bank of China.