Types of Banks


Central Bank
A bank that controls a country’s money supply and monetary policy. It acts as a banker to other banks, and a lender of last resort. In some countries, including the UK, the central bank is also the main regulator of other banks. A central bank is ultimately controlled by a country’s political system; whether central bankers should be controlled by the current government, or should be independent is controversial.

Commercial Bank
A bank dealing with the general public, accepting deposits from and making loans to a large number of households and small firms. They also provide various services for depositors, including provision of cash and credit cards, storage facilities for valuables and documents, foreign exchange, stockbroking, mortgage finance, and executor services.

Merchant Bank
A bank dealing mainly with other firms rather than the general public. Merchant banks engage in a variety of specialist activities, including: financing foreign trade by accepting bills of exchange (they provide a form of trade credit. When a company supplies goods on credit terms which allow the purchaser 3 or 3 months in which to make payment, it is in effect providing the buyer with a short-term loan); providing hire purchase and industrial finance; underwriting new issues (acts as issuing house, that is, carry all the work involved in floating a new issue); advising on and arranging finance for mergers and takeover bids; and investment management for institutions and wealthy individuals.

Trustee Savings Bank
A trustee savings bank provides deposit facilities for small savers. They also provide a current account service (i.e. payment may be made by cheque. The greater part of the assets of a Trustee Savings bank consists of government securities (i.e. loans to the government).

Development Bank
A development bank provides a savings collection system for small savers in the rural areas, while at the same time administering external...