activities can be divided into retail banking, dealing directly with
individuals and small businesses; business banking, providing services to
mid-market business; corporate banking, directed at large business entities;
private banking, providing wealth management services to high net worth
individuals and families; and investment banking, relating to activities on
the financial markets.
are profit-making, private enterprises. However, some are owned by
government, or are non-profit organizations.
Types of Banks
Commercial Bank: the term used for a normal bank to distinguish it
from an investment bank. After the Great Depression, the U.S. Congress
required that banks only engage in banking activities, whereas investment
banks were limited to capital market activities. Since the two no longer
have to be under separate ownership, some use the term "commercial bank" to
refer to a bank or a division of a bank that mostly deals with deposits and
loans from corporations or large businesses.
Community Banks: locally operated financial institutions that empower
employees to make local decisions to serve their customers and the partners.
Community Development Banks: regulated banks that provide financial
services and credit to under-served markets or populations.
Credit Unions: not-for-profit cooperatives owned by the depositors
and often offering rates more favorable than for-profit banks. Typically,
membership is restricted to employees of a particular company, residents of
a defined neighborhood, members of a certain labor union or religious
organizations, and their immediate families.
Postal Savings Banks: savings banks associated with national postal
Private Banks: banks that manage the assets of high net worth
individuals. Historically a minimum of USD 1 million was required to open an
account, however, over the last years many private banks have lowered their
entry hurdles to USD 250,000 for private investors.
Offshore Banks: banks located in jurisdictions with low taxation and
regulation. Many offshore banks are essentially private banks.
Savings Bank: in Europe, savings banks took their roots in the 19th
or sometimes even in the 18th century. Their original objective was to
provide easily accessible savings products to all strata of the population.
In some countries, savings banks were created on public initiative; in
others, socially committed individuals created foundations to put in place
the necessary infrastructure. Nowadays, European savings banks have kept
their focus on retail banking: payments, savings products, credits and
insurances for individuals or small and medium-sized enterprises. Apart from
this retail focus, they also differ from commercial banks by their broadly
decentralised distribution network, providing local and regional outreach
and by their socially responsible approach to business and society.
Building Societies and Landesbanks: institutions that conduct retail
Ethical Banks: banks that prioritize the transparency of all
operations and make only what they consider to be socially-responsible
A Direct or Internet-Only bank is a banking operation without any physical
bank branches, conceived and implemented wholly with networked computers.
Investment Banks: a financial
institution that assists individuals, corporations and governments in
raising capital by underwriting and/or acting as the client's agent in the
issuance of securities.