Bank - What is it? characteristics, types, functions, examples, and more

Bank - What is it? characteristics, types, functions, examples, and more
Posted on 11-03-2022

Bank

Financial company that carries out activities of lending and receiving money.

What is a bank?

A bank is a financial entity that carries out activities of lending and receiving money since its main function is to manage money.

Bank customers correspond to natural and legal persons who keep money in bank accounts of these institutions and to whom the bank subsequently grants an interest in favor.

On the contrary, when a client receives a loan, he has to pay interest to the bank for the loan granted. In fact, the main objective of banks is to obtain profitability for their financial intermediation operations.

Characteristics of a bank

The main characteristics of a bank are the following:

  • It is a for-profit company.
  • Generates profits through financial service loans.
  • It provides financial security to its customers.
  • It is made up of shareholders who are generally private companies.
  • They are directly related to the Central Bank.
  • They generally have solvency, profitability, and liquidity to provide their financial services.

bank types

The most common types of banks are described below:

  • Public banks: those banks where the majority shareholder is the government.
  • Private banks: those banks where the majority shareholders are individuals and private.
  • Wholesale banks: those banks involved in the most important economic operations of an economy, which involve massive amounts of money.
  • Retail banks: those banks intended for common economic operations, used by companies or individuals.

functions of a bank

The main functions of a bank are as follows:

  • Accept deposits: the reception of contributions made by the public is the main function of a bank.
  • Make loans: this is one of the most important functions for financial institutions since, with the loans granted to the public, the bank obtains profitability for the interest obtained.
  • Operations to transfer money: correspond to the operations of transferring funds from one account to another.
  • Control the money in circulation of an economy, according to the instructions of the Central Bank.
  • Maintain the minimum reserve of money required by the Central Bank to guarantee the liquidity and availability of money to customers.
  • Offer financial advice to clients, both for the acquisition of products and for the management of their resources.

bank examples

Some examples of banks are as follows:

  • Santander Bank.
  • Pichincha Bank.
  • Bank of Baroda.
  • Azteca Bank.
  • State Bank of India.
  • Macro Bank.
  • Patagonia Bank.
  • Bank of India.
  • Santa Cruz Bank.
  • BISA bank.
  • Sun Bank.
  • Punjab National Bank.
  • Social housing Bank.

 

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