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Banking
today has changed a lot in the last two decades.
Most
banks in western society are regulated
and insured, meeting strict
basic standards. This does not make all banks equal, however, because
each individual bank may be privately or publicly owned, or have
policies or philosophies directed toward certain goals. Some banks will
make conservative investments while others prefer more volatile
investments for quicker returns. There are government banks, or central
banks, designed primarily as bearers of standards, non-profit banks
with investments in particular social issues, credit unions owned by
their customers, postal savings banks run by postal services, and
community banks with a local investment focus such as mechanics and
farmers banks. Offshore banks may offer tax shelters, increased
privacy, and less market-driven volatility, but are nonetheless
regulated. Check cashing services, certain Internet-based financial
services, and some non-traditional "banking institutions" might appear
to be banks, but technically do not fit the description and therefore
avoid certain regulatory issues.
Universal
banks offer services
found among retail banks as well as investment banks, often with
offshore banking services included. But most banks are identified as
either a retail bank or an investment bank.
Retail
banking
customers are usually
individuals and small businesses. Savings banks
are very common, each branch concentrating on local populace and
business, dealing in standard savings, timed payments, insurance and
credit issues. Other retail banks include private banks for a limited
clientele, community banks run by and for the local populace, community
development banks that serve to improve local economic standards, and
banks of issue dealing in their own legal tender called banknotes.
Commercial banks serve larger businesses with deposit and loan
services.
Investment
banking customers are primarily large
corporations. The corporation, looking to raise investment capital,
will approach an investment bank for funds. The investment bank will
supply the funds and structure their investment as securities available
for sale to the general market. Often the investment bank will be used
to structure corporate mergers or acquisitions. Merchant banks are
similar, but have more conservative investment policies and buy shares
rather than make loans.
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