commercial bank

noun

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)

Examples of commercial bank in a Sentence

Recent Examples on the Web

Smaller banks, not subject to the higher costs commercial banks face, are able to offer customers higher rates. — Kevin Mcallister, WSJ, "How to Squeeze Higher Returns From Your Savings," 10 Feb. 2019 From 1870 to 2017, with rare exceptions, the net income of commercial banks as a percentage of their equity capital fluctuated within a narrow range of 5% to 10% a year, regardless of the size of their capital buffers. — Alan Greenspan, WSJ, "How to Fix the Great American Growth Machine," 12 Oct. 2018 JPMorgan’s commercial bank earned $1.0 billion, an 8% increase from the last three months of 2017, and the bank’s asset and wealth management unit reported profits of $604 million compared with $654 million a year earlier. — Emily Glazer, WSJ, "JPMorgan Profit Rises 67% Despite Cost Increases, Trading Decline," 15 Jan. 2019 Brian Belski, BMO Capital Markets Chief Investment Strategist, says commercial banks will see strong growth for next 10 years. — Bloomberg.com, "Surv.: The Age of Austerity has Been Taken Over says Collender," 13 Apr. 2018 As the foreign currency rolled in, the PBOC purchased it from commercial banks by crediting them in yuan. — John Greenwood, WSJ, "How China Copes With Capital Flight," 19 Nov. 2018 The trading desks of large commercial banks had nothing to do with the crash. — Norbert J. Michel, Fortune, "It’s Time to Just Kill the Volcker Rule," 4 June 2018 One person familiar with the matter said the capital adequacy ratio for Ant’s consumer-loan business is lower than the 8% minimum required of commercial banks. — Stella Yifan Xie, WSJ, "China Plans New Risk-Management Rules for Financial-Services Firms," 8 May 2018 The central bank’s governor, John Mangudya, in an interview at his gated mansion outside Harare, said the government might borrow money from commercial banks to pay off some of the arrears and unlock assistance from development banks for the rest. — Gabriele Steinhauser, WSJ, "Looming Election Is Vital for Zimbabwe," 15 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.

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Last Updated

23 May 2019

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The first known use of commercial bank was in 1910

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More Definitions for commercial bank

commercial bank

noun

Financial Definition of commercial bank

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

commercial bank