Banking Institutions
There are many ways to categorize a bank: by roles, by the types of deposits allowed, by ownership, and by the groups of people served. None of these types is entirely satisfactory because most banks are under several types. For an instance, the usual bank that deals with the public combines the functions of a savings bank, commercial bank, and investment bank. Therefore, this list is not intended to present the differentiation among the types of banks rather it is meant to serve as a reference of the terms usually used to describe banks.
Commercial bank is a bank licensed by a government to maintain checking accounts in addition to savings accounts. Customarily, this type of bank is an expert in the field of providing short-term loans. The major function of a commercial bank is to provide support for trade industry. It is the most common and widely known type of bank in the industrial setting.
A savings bank, from the name itself, is a type that deals mainly with savings accounts. It is commonly chartered by the state and is oftentimes created as a mutual company.
Investment bank plays the role of a company that sells or issues new bonds or stocks. The main activity of an investment bank is to buy bonds and stocks in bulk from companies issuing them. Afterwards, the investment bank makes these bonds and stocks available for purchase at a small profit. The main difference between an investment bank and a stockbroker is that a stockbroker only buys and sells as directed by a client while an investment bank continuously does the process of buying and selling stocks and bonds without regard to a specific client.