A bank is a business that provides banking services for profit.
A bank raises funds by attracting deposits, borrowing money in the inter-bank market, or issuing financial instruments in the money market or a capital market. The bank then lends out most of these funds to borrowers.
Traditional banking services include receiving deposits of money, lending money and processing transactions.
Some banks (called Banks of Issue) issue banknotes as legal tender.
Many banks offer ancillary financial services to make additional profit; for example:
- Selling insurance products,
- Investment products or
- Stock broking.
Currently in most jurisdictions the business of banking is regulated and banks require permission to trade.
Authorisation to trade is granted by bank regulatory authorities and provide rights to conduct the most fundamental banking services such as accepting deposits and making loans.
Banks have a long history, and have influenced economies and politics for centuries.
Traditionally, a bank generates profits from transaction fees on financial services and from the interest it charges for lending. In recent history, with historically low interest rates limiting banks’ ability to earn money by lending deposited funds, much of a bank’s income is provided by other fees and riskier investments.
Although the type of services offered by a bank depends upon the type of bank and the country, services provided usually include:
- Taking deposits from their customers and issuing checking and savings accounts to individuals and businesses.
- Extending loans to individuals and businesses.
- Cashing checks.
- Facilitating money transactions such as wire transfers and cashiers checks.
- Issuing credit cards, ATM cards, and debit cards.
- Storing valuables, particularly in a safe deposit box.
Banks’ activities can be characterised as retail banking, dealing directly with individuals and small businesses, and investment banking, relating to activities on the financial markets.