Who participates in the market
Banks: commercial and investment
4 min
Banks are the workhorses of the financial system — the institutions most people interact with first. Not all banks do the same job.
Commercial banks
A commercial bank serves the general public and businesses. Its classic role is financial intermediation:
- It takes deposits from savers.
- It lends that money out as loans, mortgages and credit lines.
- It earns the spread — the difference between the interest it pays depositors and the higher interest it charges borrowers.
Commercial banks also run the payment system most people use every day: accounts, cards, transfers (in Brazil, instruments like Pix and TED). Because they hold the public's deposits, they are among the most heavily supervised institutions, watched closely by the central bank.
Investment banks
An investment bank serves companies, governments and large investors rather than the everyday public. Its work includes:
- Underwriting new securities — helping a company issue shares (an IPO) or bonds.
- Advising on mergers, acquisitions and large financings.
- Trading securities and managing risk for institutional clients.
Why the distinction matters
Commercial banking is about deposits and loans; investment banking is about capital markets and advisory. Many large groups do both under one brand, but the functions are different — and understanding which hat a bank is wearing tells you whose interests it is serving in a given deal.
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