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- Banks are financial institutions that play the role of financial intermediaries, channeling funds between deficit and surplus sources. An example of an intermediary is a banking institution which turns deposits into loans. Financial intermediation is a function of banks through which certain liabilities and assets are transformed into different kinds of liabilities and assets. In this way, banking institutions channel funding from savers, who have deposited extra money, to borrowers who need additional financing for certain objectives and planned activities.
Banking institutions can be subdivided into several types of financial entities according to their focus and activities. The three main types are central bank, savings bank, and commercial bank. Central banks function to circulate money on behalf of their respective governments. They regulate the money supply by acting as a monetary authority which implements the country’s monetary policy. In the United States, the Federal Reserve System acts as the central banking system. Its responsibilities include regulating and supervising banks in the country, implementing the national monetary policy, and maintaining a stable financial system. Another duty is providing financial services to the government, official institutions of foreign counties, as well as depository institutions such as credit unions, savings and loan associations, commercial banks, and savings banks. Basically, these are financial institutions which can legally accept deposits from their clients. Mortgage banks are a type of a non-depository institution. Such entities are not allowed to accept deposits by law but are licensed to extend financing.
Savings banks are another type of bank, which can be mutually or stockholder-owned. The main purpose of savings banks is to accept deposits, but they may have other functions as well. Some saving banks specialize in retail banking, including credit and insurances, savings products, and payments. They mainly service medium-sized and small enterprises and individual clients. Unlike commercial banks, savings banks provide regional and local outreach because of their decentralized distribution networks.
Generally, savings banks are financial institutions which accept deposits and pay dividends or interest to savers. They channel the deposits of savers to borrowers who require financing. Savings deposit departments specialize in this at the trustee savings banks, credit unions, mutual savings banks, and savings and loan associations. It is important to note that savings banks do not handle demand deposits.
Commercial banks are a third type of bank which accepts deposits and transforms them into credit. The latter can be invested indirectly on the capital markets or provided in the form of loans. When it comes to the global financial markets, commercial banks serve as the link between capital surpluses and capital deficits. In general, commercial banks are financial institutions that offer a number of deposit accounts, including savings, checking, and time deposit. While these institutions are owned and run by groups of investors, some of them are members of the Federal Reserve. In addition, these institutions offer various services to individuals, but their main purpose is to accept deposits and provide loans to businesses. In addition, commercial banks provide money market, transactional, and other accounts.
There are many banking institutions in the United States to choose from, depending on your requirements and location. Among them are the U.S. Bank, Wachovia Bank, Bank United, Bank of America, Capital One Bank, and many others. Credit unions are an alternative to banking establishments. They are member-owned cooperatives, which feature the same financial services and products as banks do. US credit unions have close to 90 million members. You can choose from credit unions such as DFCU Owners United, Save First Basin Credit Union, Save Columbia Credit Union, and others.