commercial bank

noun

|Updated on: 6 Aug 2018

Definition of commercial bank

: a bank organized chiefly to handle the everyday financial transactions of businesses (as through demand deposit accounts and short-term commercial loans)

See commercial bank defined for kids

Recent Examples of commercial bank from the Web

Prior to that position, Wines was president and CEO of CNL Bank, a $1.6 billion commercial bank.

— marcia heroux pounds, Sun-Sentinel.com, "Banking executive to lead Broward initiative to house the homeless," 27 June 2018
For the rest of the banking system — a hodgepodge of smaller commercial banks, postal savings banks and other savings institutions — the central bank’s move frees up $31 billion.

— keith bradsher, New York Times, "China Moves to Shore Up Economy as Slowdown and Trade Fight Loom," 24 June 2018
By comparison, commercial banks typically have suffered losses of between 1 and 3 percent on consumer loans.

— peter whoriskey, courant.com, "Unsolicited checks can be a lifeline and an albatross," 2 July 2018
That was the Depression-era law that prevented commercial banks from gambling, among other protections of the common good.

— jon talton, The Seattle Times, "How bubbles and risk came together to cause the panic 10 years ago," 26 June 2018
Effective July 5, China’s central bank will reduce by half a percentage point the share of overall deposits that commercial banks must deposit at the central bank.

— BostonGlobe.com, "China takes steps to bolster economy," 24 June 2018
The bank's short-term interest rate benchmark remained at a record low of zero and its rate on deposits from commercial banks stayed at minus 0.4 percent.

— david mchugh, USA TODAY, "European Central Bank holds on interest rate hike, sets end date for stimulus program," 14 June 2018
These personal accounts would operate like the accounts that commercial banks already have with the Fed—with all the attendant privileges.

— david dayen, The New Republic, "Give Everyone Government Bank Accounts," 13 June 2018
The Wisconsin Bankers Association is the state’s largest financial industry trade association, representing nearly 250 commercial banks and savings institutions.

— paul gores, Milwaukee Journal Sentinel, "Park Bank's Werner elected chairman of Wisconsin Bankers Association board," 8 June 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'commercial bank.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

First Known Use of commercial bank

1910

in the meaning defined above

See Words from the same year

NEW! Time Traveler

Financial Definition of COMMERCIAL BANK

commercial bank

noun

What It Is

A commercial bank is a financial institution that offers checking accounts, demand deposits, business and personal loans, savings vehicles and a variety of other related financial services.

How It Works

Commercial banks are owned by shareholders and are run for a profit, which is largely obtained by lending at rates higher than they pay their depositors. Commercial banking is different from investment banking, which primarily raises money for businesses, facilitates mergers or acquisitions, and works for institutional investors.

A commercial bank must have a charter to operate, which will be issued by the federal government or by the state in which it plans to do business. States regulate and inspect state chartered banks, and the federal government regulates and inspects federally chartered banks.

In order to apply for a charter, the bank's "organizing group of founders" must provide a business plan, an overview of local zoning and business practice laws, and the names of directors and key executives. Each state has its own minimum capital requirements to issue a charter.

The organizing group is required to invest a minimum amount of its own money into the bank, making them primary shareholders. The remaining required funds will be raised by selling shares in the bank.

When a commercial bank receives a charter, it is a demonstration that the agency responsible for protecting the public from unsafe banking practices has done its job. Chartering requirements vary by the agency supplying the charter.

In some cases, a state-chartered bank is not required to be a member of the Federal Reserve System -- which allows them to borrow short-term funds from the Federal Reserve to meet reserve requirements.

If a bank requests a federal charter, however, it must become a member of the Federal Reserve System. All commercial banks must apply for deposit insurance with the FDIC, which protects depositors for up to $250,000 of losses if the bank fails.

Why It Matters

Commercial banks offer critical services that lubricate and facilitate economic activity throughout our entire financial system.

There are many alternatives to using commercial banks. Credit unions, savings and loans, and brokerage firms offer many of the services that commercial banks offer. Not all of these alternatives, however, have ATMs, accept certain checks, charge the same fees or offer competitive loans.

Source: Investing Answers