- commercial bank
a bank specializing in checking accounts and short-term loans.[1905-10]
* * *Bank that makes loans to businesses, consumers, and nonbusiness institutions.Early commercial banks were limited to accepting deposits of money or valuables for safekeeping and verifying coinage or exchanging one jurisdiction's coins for another's. By the 17th century most of the essentials of modern banking, including foreign exchange, the payment of interest, and the granting of loans, were in place. It became common for individuals and firms to exchange funds through bankers with a written draft, the precursor to the modern check. Because a commercial bank is required to hold only a fraction of its deposits as cash reserves, it can use some of the money deposited by its customers to extend loans. Commercial banks also offer a range of other services, including savings accounts, safe-deposit boxes, and trust services. See also bank; central bank; investment bank; savings bank.
* * *bank with the power to make loans that, at least in part, eventually become new demand deposits. Because a commercial bank is required to hold only a fraction of its deposits as reserves, it can use some of the money on deposit to extend loans. When a borrower receives a loan, his checking account is credited with the amount of the loan; total demand deposits are thus increased until the loan is repaid. As a group, then, commercial banks are able to expand or contract the money supply by creating new demand deposits.The name commercial bank was first used to indicate that the loans extended were short-term loans to businesses, though loans later were extended to consumers, governments, and other nonbusiness institutions as well. In general, the assets of commercial banks tend to be more liquid and carry less risk than the assets held by other financial intermediaries. Most commercial banks offer a variety of services to their customers, including savings deposits, safe-deposit boxes, and trust services.
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Look at other dictionaries:
commercial bank — Bank that offers a broad range of deposit accounts, including checking, savings and time deposits and extends loans to individuals and business. Commercial banks can be contrasted with investment banking firms, such as brokerage firms, which… … Financial and business terms
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commercial bank — commercial banks N COUNT A commercial bank is a bank which makes short term loans using money from current or checking accounts … English dictionary
commercial bank — n. a bank primarily concerned with accepting demand deposits, used as checking accounts … English World dictionary
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commercial bank — noun Date: 1910 a bank organized chiefly to handle the everyday financial transactions of businesses (as through demand deposit accounts and short term commercial loans) … New Collegiate Dictionary
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commercial bank — The ordinary bank of deposit and discount, with checking accounts, as distinguished from a savings bank operating on the mutual system in which the depositors are entitled to receive the profits of the business as dividends and in which… … Ballentine's law dictionary