Commercial Bank Operations
LIKE OTHER BUSINESSES, BANKS ARE profit-maximizing firms—a fact you are probably reminded of whenever you get charged a fee or service charge. If you are at all like other depositors, you probably do not like paying fees for letting your bank use your money. Banks and other financial intermediaries are unique because their creditors are also their customers. Whenever you deposit money in your bank account, you are effectively lending money to your bank, so it is understandable that you would grumble over paying fees and service charges associated with your checking account. The purpose of this chapter is to explain bank operations. Hopefully, by the time you fnish reading this chapter, you will understand why your bank charges those fees and service charges. You probably still won't like the fees, but at least you will understand why the bank charges them.
This chapter lays the foundation for how commercial banks operate. ...