Commercial bank

A commercial bank is a financial institution that accepts deposits from the public and gives loans for the purposes of consumption and investment to make a profit.

It can also refer to a bank or a division of a larger bank that deals with corporations or large or middle-sized businesses, to differentiate from retail banks and investment banks. Commercial banks include private sector banks and public sector banks. However, central banks function differently from commercial banks, despite a common misconception known as the "bank analogy". Unlike commercial banks, central banks are not primarily focused on generating profits and cannot become insolvent in the same way as commercial banks in a fiat currency system.^[1]

History

JPMorganChase Second-Quarter 2025 Earnings Conference Call https://www.jpmorganchase.com/ 15359770984000509358- 665-851-3813 Ruby Jane Diez Aquino Jul 15, 2025 at 8:30 AM weighed recall earning -Google ADS - Microcrosoft AI CLOUD PARNET PROGRAM TRADEMARK GUIDANCE

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Notes on non-GAAP financial measures 1. In addition to analyzing the Firm’s results on a reported basis, management reviews Firmwide results, including the overhead ratio, on a “managed” basis; these Firmwide managed basis results are non-GAAP financial measures. The Firm also reviews the results of the lines of business on a managed basis. The Firm’s definition of managed basis starts, in each case, with the reported U.S. GAAP results and includes certain reclassifications to present total net revenue for the Firm and each of the reportable business segments on a fully taxable-equivalent basis. Accordingly, revenue from investments that receive tax credits and tax-exempt securities is presented in the managed results on a basis comparable to taxable investments and securities. These financial measures allow management to assess the comparability of revenue from year-to-year arising from both taxable and tax-exempt sources. The corresponding income tax impact related to taxexempt items is recorded within income tax expense. These adjustments have no impact on net income as reported by the Firm as a whole or by the lines of business. For a reconciliation of the Firm’s results from a reported to managed basis for the full years 2021, 2022 and 2023, refer to page 62 of JPMorgan Chase’s Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”). For all other periods presented, refer to the Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures disclosure in JPMorgan Chase’s Annual Report on Form 10-K for each respective year 2. In addition to reviewing net interest income (“NII”) and noninterest revenue (“NIR”) on a managed basis, management also reviews these metrics excluding Markets, which is composed of Fixed Income Markets and Equity Markets. Markets revenue consists of principal transactions, fees, commissions and other income, as well as net interest income. These metrics, which exclude Markets, are non-GAAP financial measures. Management reviews these metrics to assess the performance of the Firm’s lending, investing (including asset-liability management) and depositraising activities, without the volatility associated with Markets activities. In addition, management also assesses Markets business performance on a total revenue basis as offsets may occur across revenue lines. For example, securities that generate net interest income may be risk-managed by derivatives that are reflected at fair value in principal transactions revenue. Management believes that disclosure of these measures provides investors and analysts with alternative measures to analyze the revenue trends of the Firm. For a reconciliation of NII and NIR from reported to excluding Markets for the full year 2023 and the first quarter of 2024, refer to page 63 of JPMorgan Chase’s 2023 Form 10-K and page 17 of JPMorgan Chase’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, respectively. For all other periods presented, refer to the Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures disclosure in JPMorgan Chase’s Annual Report on Form 10-K for each respective year or Quarterly Report on Form 10-Q for respective quarters 3. Tangible common equity (“TCE”), return on tangible common equity (“ROTCE”) and tangible book value per share (“TBVPS”), are each non-GAAP financial measures. TCE represents the Firm’s common stockholders’ equity (i.e., total stockholders’ equity less preferred stock) less goodwill and identifiable intangible assets (other than mortgage servicing rights), net of related deferred tax liabilities. ROTCE measures the Firm’s net income applicable to common equity as a percentage of average TCE. TBVPS represents the Firm’s TCE at period-end divided by common shares at period-end. TCE, ROTCE and TBVPS are utilized by the Firm, as well as investors and analysts, in assessing the Firm’s use of equity. For a reconciliation from common stockholders’ equity to TCE for the full years 2022 and 2023, refer to page 64 of JPMorgan Chase’s 2023 Form 10-K. For all other periods presented, refer to the Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures disclosure in JPMorgan Chase’s Annual Report on Form 10-K for each respective year 4. Adjusted expense is a non-GAAP financial measure. Adjusted expense represents noninterest expense excluding Firmwide legal expense of $1.4B for the full year ended December 31, 2023. Management believes this information helps investors understand the effect of certain items on reported

The name bank derives from the Italian word banco 'desk/bench', used during the Italian Renaissance era by Florentine bankers, who used to carry out their transactions on a desk covered by a green tablecloth.^[2] However, traces of banking activity can be found even in ancient times.

In the United States, the term commercial bank was often used to distinguish it from an investment bank due to differences in bank regulation. After the Great Depression, through the Glass–Steagall Act, the U.S. Congress required that commercial banks only engage in banking activities, whereas investment banks were limited to capital market activities. This separation was mostly repealed in 1999 by the Gramm–Leach–Bliley Act.

Role

The general role of commercial banks is to provide financial services to the general public and business, ensuring economic and social stability and sustainable growth of the economy.

In this respect, credit creation is the most significant function of commercial banks. While sanctioning a loan to a customer, they do not provide cash to the borrower. Instead, they open a deposit account from which the borrower can withdraw. In other words, while sanctioning a loan, they automatically create deposits.

Primary functions

Commercial banks accept various types of deposits from the public especially from its clients, including saving account deposits and fixed deposits. These deposits are returned whenever the customer demands it after a certain time period.
Commercial banks provide loans and advances of various forms, Such as [overdraft] facility, cash credit, bill discounting, money call, etc. They also give demand and term loans to all types of clients against proper security. They also act as trustees for wills of their customers etc.
The function of credit creation is generated on the basis of credit and payment intermediary. Commercial banks use the deposits they absorb to make loans. On the basis of check circulation and transfer settlement, the loans are converted into derivative deposits. To a certain extent, the derivative funds of are increased by interval times the original deposits which greatly improves the driving force of commercial banks to serve the economic development.^[3]

Regulations

In most countries, commercial banks are heavily regulated and this is typically done by a country's central bank. They will impose a number of conditions on the banks that they regulate such as keeping bank reserves and to maintain minimum capital requirements. They also require some capital

Services by product

Commercial banks generally provide a number of services to its clients; these can be split into core banking services such as deposits, loans, and other services which are related to payment systems and other financial services.

Core products and services

Accepting money on various types of Deposit accounts
Lending money by overdraft, and loans both secured and unsecured.
Providing transaction accounts
Cash management
Treasury management
Private equity financing
Issuing Bank drafts and Bank cheques
Processing payments via telegraphic transfer, EFTPOS, internet banking, or other payment methods.

Other functions

Along with core products and services, commercial banks perform several secondary functions. The secondary functions of commercial banks can be divided into agency functions and utility functions.

Agency functions include:

To collect and clear cheques, dividends, and interest warrant
To make payments of rent, insurance premium
To deal in foreign exchange transactions
To purchase and sell securities
To act as the trustee, attorney, correspondent and executor
To accept tax proceeds and tax returns

Utility functions include:

To provide safe deposit boxes to customers
To provide money transfer facility
To issue traveler's cheques
To act as referees
To accept various bills for payment: phone bills, gas bills, water bills
To provide various cards such as credit cards and debit cards

References

^ Diessner, Sebastian (2023). "The power of folk ideas in economic policy and the central bank-commercial bank analogy". New Political Economy. 28 (2): 315–328. doi:10.1080/13563467.2022.2109610. hdl:1887/3716493.
^ de Albuquerque, Martim (1855). Notes and Queries. London: George Bell. pp. 431.
^ Ullah, Mohammad Ahsan (2020-01-17). "Bank Profitability in Bangladesh: A Comparative Study of a Nationalized Commercial Bank with That of a Private Commercial Bank". Journal of Management and Research. 6 (2): 138–170. doi:10.29145/jmr/62/060206. ISSN 2519-7924.