Banks have already become an integral part of every citizen’s life. Some use banks for simple personal transactions, while others conduct multi-million deals and invest large sums of money with the help of banks.
The article below provides the definition of a bank, outlines its main types and functions, and explains how online data room software facilitates internal banking processes and improves the security of clients’ data and assets.
What is a bank?
A bank is a financial institution that is regulated at the federal level and has a license to receive deposits and make loans. Banks also provide a variety of other financial services including currency exchange, safe deposit boxes, individual retirement accounts (IRAs), and certificates of deposit (CDs).
Types of banks
There are several categorizations of banks, but the most common one defines the following types:
- Retail banks
- Commercial banks
- Private banks
- Investment banks
Now, let’s review each type in more detail.
Retail banks
This type of bank usually serves the general public — it’s a bank every individual uses for personal needs. As a rule, each retail bank has a main office with a number of branch offices for their client’s convenience. Additionally, some retail banks provide online banking, which allows customers to reach their accounts via phone or desktop.
Among the main services a retail bank offers are opening deposit accounts, giving loans and mortgages, issuing credit cards, and providing financing for automobiles. Retail banks also give access to mutual funds and individual retirement accounts.
Commercial banks
Compared to retail banks, commercial banks mostly cater to big businesses or corporations. However, they can also serve the needs of individual customers.
The range of services commercial banks provide includes transaction processing, international banking, giving loans, and opening deposit accounts. Commercial banks often grant business or real estate loans.
Investment banks
These banks serve the needs of corporate or government clients and assist them in raising capital and such complex transactions as mergers and acquisitions.
Basically, investment banks act as a go-between for investors who want to invest money in to the markets and potential sellers who want to raise capital. The main clients of investment banks are hedge funds, pension funds, governments, and other financial institutions.
Based on the clientele, investment banks need to take extra measures to ensure the safety of their client’s sensitive data. That’s why investment banks often opt for virtual data room services.
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Private banks
Private banks are very much like retail banks that serve the needs of individuals. However, private banking mostly caters to a high net-worth client base.
Just like retail and commercial banks, private banks also offer services of providing loans, opening deposit accounts, or conducting financial transactions. Additionally, with the help of private banks, wealthy private individuals can get investment management or financial advisory services.
Functions of banks
Generally, all banking functions can be divided into primary and secondary. In turn, both types include a few more subtypes.
Primary functions of banks
- Accepting deposits. This subtype includes such services as saving deposits, fixed deposits, current, deposits, and recurring deposits.
- Granting of loans and advances. Banks offer several types of loans and advances — overdrafts, cash credits, discounting the bill of exchange, and loans.
Secondary functions of banks
- Agency functions. Banks serve as agents for their clients and perform such agency functions as the transfer of funds, periodic payments, collection of checks, and portfolio management.
- General utility functions. These secondary functions of banks include issuing letters of credit, dealing in foreign exchanges, underwriting shares, and project reports.
Banks and virtual data rooms
Most banks that deal with corporate or government organizations implement virtual data room software to provide an extra layer of security to the customers’ data and facilitate their financial transactions.
Virtual data room providers offer online cloud-based repositories where large volumes of sensitive data can be stored. To ensure the security of that confidential data, electronic data room vendors take various security measures that protect corporate information from unauthorized access, viewing, or downloading. Each virtual data room provider has its own set of document security features.