A classification of banking institutions sometimes used to indicate those institutions that supply, long-term and intermediate credit to borrowers. The term "bank," however, is loosely used in such a sense. The Board of Governors of the Federal Reserve System defines a bank as a financial institution that accepts money from the general public for deposit in a common fund, subject to withdrawal or to transfer by check on demand or on short notice, and makes loans to the general public. This definition therefore includes national banks and state-chartered commercial banks, trust companies, mutual and stock savings banks, and industrial banks (private banks and bankers). It therefore excludes building and savings and loan associations, personal loan and other small-loan companies, insurance companies, and the various credit agencies owned in whole or in part by the federal government.
Prior to the Banking Act of 1933, which divorced security-selling affiliates of member banks, many banks operated departments for the purchase and sale of securities through their security affiliates, thus coming close to the European concept of investment banks, which not only accept deposits from the public of the savings and commercial type, but also underwrite, purchase, and sell securities in addition to transacting savings and commercial banking.
In recent years, certain of the more aggressive commercial banks have aroused the opposition of the Securities Industry Association and its investment banking members as well as the INVESTMENT COMPANY INSTITUTE, based on the prohibitions to commercial banks contained in the BANKING ACT OF 1933. This opposition is to attempts to authorize commercial banks to underwrite REVENUE BONDS, to organize and to sell publicly COMMERCIAL BANK-ORGANIZED INVESTMENT COMPANY shares, and to become active as COMMERCIAL PAPER dealers. On the other hand, commercial bankers complain of the encroachments upon their banking functions by aggressive investment bankers, as exemplified by organization and sale of money market funds with checking privileges and by the offering to the public of money management accounts involving the acceptance of deposit-like funds from the public. The future is likely to witness increased pressures from both sides in the competition for such financial services.
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