Banks differ in the services they provide and in how they are owned.  Many financial experts use the word bank to refer only to a commercial bank.  These experts believe that savings banks, building societies, and credit unions are not true banks because they do not perform all the functions of commercial banks.  Savings banks, building societies, and credit unions are in business to encourage saving. 

Commercial banks are the most numerous banks.  They offer a full range of services, including current and savings accounts, loans, and trust services.  They primarily serve the needs of businesses but also offer their services to individuals. 

A commercial bank is owned by shareholders, who buy shares in it.  In return for investing in the bank, shareholders expect the bank to pay them cash dividends from its profits. 

Building societies, or savings and loan associations, were established to help people buy homes.  For many years, they have been the chief source of home mortgages.  Today, they offer current and savings accounts, and various other banking services. 

Savings banks were created in the early 1800's as charitable institutions to provide a safe place for poor working people to save for retirement.  Laws ensure the safety of depositors' money by limiting the investments such banks can make and by insuring the deposits.  Savings banks invest chiefly in mortgages and government bonds. 

Credit unions are usually formed by people with a common bond.  For example, they may work for the same company or belong to the same church.  The members pool their savings.  When one of them needs money, he or she may borrow from the credit union, often at a lower rate of interest than from another financial institution.  Credit unions are important in the United States and Canada. 

Investment banks, or merchant banks, provide long-term loans and capital to industry.  They also give advice to companies on such things as takeovers.  In the United States, such activities may not be carried out by commercial banks.  The first merchant banks were formed by British merchants in the 1800's. 

International banks and banking.  Much of the world's banking activity takes place between countries.  Such borrowing and lending increased during the 1980's.  Most transactions are between banks in industrial countries.  Many large banks have branches in several countries. 

Central banks in every country are first and foremost banker to the government.  They do not lend money to the general public.  They ensure that their government has the money to pay all its bills.  Central banks also manage the government's debt, which is built up in order to pay bills.  These banks also make sure that the government's monetary policy is carried out, usually by controlling the money supply.  The money supply is the total quantity of money in the country, including cash and deposits with banks and other financial institutions.  A central bank is usually responsible for the regulation of other banks and, sometimes, other financial institutions such as insurance companies. 

In all countries, the central bank receives as deposits all the government revenues and foreign reserves.  The government pays for all its public expenditure bills on central bank cheques.  For this service, the central bank charges the government a fee.  In its role as banker to the other banks, the central bank takes their deposits and gives them loans.  In this way it is able to influence the money supply.  If a bank is in difficulties because a lot of its customers suddenly decide to withdraw their deposits, the central bank will assist it with a loan. 

The central bank is responsible for the issuing of currency, and often for the design and printing of notes and the minting of coins.  It buys and sells foreign exchange in the foreign currency markets and may intervene to protect its country's own currency.  By changing interest rates, central banks also affect exchange rates