What Are the Different Types of Banks?

There are many different types of banks. It's good to know how each of them function in the banking system and to differentiate between the terms.

Most countries have Central banks. Some of these examples are the Federal Reserve is in the US or the Bundesbank in Germany.

The next type of bank is the commercial bank. These are banks in the classic business of taking deposits and lending money. There are two further relevant terms -- retail banking and wholesale banking. Retail banking involves high street branches, dealing with the general public, shops and very small businesses. The use of checks and plastic cards is normally a crucial importance. This is a high-volume low value proposition. Wholesale banking involves low-volume and high-value. It covers dealings with other banks, the central bank, corporations, pension funds and other investment institutions. Checks and credit cards are not so important here, but electronic settlement and clearance is.

Investment banks are institutions that help people find the money. The savings banks are looking more like ordinary commercial banks due to mergers, and deregulation.

Credit unions are banks which are owned by the members and with the maximum profit not necessarily the main objective, the name, for example to give low-cost loans to members. The membership usually comes from a trade or profession. In the United States, there are more than 70 million people who are members.

As you can see, there are different types of Banks. Once you understand what the function of each of the banks are, it takes the mystery out of everything. Each of these banks serves some kind of purpose and depending on what your needs are, you may or may not have to use their services. Central banks influence all of us whether we like it or not.

If you liked this financial topic then you may be interested in additional articles that cover how to learn the value of old currency today and the value of old coins Canada.

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