A bank is a type of financial credit institution whose main purpose is the control and administration of money, through different services offered such as storing large amounts of money, carrying out financial operations or granting loans or credits, among others.

The usual practice of a bank is to collect capital from different individuals or companies who place their trust and resources in it through savings accounts or checking accounts.

At the same time, a bank works like another company and has its own funds on many occasions. Of course, also with your own business idea when dealing with credit operations or other types in the field of finance.

The intermediary work of the bank

The entity has such means to carry out an activity of granting loans to others, the repayment of which must bring with it the profit of a greater amount depending on the interest rate that has been applied.

The appearance of these capital gains is what gives meaning to the existence and viability of the banks, since these profits are destined first to offer profitability to the depositors and in turn represent the benefit of the entity itself. For this reason, banks are considered as economic intermediation entities. Financial intermediaries fulfill a very important commercial function since they are in charge of putting in contact the bidders and demanders (savers) of financial products in order to activate the market by channeling savings to investment and thus make investors' capital profitable.

For this to be possible, normally the rates at which the bank agrees with the initial depositors are lower than those established at the time of making the loans, since various factors such as risk are taken into account.

The evolution of the current concept of bank dates back to the Renaissance and the appearance of the first capital management entities and in a position to lend money to third parties with certain repayment conditions.

Types of banks

The set of existing banks in the economic system makes up the banking or banking system. Having said all this, there are different types of bank depending on the sector to which this entity is directed and the size of its action. There are two types of banking:

  • Retail banking: The most common in simple operations of people and companies. In turn, it is divided into:
    • Private banking: financial advice, investment funds, etc.
    • Banking of individuals: sight accounts, deposits, receipts and payroll, mortgages, credits, etc.
  • Wholesale banking: Intended for large volumes of money from important economic operations. It is also divided into two segments:
    • Investment banking: financial structures, mergers and acquisitions (M&A), advice, etc.
    • Business banking: Liability management (credit lines, factoring or confirming), fixed asset management (loans, leasing, renting, etc).

Other functions of a bank

With the development of the banking sector, there are many other activities that these types of organizations have tackled, to such an extent that the banking system has come to have a high influence on the lives of people and the business network around the world.

The creation of guarantees, routine tasks such as the initialization of payments, the purchase and sale of currencies or the storage of valuables or documents of great importance are other responsibilities that a bank meets within its normal activity.

Banks functions

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