What is a commercial bank?
1. A retail bank that provides financial services to its customers, like savings, loans, and
mortgages.
How does a commercial bank operate?
1. They accept deposits from customers and then lend that money to people who have a
demand for it. They act as a financial intermediary and make a profit from charging a
higher interest rate to borrowers than the interest rate they pay to people who deposit
them.
How is a commercial bank regulated?
1. The government places regulations and supervises them. An organization determines
certain rates, and all commercial banks must follow those rates.
What economic function does the bank play?
1. It accepts deposits from customers, lends money to those who need money, and enables
customers to make payments, as well as other secondary functions. These banks help
provide services to consumers with demand for them in society, which ensures economic
stability and growth.
What are the customers of a commercial bank?
1. Consumers with a demand for money
2. Consumers with want to store money
What economic system does a commercial bank operate in?
1. Market economic system
Commercial bank example:
1. Chase Bank from JPMorgan Chase
In a situation like the Great Depression, what would a commercial bank do?
How are they similar and different?
1. Similar: they both
2. Different: they have different motives, a central bank does not operate with the aim to
make money, while a commercial bank does. Commercial banks serve individuals and
firms, while a central bank serves the government.