How much do you know about commercial banks besides being a financial institution that receives deposits and provides them to us on-demand? If your knowledge about commercial banks is shallow or restricted to that of a typical layperson, you may want to improve it. And what better way to do that than learn some interesting facts about commercial banks.
There are lots of interesting facts about commercial banks such as: how commercial banks make money, how they operate, who they answer to and much more. The most interesting fact about these banks is that they make money (not literarily though).
If you have your money stashed in commercial banks, it makes sense to have a little insight about what these banks are, what they do, how they function or operate, etc. In this article, I’m not going to bore you with some financial jargon regarding commercial banks. Rather, I’ll be feeding you some interesting facts about these banks.
Interesting Facts About Commercial Banks
Banks play a crucial role in our economy. They are the center of finance. Individuals open bank accounts and keep money in them because they believe it is the safest and easiest way to store their money. That said, let’s look at what commercial banks are before we consider some interesting facts about these banks.
What Are Commercial Banks?
Whenever we receive a huge amount of money or get a paycheck from our job, most of us often proceed to store it in our various banks after taking out a few cash to cover some daily expenses. Many people are account owners, but only a few of these people understand what a commercial bank is, which of course, is where they store their hard-earned money. That said, let’s look at what a commercial bank is.
Commercial banks are financial institutions that provide financial services, including loans, deposits, electronic transfer of funds, etc., to their customers. These banks have a huge role in a country’s economy as they fulfill industries’ short and mid-term financial requirements.
The functions of commercial banks are mainly based on a business model of receiving public deposits and using that fund for several investment purposes. Such functions can be grouped into two classes, primary and secondary functions.
Since banks are profit-based financial institutions, you may be eager to learn how they make their money. Do they print money themselves? Or do they siphon customers’ money?
Commercial banks make money in several ways, but one of the major ways commercial banks make money is via loans. Commercial banks make a profit by charging interest on all loans given to their customers.
People may find a commercial bank account attractive because all savings and certificates of deposits are insured by the Federal Deposit Insurance Corporation (FDIC). But, their account interest rate often pays out little to no interest.
Commercial Bank Examples:
Contrary to what some think, commercial banks don’t let deposits remain idle. Instead, they use their cash reserves to give loans. They provide different types of loans according to the needs and abilities of their customers to repay.
One of the types of loans offered by banks is credit loans. A credit loan is a loan that a bank gives to a borrower against his stocks, bonds or other assets. The bank sets a credit limit on the loan, and the borrower can initiate withdrawals within the limit. Of course, as usual, the bank charges interest on the amount withdrawn.
Common examples of commercial banks are:
|1||JPMorgan Chase & Co.||$3.19 trillion|
|2||Bank of America Corp.||$2.35 trillion|
|3||Wells Fargo & Co.||$1.78 trillion|
|4||Citigroup Inc.||$1.70 trillion|
|5||U.S. Bancorp||$547.85 billion|
|6||Trust Bank||$510.29 billion|
|7||PNC Financial Services Group Inc.||$453.97 billion|
|8||T.D. Group U.S. Holdings LLC||$415.51 billion|
|9||Bank of New York Mellon Corp.||$384.54 billion|
|10||Capital One Financial Corp.||$369.05 billion|
|11||Goldman Sachs Group Inc.||$351.16 billion|
|12||State Street Corp.||$322.96 billion|
|13||Fifth Third Bank||$203.98 billion|
|15||Citizens Financial Group|
Products and Services Offered by Commercial Banks:
Commercial banks offer loans to businesses and individuals. These banks also offer some financial products almost similar to those individuals use daily. Common financial products offered by commercial banks are checking and savings accounts. While these accounts are tailored for corporate needs, their structure remains similar. Aside from these deposit products, banks offer a panoply of other products and services. These services include:
- Global trade services, like foreign exchange, financing, letters of credit, and global payments
- Employee stock ownership plans
- Advisory services
- Merchant services, like credit card processing, mobile payment solutions, gift cards, and electronic check services
- Treasury management services, like fund-collecting and disbursement, including fraud prevention.
- Lending services, like working capital for businesses, commercial real estate lending, equipment financing, and other types.
- Retirement products and services for businesses and their employees
- Employee stock ownership plans
- Insurance products created for corporations and institutions
Next, let’s look at some fascinating facts about commercial banks.
Fact About Commercial Banks:
- Commercial banks make money from your deposits. In other words, they lend your deposits to individuals and make a profit off the interest. I bet some of us aren’t aware of this.
- Commercial banks answer to Central banks. In the case of the United States, all commercial banks answer to the Federal Reserve System.
- Commercial banks create money. However, they don’t do this literally. The Central Banks mints money.
- Commercial banks are a haven for people storing precious items and materials like gold, birth certificates, wills, marriage certificates, etc.
- A bank can fold up. I bet you wouldn’t want this mishap to befall your bank.
- The Federal Deposit Insurance Corporation insures commercial banks. This insurance helps protect people who deposit their savings in banks against insolvency. Each depositor is insured to at least $250,000 per bank.
- Contrary to what many think, banks don’t store millions of dollars in their vaults. Instead, they keep the cash required to meet their future transaction needs. Small banks may only keep $50,000 or less at hand. Larger banks might keep around $200,000 or more needed for transactions.
- The richest commercial bank in the world is the Industrial and Commercial Bank of China Limited
- The largest bank in the world is the Industrial and Commercial Bank of China Limited
- Banca Monte dei Paschi di Siena remains the oldest surviving commercial bank in the world. It was founded in 1472.