What are the functions of commercial banks?

Commercial banks in modern economic activities play a major function: credit intermediation, payment intermediation, credit creation, financial services, regulating the economy and risk management six functions.

1. Credit IntermediationCredit intermediation is the most basic function of commercial banks that best reflects the characteristics of their business activities.

It is through the bank's liability business, the community's various idle business to the bank, and then through the asset business, to the sectors in need of funds.

Commercial banks act as intermediaries between those who have idle funds and those who are short of funds to realize the financing of funds.

Commercial banks play this credit intermediary function, acting as the role of merchants buying and selling "the right to use capital goods", in the process of earning the difference in the formation of the bank's profits.

However, what commercial banks buy and sell is not the ownership of capital goods, but the right to use them, so we call this buying and selling activity of commercial banks credit intermediation.

Playing the function of credit intermediation can make idle money into capital, make full use of idle capital, renew the short for the long, and satisfy the social need for long-term capital.

2. Payment intermediary

Payment intermediary refers to the commercial banks to use the demand deposit account, for customers to handle a variety of currency settlement, currency payment, currency exchange and transfer of deposits and other business activities.

Payment intermediation is the traditional function of commercial banks, with the help of this function, commercial banks have become the commercial and industrial enterprises, government, families and individuals of the currency custodian, cashier and paying agent.

The commercial bank is the center of the economic process, the formation of the beginning and end of the payment chain and debt relationship.

Payment intermediaries function well, can promote the expansion of bank deposits and loans business, so that the bank's credit intermediary function is given full play.

Payment intermediary function, so that commercial banks continue to have a relatively stable source of cheap funds, saving social circulation costs, increase production capital investment.

3. Credit creation

Commercial banks, on the basis of credit intermediation and payment intermediation, produce credit creation function.

Credit creation means that commercial banks take advantage of their favorable conditions of being able to absorb demand deposits and derive more deposits by granting loans or engaging in investment business, thus expanding the social money supply.

Commercial banks create and contract demand deposits through their own credit activities, which constitute a major part of the money supply, and thus commercial banks can circulate their liabilities as money with a credit creation function.

Because the credit creation function has a huge impact on the scale of social credit and money supply, commercial banks have become the focus of the monetary authority's supervision.

Credit creation through the creation of circulation tools and means of payment, can save cash use and circulation fees, but also to meet the needs of social and economic development of circulation and means of payment.

4. Financial services

Financial services is the commercial banks to use its special position in the national economic activities, in the process of providing credit intermediation and payment intermediation business to obtain a large amount of information, and then the use of the computer network and other technological means and tools, to provide other services for customers.

For example, it provides consulting services to enterprises and decision-making support services.

The development of production and circulation specialization of industrial and commercial enterprises requires that many of the original belonging to the enterprise's own monetary business to the bank to handle, such as payroll, agent to pay other expenses.

Personal consumption from the original simple money transactions, the development of the transfer settlement.

Modernized social life, from various aspects to the commercial banks put forward the requirements of financial services.

Under the pressure of strong business competition, the commercial banks also continue to develop service areas, through the development of financial services business, to further promote the expansion of asset-liability business, and asset-liability business and financial services combined to promote the "e-banking", "Internet banking The development of the "e-banking" and "internet banking" businesses has also been promoted.

In modern economic life, financial services have become an important function of commercial banks.

5. Regulating the economy

Regulating the economy means that commercial banks, through their credit intermediation activities, mediate the shortage of funds in various sectors of the society, and at the same time, under the guidance of the central bank's monetary policy and other national macro-policies, realize the adjustment of the economic structure, the ratio of consumption and investment, and the industrial structure.

In addition, commercial banks can also regulate the country's balance of payments through their financing activities in the international market.

6. Risk management

Commercial banks, by borrowing high-risk funds and issuing low-risk indirect securities to depositors, actually undertake the function of risk arbitrage in the financial market.

When a bank uses borrowed funds to make loans to others in need of funds, the bank in effect assumes the function of managing credit risk and market risk.

It is through the management of these risks that commercial banks generate their profits by obtaining a spread between deposits and loans.

Commercial banks have a wide range of functions, can significantly affect the entire socio-economic activities, in the entire financial system and even the national economy in a special and important position.

With the development of the market economy and the integrated development of the global economy, commercial banks in 2016 have highlighted the development trend of functional diversification.