Banking: Credit Intermediation Through Depository Institutions

Commercial banks are the key type of financial intermediary in any economy. They are central to the functioning of the economic system in contrast to many other financial businesses which are of lesser centrality. Most commercial banks have a retail and a wholesale banking operation. In their retail operations as high street or main street banks, they offer deposit, lending and money transfer services (cheques, debit card, e-transfers) to households and to small and medium sized enterprises (SMEs). Included under loans would be consumer loans, mortgage loans, credit card loans and business development loans. The retail part of a commercial bank may have some thousands of branch offices. The wholesale part, on the other hand, is likely to be a single office on Wall Street (in the case of the US), in the City of London (the UK financial district), in Shanghai (in the case of mainland China) or Hong Kong. The wholesale part is likely to be involved in large scale lending, including cross-border lending, normally as part of a lending syndicate with other banks.