Types of Banking

There are several types of banks who provide different banking services. Most banks are privately owned businesses with the aim of raising profit, though there are non-profit enterprises and some government banks that are also not-for-profit.

Retail banking

A retail bank caters services towards individuals rather than companies, corporations or other banks Also known as consumer banking, retail banking services include savings and current accounts, overdraft facilities and personal loans, as well as debit and credit cards. Building societies and Landesbanks are other examples of retail banks found in Europe.

Business banking

Business or commercial banking is a bank or a division of a bank that provides services solely to businesses, including loans, credit, savings and checking accounts. Also offering a range of financing options for business expansion, acquisitions, or growing operating costs. Some banks specialise in lending in particular industries and offer cash management services to help with cash-flow and liquidity.

Private banking

Private banks provide personalised, private and exclusive wealth management services to high-net-worth individuals and families who can access a larger range of conventional and alternative investments. As well as providing exclusive investment-related advice, private banks appoint an account manger to manage a client’s entire financial situation including retirement and inheritance.

Investment banking

Investment banks act as the go-between for a company and investors. Investment banks will identify and take on risks, by underwriting new debt and equity securities. They also help in the sale of securities, facilitate reorganisations, mergers and acquisitions, and broker trades for institutions and private investors. Investment banks also guide corporations with issuing and placement of stock.

Corporate banking

A sub-category of business banking, corporate banking offers customised financial and banking services for large organisations strong enough to qualify for help with the daily business operations. This can include ash management, working capital loans and commercial mortgages. Some offer financial supply chain optimisation.

Offshore banks

Banks located in jurisdictions with low taxation and historically, less regulation. Many offshore banks are essentially private banks.

Central banks

Usually government-owned banks with regulatory responsibilities, including control of interest rates or supervising commercial banks. Central banks also provide liquidity to the banking system, acting as the lender of last resort in event of a crisis.

Islamic banks

Banking that revolves around Islamic principles based on scripture. Instead of charging interest on banking activities, which is against Islamic teachings, banks charge fees for the financial services they offer to clients.

Community banks

Usually locally owned and operated financial institutions that focus on the needs of the local businesses and families where the bank holds branches and offices. Lending decisions are made by people who understand the local needs of families, businesses and farmers.

Community development banks

Providing financial services and credit to under-served populations or markets.

Credit unions or co-operative banks

Not-for-profit cooperatives owned by the depositors and often offering rates more favourable than for-profit banks. Membership is restricted to a particular company, residential area, union membership or religious organisations, and their immediate family members.