COMMERCIAL BANK
definition
provides financial service to customers (accept saving deposits, approve bank loans or mortgages)
Accepting deposits
deposit: sum of money kept in bank acc, usually to gain interest
accept deposits from customers including private individuals, businesses and governments
sight deposits: payable on demand
time deposits: payable after a fixed time period e.g 6 months or a year
tend to attract higher rates of interest than sight deposits
businesses deposit cash in commercial banks for the convenience of financial operations (pay suppliers, employees
Making advances
provide advance loans
advances include overdrafts: a banking service that allows approved customers to withdraw more money than they actually have in acc
mortgages: long-term secured loans for the purchase of assets such as commercial and residential property
Credit creation
process by which banks increase money supply in economy by making money available to borrowers
credit allows the borrower to gain purchasing power by promising to pay the lender at a future time
enables com. banks to generate considerable additional purchasing power from cash deposits
KEY FACTOR THAT DISTINGUISHES COM. BANKS FROM OTHER FINANCIAL INSTITUTIONS E.G CENTRAL BANK
Secondary functions
- collecting and clearing cheques on behalf of their clients
- offering additional financial services e.g tax advice, foreign exchange dealings and the buying and selling of shares
- providing safety deposit boxes for customers to protect highly valued possessions
- providing money transfer facilities e.g transfer money to an overseas bank acc, pay various bills such as telephone, electricity, gas and water bills
- offer credit card facilities for the convenience of customers
- offering internet banking facilities e.g online payments, wired bank transfers, foreign currencies
Examples in Vietnam
2. BIDV country's number one bank in net income ($70 million USD). Second biggest by assets
1. Agribank largest commercial bank in Vietnam by total assets. Also the largest corporation in VN
3. Vietcombank the bank had 89 branches in Vietnam, 3 local subsidiaries, 2 overseas subsidiaries, 3 joint ventures, one associate, an overseas representative office in Singapore