Commercial banking was first introduced in the US in the late 1700’s and early 1800’s. They were set up with a profit motive and were usually structured as a joint stock company. In the beginning, only a few commercial banks gained charter from their respective states. The emergence of commercial banks in the US has resulted in the economic growth of the nation as these banks contribute a great deal to the treasury.
Commercial banks vary greatly in size from the “money center” banks that offer a wide range of traditional and non-traditional services, including international lending to various regions. In the US, the number of small financial banks continues to decline while the number of bigger ones continues to grow.
Commercial banks receive huge revenues from various sources. Their assets and liabilities are typically managed in a way that the revenue is maximized and liquidity is maintained. However, the fluctuation in the rates of interest all over the world makes it unpredictable for commercial banks to estimate their revenue.
Commercial banks make a great deal of revenue by tracing their revenue sources to many different functions. Modern banking includes functions such as foreign exchange, payment of interest and granting of loans. Commercial banks also offer various other functions such as opening savings account, safe deposit boxes and trust services.
The apex bank of the country regulates the rates of interest charged by a commercial bank. Although most commercial banks control a tremendous quantum of wealth, it is only allowed to hold on to a fraction of it. The rest has to be sent out for circulation in the economy.
In the US, there are many commercial banks and the functions of these banks are critical to the nation’s economy. The activities of these banks in certain functions such as the interest rate are monitored by the apex bank to ensure transparency and secure the overall interests of the tax-paying citizen.