The banking system is an extensive network of credit organizations. Currently, they distinguish between types of banks depending on their functions, the operations they perform, the service sector, the amount of work, and the availability of branches. Almost everyone faces the need to cooperate with various banks. Therefore, let us dwell on their classification in more detail.
At the first stage of the emergence of a credit organization, it is referred to as a closed or open type company or as a limited liability company. It depends on the legal form of the bank.
Depending on the operations and services rendered, banks are divided into universal and specialized.
There are state, private, joint stock and mixed credit organizations. It depends on the type of owner. State organizations mainly include central banks of the country.
Foreign banks may also be present in the market for the provision of services, and this is stipulated separately in the legislative framework.
The functions performed distinguish between commercial, investment, mortgage, savings, issuing and deposit banks.
Commercial banks are involved in the provision and sale of banking products. These are settlement operations and trade commission; on factoring, leasing. The following types of commercial banks are distinguished: savings, insurance and mortgage. They operate in almost all sectors of loan capital.
Larger banks provide a full range of services. Types of specialized banks have more limited capabilities. Commercial banks are a stable base component of the entire credit system. They can carry out their activities not only within the country, but also beyond its borders, opening their branches there.
The next type is investment banks that are engaged in the issue of securities and founding activities. Usually, at the request of the state, they determine the size of the issue, determine the type of securities to be issued, and also help with their placement and circulation. These types of banks become guarantors of security for securities. They acquire them and provide loans and loans to other buyers.
Savings banks that are not commercial are state-controlled. These are medium-sized credit organizations. Usually they accept deposits from individuals and provide loans to the public. In addition, they are involved in the purchase of securities and the issue of credit cards.
Mortgage banks provide loans secured by real estate. They also issue mortgage bonds .
The status that banks have, their types and functions depend on many factors. This is primarily a list of services provided. But banks also distinguish according to the branching of their network. If a bank has many branches, then it is customary to call it multi-branch. Small credit organizations that do not have branches are called branchless.
Depending on the industry served and their number, the bank may be diversified or have a certain specialization.
Basically, existing banks are diversified. In this case, the risk of non-repayment of loans is significantly reduced. Some banks primarily work with a specific group of companies that are their founders. Here, the risk of non-repayment of loans is very high.
There are various types of banks. But the most common ones are those that provide a wide range of services and are multidisciplinary. In this case, they are considered more reliable and stable.