Banks play a crucial role as financial intermediaries, distinguishing between central banks and commercial banks. Bank operations involve managing funds, processing transactions, and providing various financial services.
Banks as Financial Intermediaries: Banks act as intermediaries between savers and borrowers, facilitating the flow of funds from those with excess capital to those in need of funds for investments or consumption. They play a crucial role in the economy by providing various financial services such as savings and checking accounts, loans, and investments.
Central Banks vs. Commercial Banks: Central banks, like the Federal Reserve System, focus on macroeconomic objectives such as controlling inflation and interest rates, regulating the money supply, and overseeing the banking system. In contrast, commercial banks serve individuals and businesses, offering everyday banking services and financial products.
Bank Operations: Banks keep records, process transactions, manage deposits, and provide lending services to customers. They handle check clearings, money transfers between banks, and ensure the security of customers' funds through mechanisms like safe deposit vaults.
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