Property Futures

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Types of Lenders: Banks

Article: types of lenders, their roles and services, and your loan options.

All banks receive and store money for their clients and lend it to other people for a fee. However the size and range of services offered varies enormously, and includes commercial and investment banks as well as central and private banks.

"I'm not much of a hunter or a gatherer. I'm more of a borrower."

Borrowing from banks

While the two primary types of banks are commercial banks (where you have your current or checking account) and investment banks (which focus solely on longer term investment portfolios), there are also government-run central banks as well the highly specialised services of private banks for the ultra wealthy.

Commercial or retail banks

These are the banks which have branches in primary business centres and retail streets and which offer everyday services including current accounts, savings accounts and credit or debit cards.

Commercial banks will usually:

  • Have local branches
  • Mostly deal with individuals and small businesses
  • Deal with day-to-day transactions such as paying bills

Services offered by commercial banks

While different commercial banks offer a diverse range of services, these will usually include some or all of the following:

  • Current or checking accounts
  • Savings accounts
  • Credit or debit cards
  • Bill payment (e.g. direct debits)
  • Accounts for children
  • Mortgages and buy-to-let mortgages
  • Personal and business loans

Investment banks

Unlike commercial banks, investment banks don’t provide the typical, everyday services. Their focus is on higher-level services for individuals, companies and governments and transactions will usually involve a sizable amount of money.

Investment banks will usually:

  • Work from a standard office building
  • Mostly deal with wealthy individuals and large businesses
  • Only deal with large sums of money

Services offered by investment banks

Many investment banks specialize but their services may include:

  • Raising capital for large projects, e.g. large-scale developments
  • Issuing securities
  • Assisting with mergers and acquisitions
  • Derivatives, commodity or currency trading

Other types of banks

While commercial and investment banks are the most common, there are other types of banks and many other financial institutions including credit unions, mortgage brokers and cooperative societies.

Central bank

Run or backed by the government, a country’s central bank will have a wide range of responsibilities but will not deal directly with private or business accounts. A central bank may:

  • Issue currency
  • Manage government borrowing and lending
  • Oversee the country’s monetary policies
  • Regulate other financial institutions

Private bank

Private banks manage the money of high-worth individuals, millionaires or billionaires. They typically provide a high level of personalized service and may manage all aspects of a client’s finances, including both personal and investment banking, as well as property investments and other financial assets. As they deal with wealthy individuals, privacy and excellent service are usually considered critically important and many private banks are selective about their clientele.

  • The phrase ‘private bank’ may also refer to a small bank that is not incorporated, but this use is less common.

One comment on “Types of Lenders: Banks

  1. Hard Money Loans
    May 23, 2013

    That’s right bank comes with different names and they may vary in terms of how it functions. If I may add some, it also includes Credit unions and Online banks.

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