Commercial Bank

See Also:
Investment Banks
5 C’s of Credit (5 C’s of Banking)
Categories of Banks
Bank Statement
How to manage your banking relationship.
Certificate of Deposit (CD)
Personal Credit for Commercial Loan
Alternative Forms of Financing
What Your Banker Wants You to Know

Commercial Bank Definition

Commercial banks are the most unrestricted and common of the different bank forms. A commercial bank is often considered a financial intermediary for transactions involving anything from a savings account to a certificate of deposit (CD).

Commercial Bank Meaning

A commercial bank often deals with daily transactions between checking and savings accounts. But they also deal with term deposits and money market accounts. These banks in the past was not allowed to take part in the capital markets under the Glass-Steagall Act. This activity was typically performed by investment banks. However, since the repeal of the act there has been less and less division between the two groups.
Commercial banks create money when they accept money from businesses or individuals owning a savings account, checking account, or a CD. It then loans these funds to businesses or individuals. It makes its profit by accepting interest payments.
This means that unlike most institutions, a bank’s assets are loans and bonds that it issues, while its liabilities are the savings and checking accounts along with other deposits. This is because these liabilities are payable on demand from the account holder unless it is a term deposit in which it is payable at the end of the term.
This is also why the Federal Reserve requires commercial bank reserves to ensure that a bank always has the proper amount of funds to meet its liabilities. This commercial bank regulation came after scares during the depression in which commercial banks were unable to meet their liabilities. This is why every bank is also required to carry Federal Deposit Insurance through the Federal Deposit Insurance Corporation (FDIC).
Learn how you can be the best wingman with our free How to be a Wingman guide!
commercial bank
[box]Strategic CFO Lab Member Extra
Access your Projections Execution Plan in SCFO Lab. The step-by-step plan to get ahead of your cash flow.
Click here to access your Execution Plan. Not a Lab Member?
Click here to learn more about SCFO Labs[/box]
commercial bank

ARTICLES YOU MIGHT LIKE

Mining the Balance Sheet for Working Capital

Mining the Balance Sheet for Working Capital Let’s face it… There has been significant liquidity in the marketplace over the past couple of years. Debt and equity capital has been relatively easy to find and commercial banks have been very willing participants as capital providers; however, many of the commercial banks have admitted that this robust marketplace

Read More »

Is Your Business Bankable?

Businesses call us for many reasons but here are two very common reasons why we get called… They are growing and want to strengthen the financial function. OR They are in financial distress and can’t find a way out. Why does a business need to be bankable? What does being bankable mean? In this blog,

Read More »

Alternative Forms of Financing

It happens all the time. Companies need capital, but they aren’t bankable. Banks or other financial institutions will not touch them because they are either too risky, not able to meet covenants, or it just doesn’t work out for some reason. So, where do those companies go? They need to look at alternative forms of

Read More »

JOIN OUR NEXT SERIES

Financial Leadership Workshop

MARCH 28TH-31ST 2022

THE ART OF THE CFO®

Financial Leadership Workshop

Days
Hours
Min

September 12-15th 2022

Days
Hours
Min
SHARE THIS ARTICLE

JOIN THE NEXT STRATEGIC CFO™ WORKSHOP SERIES

Strategic CFO™ Financial Leadership Workshop
The Art Of The CFO®

Days
Hours
Min

December 5-8th, 2022