LeoGlossary: Commercial Bank
A financial institution that provides a number of services. It will:
- accept deposits
- provide checking and savings accounts
- make loans
- offer certificates of deposit (CDs)
They typically cater to individuals and small businesses, meaning that most do their banking here.
A bank makes money by issuing out loans, which carry a specific interest rate. These come in the form of:
- mortgages
- auto
- business
- personal
Banks get the capital from deposits which are liabilities on their balance sheets.
Commercial banks are the institutions that create the major currencies of the world. Money creation of the USD, for example, occurs when the banks make loans. To destroy (or contract) the money supply, individuals and businesses pay down the principal or default on the loan.
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