How Are Investment Banks Different From Commercial//Common Banks? (in the way they function & perform basic tasks)! (#87)

 

Today we are going to learn about what the major differences between an Investment Bank & a Commercial Bank are!

You know they are both Banks; so it ain't unnatural to confuse 'em!

But; so today we'll make it clear specifically about the way each bank functions!

I recently wrote an article on How Investment Banks works & also How Banks works!

Read: How Do Investment Banks Works?

Also Read: How Do Banks Works?

Today, we'll do the comparison among the 2 & find out what are the major differences between an Investment Bank & a Commercial/Common Bank!

So, here we go;

First of; talking 'bout what do they do;

So; Investment Banks tends to help businesses to find investors,.... so they are basically the middlemen in this case!

Also; Investment Banks tends to help Businesses in merger & acquisition of other Companies or Businesses.

Commercial Banks on the other hand; give out loans to people; make transactions like transferring money & stuff. They collect money & also give out a percentage of interest to people who tend to keep their money in Banks for a certain amount of time.

Okay!

So this was all about what they do;.... now let's talk about what benefit do each of'em provide to the economy & to others.

Investment Banks are just beneficial for both the businesses & the investors! You might already have an idea as I just mentioned the tasks they perform.

Common Banks on the other hand, just makes transactions & look out for no mistakes to be made in transferring or receiving money; they also tends to give out interest to people!

How Do Investment Banks & Commercial Banks Earns?

Investment Banks get's paid alot after they've successfully completed the proposed task. It is because of them being the middle person & carrying out all of the risk involved.

While;

Commercial/Common Banks give out loans to people & get interest; out of which they pay some to the people who keep their money in the Banks (as they took this money they've kept in the bank to give out loans) & the rest of the money belongs to the Bank themselves.

& that's how these earns!

Now, let's talk about the risk each one takes over!!

I've already mentioned that Investment Banks carry out a lot of risk; if you wanna know in details then I recommend you read the following article— How Do Investment Banks Works?

& also while Investment Banks are Private Companies.

Many Commercial Banks are Government Backed Up; which means in case the Bank is at the verge of shutting down in any scenario; then I'll simply say that the Government have got it's Back &'ll usually help it out.

& so that's all for today.

I hope you enjoyed reading this article!

Thanks For Reading!