Commercial banks

Commercial banks, one of the major components of any economy in the world, in this article we will discuss some of their functions and how important is their role in the economic cycle .

Commercial banks are financial institutions that accept deposits, grant loans and offer basic financial products.
Commercial banks earnings are mainly interests from loans such as mortgages, auto loans, business loans, personal loans…

Functions of commercial banks :
Commercial banks offer various financial products and services to their customers:
– Deposit products: checking accounts and savings accounts .
– Lending services: working capital for businesses, commercial real estate lending, equipment financing..
– Merchant services: such as credit cards processing.
– Global trade services: foreign exchange, global payments..
– Treasury management: like fund collection and disbursement.
– Retirement services.
– Insurance products and services.

The importance of commercial banks in the economy ?
Banks play the role of intermediaries between economic agents and bring together suppliers and applicants for capital, by taking the money their customers deposit for savings and lending it to others to invest it banks help create capital, increase production, employment and consumer spending which means boosting the economy.
They also contribute to the economic growth by granting loans to agriculture, trade and industries.
In the modern economy, banks are not just financial intermediaries. They also finance the state by issuing currencies that allow the state to pay, for example, civil servants. Important and very large customers of banks, the State, municipalities and public institutions also have financing needs. Their financing constitutes what is commonly called public debt. This compensation allows the state to meet its obligations and prevents it from standing still in the face of possible budget deficits. Commercial banks help establishing the monetary policy by following the instructions of central banks that regulate the money supply in the economy.