The banking , according to one of the meanings of the term, is the set of banks and bankers . The concept is used to name the entities dedicated to facilitate the financing .
Commercial is that pertaining to or relating to trade or merchants . The adjective is also used in reference to what is easily accepted in a given market.
The notion of commercial Bank is linked to banks that act as universal operators and that they can offer all the services and the passive and active operations that are allowed by law . The commercial bank, therefore, is a type of Bank , As the investment bank or the hipotecary Banc .
The main function of commercial banking is intermediate between the supply and demand of financial resources . These banks can receive savings from individuals and companies (in deposits, fixed terms, etc.) and grant loans and credits. Receiving resources is a passive operation, while the loan of money is an active operation.
The operation of commercial banking is subject to the specific laws of each country and the regulations of each central bank . It is common for these commercial banks to provide other services, such as changing bills and coins, renting safe deposit boxes or collecting taxes.
When talking about commercial banking, reference to the so-called investment banking is irremediably referred to. These are two terms with points in common but different at the same time because while the first one we have already seen the functions that it has, the second counts as main tasks to undertake mergers, to take different companies to the stock market, to issue bonds, to proceed to the sale of divisions between companies and even to carry out trading operations or create OPAs.
Taking into account all these nuances we can establish a series of characteristics that allow us to better understand the difference between one and the other:
• Commercial banking is very difficult to enter a loss situation, hence its benefits are very stable.
• Investment banking, meanwhile, has benefits that are much more unstable since they depend on market fluctuations. In this way, in times of bonanza it manages to make those superior to those of commercial banking but in times of crisis they decrease more than those of the other.
• Commercial banking could establish that it already has its origin in the Middle Ages because that was when the first people who no longer wanted to save the money they had at home began to emerge.
• There are very few entities in the world that can be considered as pure investment banks. Specifically, experts agree that the only one that could currently be qualified as such is the Goldman Sachs, which exists in the United States.
The distinction between commercial banking and investment banking arose after the Great Depression , when the US Congress demanded that banks only develop traditional banking activities, leaving operations in the capital market to the so-called investment banks.