The Different Types of Banks are:
Clearing Banks
A clearing bank is probably the most well known type of bank in the UK as these are the banks that provide customers with bank acounts and transact the day to day banking operations that most of the population take advantage of.
Officially a clearing bank is a bank that is a member of the London Bankers Clearing House and has the facilities and authority to clear cheques for its customers. Relaxation of banking regulations have also allowed clearing banks to transact in other ways including Debit and Credit cards, savings acounts as well as ATM cards and lending services.
The big 5 UK high street banks are all classed as clearing banks although they have separate arms of their businesses that can also be classified into the other banking type classifications.
Merchant Banks
Merchant banks are actually the original commercial banks as they were created in the middle ages by grain merchants in Italy. Their purpose was to provide finance and insurance to farmers and international traders allowing them to obtain the finances to grow and transport their produce based on the selling price to the end user or trader.
Today merchant banks have diversified somewhat from these early days, but their activities still remain within the boundaries of the original definition.
Merchant banks generally do not provide public bank acounts instead providing facilities of finance and insurance to businesses. In the UK merchant banks are also called acceptance or issuing houses and in the US they are called investment banks.
Other Financial Institutions
There are a raft of other financial institutions and these include Building societies, Mutual societies, insurance companies and private lending companies. All of which are regulated and each serves a purpose providing a particular service.
It is interesting to note that when the banking regulations were relaxed by the government in the late 20th century it allowed Clearing banks to provide many services that were traditionally only available from building societies, specifically the facility to end money for property purchases. This change in the law opened that gates to a number of mergers as well as a number of building societies changing themselves to banks.
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