Commercial Bank - The Role of Commercial Banks

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.

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