When you sit back and think about it, banks are often a huge part of our lives. We deposit our paychecks, take out loans, and set up savings accounts, all at a bank. But what do banks do? What are the different types of banks? Let's start finding some answers to these questions by looking at the different types of banks that make up a banking system.
A banking system is a group or network of institutions that provide financial services for us. These institutions are responsible for operating a payment system, providing loans, taking deposits, and helping with investments.
Functions:
Banking systems perform several different functions, depending on the network of institutions. For example, payment and loan functions at commercial banks allow us to deposit funds and use our checking accounts and debit cards to pay our bills or make purchases. They can also help us finance our cars and homes.
By comparison, central banks or systems distribute currency and establish money-related policies. Investment banks or systems conduct trades or deal with capital markets.