commercial bank

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 Besides appealing for political will of African states, the AU Commissioner, urged commercial banks and the private sector to invest in the transformation of research findings. — Amindeh Blaise Atabong, Quartz Africa, "Africa’s medical scientists are struggling to get funding to back their research," 13 Dec. 2019 Innes was referring to the medium-term lending facility rate, a benchmark against which the Chinese central bank lends to commercial banks. — Laura He, CNN, "Asian markets mixed after soaring pork prices push China's inflation rate to eight-year high," 9 Dec. 2019 Many assumed that SunTrust Park would get renamed after Truist, which is now America's sixth-largest commercial bank. — Matt Egan, CNN, "Get ready, Braves fans: Atlanta stadium will be renamed after Truist," 12 Dec. 2019 After a decade of steady growth, deposits in commercial banks have begun to shrink (see chart). — The Economist, "A long-feared currency crisis has begun to bite in Lebanon," 3 Oct. 2019 That’s concerning since, going back to 1959, there’s never been this much money in savings deposits at commercial banks. — Matthew Goldberg, chicagotribune.com, "How to keep your money from losing purchasing power," 20 Sep. 2019 The third cause is that the cash sitting on the books of financial firms is largely held by a few big commercial banks. — The Economist, "How to ensure financial firms have enough cash," 2 Nov. 2019 Public banks are intended to use public funds to let local jurisdictions provide capital at interest rates below those charged by commercial banks. — James F. Peltz, Los Angeles Times, "Public banks can be formed in California: Newsom signs new law," 2 Oct. 2019 Collectively, America’s commercial banks now hold $1.3trn of cash. — The Economist, "Why the repo market went awry…," 2 Nov. 2019

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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Statistics for commercial bank

Last Updated

8 Jan 2020

Cite this Entry

“Commercial bank.” The Merriam-Webster.com Dictionary, Merriam-Webster Inc., https://www.merriam-webster.com/dictionary/commercial%20bank. Accessed 19 January 2020.

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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