What exactly is a bank? Definition, types of banks

A bank is a financial institution that provides banking services. Banks can be state-owned or private. Banking services include: storing money, making transfers, granting loans, selling and buying currency. Banks operate in the financial market and are regulated by banking law.

Bank – definition of the term

If someone asks what a bank is, many different definitions can be given. In the simplest terms, a bank is a financial institution that provides various types of financial services to its customers. These include, for example, credit, deposit or investment services. Banks can be both state-owned and private. There are many different banks that offer a wide range of financial services to their customers.

Tasks of a bank

A bank is a financial institution whose task is to provide financial services. Bank customers can use such services as withdrawing and depositing money, transfers, loans and credits. Banks are regulated by the state and are subject to supervision by the relevant authorities.

The main tasks of a bank include protecting deposits and providing financial services. Protecting deposits means that a bank has a duty to take care of its customers’ money and ensure their safety. Providing financial services, on the other hand, is the bank’s offering of various types of products and services that may be useful to its customers. Among these services are: withdrawing and depositing money, transfers, loans and credits.

Banks are regulated by the state. This means that they must comply with certain regulations and are subject to supervision by the relevant authorities. This supervision is aimed at ensuring the safety of transactions carried out by banks and protecting the interests of their customers.

Types of banks

Banking is a financial activity that involves collecting money from individuals and businesses and storing and making it available. Banks have different organizational forms and can be divided into several types.

The first division of banks is retail banks and institutional banks. Retail banks conduct business aimed at individual customers, such as individuals and small and medium-sized businesses. Institutional banks mainly deal with large corporations, investment funds and other financial institutions.

Another division of banks is between commercial banks and specialized banks. Commercial banks are the largest banks in the market and provide a wide range of financial services, such as personal accounts, cash loans, credit cards, mortgages, etc. Specialized banks mainly deal with one or more areas of banking, such as investments, insurance or handling financial markets.

Acentral bank is the last type of bank to be distinguished. It is a state or international institution that regulates the financial market in a country or region. The most important functions of a central bank include maintaining price stability (inflation), maintaining financial stability (bankruptcies), and influencing the level of the economy by regulating the money supply.

Banking supervision

Banking supervision is the process of controlling the activities of a bank by a supervisory institution. Banking supervision aims to ensure the safety of money and the financial stability of the entire banking system.

Banking supervision includes a number of activities, such as monitoring the market, analyzing financial data, auditing financial statements or overseeing compliance with internal regulations and procedures. Banking supervision is carried out by relevant institutions in each country, such as the Financial Supervision Commission in Poland.

Thanks to banking supervision, it is possible to prevent crisis situations in the financial industry, as well as to provide greater certainty and security for bank customers. Banking supervision is therefore a very important part of the functioning of the entire banking system.

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