Learning Objectives:

  • Distinguish between different types of banks.

  • Understand the services provided by each type.

  • Explain the blurring of distinctions in the modern banking landscape.

4.1 Categories of Banks

The University of Sussex module covers “banking activities and the type of banking” as a core topic . The BUSN 1180 course at Minnesota State College provides “an overview of the financial services industry and its relationship to finance” .

Retail Banking: Providing services to individuals and small businesses, including savings and checking accounts, mortgages, personal loans, and credit cards. The course notes that “the boundaries between commercial and investment banks are disappearing while competition in financial sector is becoming global” .

Commercial Banking: Serving businesses and corporations through business checking accounts, lines of credit, commercial real estate loans, and treasury services.

Investment Banking: Capital raising and advisory services, including underwriting debt and equity issuances, IPOs, and M&A advisory.

Universal Banking: Combining commercial and investment banking activities. The course notes that “the boundaries between commercial and investment banks are disappearing” .

Central Banking: The institution responsible for monetary policy and financial stability. The BUSN 1180 course covers “monetary policy” as a core topic .

4.2 Distinguishing Between Bank Types

Key distinctions include:

  • Retail vs. Commercial: Retail serves individuals; commercial serves businesses.

  • Commercial vs. Investment: Commercial focuses on deposit-taking and lending; investment focuses on capital markets and advisory.

  • Universal vs. Specialised: Universal banks offer a full range of services; specialised banks focus on specific segments.

The course notes that “Lots of factors, e.g. innovations, technologies, taxes and regulation, help to decrease barriers for capital flows” .

4.3 The Blurring of Distinctions

The course emphasises that “the boundaries between commercial and investment banks are disappearing while competition in financial sector is becoming global” . This blurring reflects the evolving nature of banking in the modern financial system.

PreviousNext