4.2.4.2 Commercial banks and Investment banks

commercial banks

the banks that households and businesses normally use for everyday financial services

accept deposits, provide loans, offer payment services

Main functions of commercial banks

accepting deposits

Commercial banks provide a safe place for households and businesses to deposit their savings and current accounts

monetary policy, issue currency, lender of last resort

Main functions of central banks

regulate money supply, interest rates, and sometimes exchange rates

How do central banks implement monetary policy

investment banks

A financial institution that helps companies raise money by issuing shares or bonds and gives advice on large financial deals like mergers.

buying/selling of financial assets, growth of large businesses, maintaining stability in financial markets, advice on mergers/acquisitions

What do investment banks help with

marger

2 companies taking over another

acquisition

one company taking over another

commercial, investment, systematic, spread

Universal Banking:

Many modern banks(e.g. Barclays, HSBC) operate as both ________ and _________ banks. This can increase _______ risk, as problems in risky investment activities may _______ into ordinary banking services.

central-mostly for gov. and regulators, commercial-basic advice for customers, investment-large financial deals

Who dod banks give financial advice too?

central-regulate money supply, interest and exchange rates, commercial-follow regulations of central bank and regulators, investment banks are regulated but not regulators

Regulation of banks

central-financial institutions, commercial -households/businesses, investment - corporate loans

Who do banks lend too?