Commercial Bank

Topics: Bank, Banking, Loan Pages: 15 (4987 words) Published: December 2, 2012
A commercial bank (or business bank) is a type of financial institution and intermediary. It is a bank that lends money and provides transactional, savings, and money market accounts and that accepts time deposit. Commercial banks represent the core of the credit for any national economy. In turn, the credit is the engine that put in motion the financial flows that determine growth and economic development of a nation. As a result, any efficiency in the activities of commercial banks has special implications on the entire economy. That is why we consider very useful to present an analysis of possibilities for evaluating the performance in the commercial banks. The management of every commercial bank must establish a system for assessing investment performance which suits its circumstances and needs and this evaluation must be done at consecutive intervals to ensure the achievement of the Bank's investment objectives of hand; and to know the general direction of the behaviour of investment activity in the past and therefore predictable as it in the future on the other hand. Because of the crucial role that commercial banks hold in the financial sector, this paper focuses specifically on the managing core risks is banking sector as a vital segment of the whole economy, without which no modern economy can exercise the role and own functions. -------------------------------------------------

Origin of the word
The name bank derives from the Italian word banco "desk/bench", used during the Renaissanceera by Florentine bankers, who used to make their transactions above a desk covered by a green tablecloth.[2] However, traces of banking activity can be found even in ancient times. -------------------------------------------------

The role of commercial banks
Commercial banks engage in the following activities:
* processing of payments by way of telegraphic transfer, EFTPOS, internet banking, or other means * issuing bank drafts and bank cheques
* accepting money on term deposit
* lending money by overdraft, installment loan, or other means * providing documentary and standby letter of credit, guarantees, performance bonds, securities underwriting commitments and other forms of off balance sheet exposures * safekeeping of documents and other items in safe deposit boxes * sales, distribution or brokerage, with or without advice, of: insurance, unit trusts and similar financial products as a “financial supermarket” * cash management and treasury

* merchant banking and private equity financing
* traditionally, large commercial banks also underwrite bonds, and make markets in currency, interest rates, and credit-related securities, but today large commercial banks usually have an investment bank arm that is involved in the mentioned activities[clarify]. -------------------------------------------------

[editTypes of loans granted by commercial banks
[edit]Secured loan
A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan, which then becomes a secured debt owed to the creditor who gives the loan. The debt is thus secured against the collateral — in the event that the borrower defaults, the creditor takes possession of the asset used as collateral and may sell it to regain some or all of the amount originally lent to the borrower, for example, foreclosure of a home. From the creditor's perspective this is a category of debt in which a lender has been granted a portion of the bundle of rights to specified property. If the sale of the collateral does not raise enough money to pay off the debt, the creditor can often obtain a deficiency judgment against the borrower for the remaining amount. The opposite of secured debt/loan is unsecured debt, which is not connected to any specific piece of property and instead the creditor may only satisfy the debt against the borrower rather...
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