Bank is where consumers and businesses stow their cash and get loans to buy cars, houses, or expand their companies. It’s also where they pay bills and make purchases using services like credit cards and debit cards. And it’s where they turn to for financial advice and digital tools that help them manage their money.
Banks are privately owned institutions that accept deposits and make loans. They derive their profit from the difference between costs (including interest payments to depositors) and income earned on securities and loans, a practice known as financial intermediation. Deposits are money people give to an institution with the understanding they will be able to withdraw it at any time or borrow it back with interest. Loans are money given to a borrower in exchange for interest and the promise of repayment at an agreed-upon future date.
Since their beginnings in the 14th century, banks have evolved to meet a wide variety of needs. Today, they compete with credit unions, savings and loans associations, financing companies, investment banks and insurance firms for customers. They are also used by governments as instruments of broad economic policy, from enforcing nondiscrimination laws to stimulating local economies. And they are regulated by state and federal agencies, from the Office of the Comptroller of the Currency to the Federal Reserve Board. To stay in business, banks must balance their own goals with the needs of their communities. And they must be profitable to ensure that their resources are available when needed.
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