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)
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Recent Examples of commercial bank from the Web
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In modern economies, most money takes the form of deposits in commercial banks, rather than the cash in circulation and the reserves determined by the central bank.
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The bride’s father is a senior vice president and oversees agricultural lending in California for Banner Bank, a commercial bank with headquarters in Walla Walla, Wash.; his office is in Yuba City.
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Wilmington Trust, founded by members of the same branch of the du Pont family who organized the modern chemical company in 1901, was at the time of its collapse the largest commercial bank still headquartered in the Philadelphia region.
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Rapid decline in Swedish cash usage now looks to have halted Banks say e-krona could compete with commercial banksThe Swedish central bank’s deliberation on creating an electronic currency is sounding the alarm at the country’s lenders.
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That law allowed commercial banks and investment banks to merge, a phenomenon that many analysts later argued paved the way for the 2008 financial crisis by creating wobbly behemoths such as Citigroup.
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That law allowed commercial banks and investment banks to merge, a phenomenon that many analysts later argued paved the way for the 2008 financial crisis by creating wobbly behemoths such as Citigroup.
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On top of leaving the short-term interest rate at zero on Thursday, the ECB council did not touch the deposit rate at which the ECB takes deposits from commercial banks.
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But wait: Then came a survey by the European Central Bank showing that commercial banks in the eurozone are becoming more willing to lend.
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
Financial Definition of COMMERCIAL BANK
commercial bank
What It Is
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
Law Dictionary
Learn More about commercial bank
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Britannica.com: Encyclopedia article about commercial bank
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