CLASSIFICATION OF BANKS

Classification according to their type of operation

Banks can be classified into several groups according to their type of operation.
of which I will analyze investment banking in detail. The classification by its
the type of operation is the following:
1. Commercial bank: It is the bank most known to the public.
is responsible for raising funds and giving loans primarily.
2. Central banks: They are supervisors of banking entities and their
the function is to control, supervise, and ensure the normal operation of the
banks.
3. Private banking: This type of banking is the least common since it is
especially directed towards spending agents with a large surplus, in this
In this type of banking, the client usually has an advisor who advises them.
where to invest according to your assets, that is, private banking provides a service
customized.
4. Investment banking: As its name suggests, its main activity
it is the investment. They capture resources through the issuance of securities and the
advising companies mainly. The activity that sets it apart from the
It is a personalized advice related to the stock market, already
who are responsible for organizing a plan and allocating resources to achieve a
benefit in the stock market.

Although investment banking clients are always advised, this does not
it means that they are not good investors, they are usually good.
investors, used to performing operations of large amounts of
money. The most important clients of investment banks are banks.
commercial and mortgage loans since they invest in the instruments they issue
investment banks.

As for the operations they perform, they are also qualified to

grant medium and long-term credits, conduct operations with currency
foreign, receive deposits, the issuance of bonds and obligations and investments
in securities. They also carry out other operations but to a lesser extent.
importance that the aforementioned.
According to the types of operations they carry out
Commercial banking: Commercial banks are the most
abundant. Their activity focuses on the recruitment of
deposits of individuals and legal entities, the provision of
payment and collection services, the granting of credits and the
financing of domestic and international trade. These
basic activities are complemented by those of commerce
currencies for one's own account and for clients, as well as in the
securities trading, also on one's own account and/or of
clients.
These values are usually mainly fixed income or income
monetary, although many jurisdictions authorize the
banks to invest and intermediate also in actions and
derivatives. Banks' proprietary trading
are subject to limits based on their capital, so the
banks with greater capital can maintain higher
inventory of values, and thus they can offer a wider range
of products to their clients. This is particularly
important when it comes to fixed income values that
they generally buy and sell over the counter, directly
of the banks' inventory.
In recent years, many banks have created funds of
investment that they distribute among their clients, with which in the
In developed countries, the disintermediation of banking has been
very important, although the bank continues to obtain a margin
for the distribution or management of funds. As we have said
Previously, commercial banking is a business in which the margins
are becoming increasingly limited, so banks strive to
capture the maximum number of clients, either through
numerous branches or through direct marketing, Internet, etc. In
many countries this need to increase in size has
driven banks to merge, with what is happening
a significant banking concentration at a global level.

Savings banks: Savings banks in Europe began

as non-profit entities with a marked character
social. Many of them were founded by organizations
religious authorities (England) or municipal authorities (Germany) or
regional (Spain), without having the condition of
joint stock companies, that is to say, without capital or shareholders. Their
the activity consisted of capturing savings accounts generally
of small savers, who sought to form a capital to
finance your retirement.
They were not allowed to carry out credit operations of any kind.
type, except for mortgage credits financed by the
contributions from their depositors. For all these reasons, the boxes of
savings were not fully integrated into the banking systems
until the last quarter of this century. In Spain, for example,
savings banks and credit unions (entities
property of the own taxpayers) depended on the Ministry
I worked until 1964, the year in which the Bank of Spain took over
its control. In 1977, its operations were liberalized, to
to practically equate them with those of the banking sector, and they are
authorized to open branches inside and outside of its Communities.
Many of these took advantage of the 1978 Constitution to
change the provisions regarding the boxes in its Autonomy and
to take greater control of their operations. Since 1977 the
the growth of savings banks in Spain has been
spectacular and today many offer a range of products and
services as complete as banks, including banking
corporate and investment funds. This growth has also
forced the boxes to greatly limit their investments in works
social to be able to endow its reserves and comply with the
required capital requirements.
In France, there has been a parallel process of liberation and
since 1984, the boxes can grant personal loans and
provide all kinds of banking services. In Germany, which
together with Spain, it is the country in Europe with the most offices of
savings banks (19,041 compared to 16,094 in 1996), the banks have
has been a source of funding since the sixties
importance of SMEs (small and medium enterprises) of
family property. In the United States, savings banks
Savings & Loan Associations control
approximately 25 percent of the total deposits of
country.
Their activities were limited until 1980 to the capture of
savings accounts for housing and investment in loans
mortgages. The real estate crisis of 1980 caused everything to collapse
savings and loans system and caused regulatory changes
that liberalized their activities. Nowadays the SLAs
Americans can invest their resources in a wide variety
of assets. Savings banks have evolved and have
incorporated into the banking systems of the markets
developed.
This evolution, and the capital requirements it poses
growth of the boxes makes it questionable that in countries
developed, many boxes still do not issue shares to
public. Its control by political entities (communities,
municipalities, etc.) in many cases is excessive, and goes in
to the detriment of their own boxes. That same political junction
allows many boxes to have guarantees for state-owned
that allow them to obtain cheaper resources than banks
what they compete with.
These are some of the fundamental challenges that have to
resolve the European boxes to finish fitting in their
respective banking systems, on equal terms
with commercial banks.

Investment banking: This activity is carried out by companies.

of Values and Stock Exchange in the most developed markets and
define the term investment banking by assimilation with the
investment banking. These Securities Firms (that
they are traditionally called 'investment banks' in English
they are specialized in placing debt issues or
actions among the public, acquiring them firmly from the issuer to
a 'wholesale' price and then distributing them at prices
retailer.
In addition to focusing on the placement of securities issues,
Investment banks offer their clients advice.
in financial strategies and in mergers and acquisitions. These
services fall under the definition of corporate banking.
Investment banks also actively trade for
own account and that of their clients in foreign currencies and in all types of
securities, promissory notes, bills, bonds, obligations, stocks
derivatives, etc. Some of the major investment banks
Americans (Merrill Lynch, Salomon Smith, Barney, etc.) are
members of the exchanges and they also have private clients who
they attend through special offices.
Thus, they "close the circle" by satisfying the demand for new
values that originate from their office networks with emissions of
its corporate clients, and when using their tables of
hiring to buy and sell securities both to individuals
like institutions. Commercial banking and banking of
investment are the main actors in the markets
financial and as their scope of operations increases
are becoming direct competitors. For example,
commercial banks are competing today with the banks of
investment in the placement of fixed income securities emissions
and in the acquisition of individual and corporate clients.
All banks are both competitors and customers of each other.
banks. Just as happens with commercial banks, the
investment banks with higher capital can maintain
greater inventories of values and offer more products to their
clients. As we have already said, investment banking
international is still dominated by American houses,
although the major German, Dutch, and Swiss banks have done
presence from the 90s, upon practically acquiring
all the top-tier London investment banks. In the
commercial banking leadership is much more found
distributed.

Central banks: They are the banking houses of category

superior that authorizes the operation of entities
credit operations are supervised and controlled. The Central Bank is the
monetary authority par excellence in any country that
it has developed its financial system. It is an institution
almost always state that has the function and the obligation to
direct the government's monetary policy.
Private banking and personal banking: This sector of activity
banking is the least of the five and the fastest
growth. The terms personal banking and private banking
are usually applied to the range of banking services aimed at
high net worth individual clients, and that
they usually include the assignment of an advisor, or manager,
especially dedicated to the client. This advisor establishes the
investment profile of your client, and presents investments that
fit into it while keeping track
continuation of the portfolio.
The growth of the population of wealthy individuals (it is estimated
that there are about 6 million people with a wealth
financial above one million dollars in the world has
fostered the growth of private banking, in many
cases like branches or divisions of commercial banking. In
In general, the takeoff of private banking took place in
the end of the 80s, although the Swiss banking, dean
from private banking and Anglo-Saxon 'trust banks', also
ancestors of private banking have existed for a long time
years.
Personal banks and private banks offer to their
clients services and products aimed at ensuring
long-term returns with tax advantages. These four
different types of financial entities compete to attract
individual investors, and each of these classes of
entities offer advantages and disadvantages, which the investor
you should weigh when selecting the bank to trust your money.
Besides the five different types of banks that we have
related, in recent years insurance companies have
began to compete for investors' money,
offering through banks and financial entities
life insurance contracts whose investments are selected
the insured party themselves, who can give purchasing instructions and
sale of investment funds to the insurer for their
contract. In these cases, the money legally belongs to the
insurance company until the insured rescues their
contract, and insurance companies in Spain and many
countries have a favorable tax treatment in what regards
refers to the investments on behalf of its policyholders.
In Spain specifically, those investments enjoy a
100 percent exemption, with which the insured can
liquidate any investment from your contract without fear of
taxes on the profits made. The insured only
they pay taxes when they rescue the contracts and recover their
initial investment, more or less, the results of your management,
Well, the insurance company is not responsible for them. The
module 12 analyzes this investment alternative in detail,
commonly known as 'unit linked' (from English, which
unit-linked life insurance
life insurance combined with investment funds