Read the introductory material and then have a go at the 'Categorise' activity on the functions of commercial and investment banks.
Commercial banks offer services to businesses and individuals. Commercial banking is sometimes split into two areas: retail banks provide services to individuals and small businesses; commercial banks (sometimes called wholesale banks) provide services to larger businesses.
Some examples of commercial banks include HSBC, Santander, Lloyds etc.
The main roles of commercial banks are:
They can also provide other services like financial advice and insurance.
Investment banks provide a range of services to their customers but do not accept savings deposits.
Examples of investment banks include Goldman Sachs, JP Morgan and Morgan Stanley.
The main roles of investment banks are:
Investment banks engage in other activities, including: trading of derivatives (financial instruments that base their price off of other assets' prices); proprietary trading (trading in shares with the bank's own money).
It is possible for a bank to have both a commercial and investment banking division - large banks like Barclays do this. Regulation exists to keep these two areas separated to avoid systemic risk that might occur if investment banks were to risk consumers' savings buying risky assets.
Test your knowledge of the roles of investment and commercial banks with this 'Categorise' activity. Good luck!
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