Differentiating Between Types

of Financial Institutions
Whether you are financially comfortable or struggle to make ends meet, it
pays to know how various financial institutions differ and what role they
play in todays world. Here are some of the main categories you should
know:

The Central Bank

A central bank is an organization responsible for managing banking
activity. Many countries have central banks. In the US, the central bank
is the Federal Reserve, commonly known as 'the Fed'.

Their role of the central bank is similar from country to country, but the
objectives may differ. In the US, the central bank has three primary
goals:
Conduct monetary policy
Supervise and regulate financial firms
Provide financial services

Most consumers do not interact with the central bank. Instead, large
financial firms generally work with them.

Retail / Commercial Banks

A retail bank works with consumers.
A commercial bank is one that
works with businesses. However,
most banks today offer their
products and services to both
consumers and businesses and are
commonly referred to as
commercial banks. Commercial
banks provide basic banking
services to the general public,
including:
Interesting Fact
Checking and savings accounts
Certificates of Deposit Not all banks that have
Safe deposit boxes National in their name
Loans including Mortgages actually fit the profile of a
national bank! Some are
Credit cards actually community banks
Other related products and serve a very small
geographic area. Reason: It
There are approximately 7,000 commercial banks in the didnt used to be popular to
use the word community in
U.S. (2013 figure). Within the commercial banking a banks name.
world, there are different sizes and types of banks. They include:

National Banks These are the larger banks that have branches
and interests across the country. Their business models are
complex. The largest ones have become known as The Big Banks.
Among the 5 largest banks in the U.S. are Bank of America and
Wells Fargo.

Regional Banks Although the definition of a regional bank varies,

it is generally one that operates in one region of the country, such
as a state or within a group of states and is concerned with the
regional economy. Well known regional banks in Southern Virginia
include First Citizens and Carter Bank & Trust.

NOTE: Some banks such as BB&T and SunTrust were for years
considered regional banks but now are
often referred to as national banks.

Community Banks Community banks

are typically locally owned and operated.
They tend to focus on the needs of the
businesses and families where the bank
has branches. Lending decisions are
made by people who understand the
local needs of the families, businesses
and - because many serve smaller, rural
communities - farmers. Employees
usually reside within or near the
communities they serve. Benchmark is
a good example of a community bank.
Internet Banks Some banks these days do not have physical locations.
They serve customers strictly in the virtual world. Everything, including
opening accounts, is done online at these banks.

Savings & Loan Associations - Also known as thrifts, these are financial
institutions that specialize in savings type deposits, mortgages and other
loans. They can serve both consumers and businesses; however, by law,
thrifts can have no more than 20 percent of their lending in commercial
loans. They are often mutually held, meaning that the depositors and
borrowers are members with voting rights. The number of savings
and loans in the U.S. has fallen dramatically since the mid-1990s.

Credit Unions - Credit unions differ from banks and other financial
institutions in that those who have accounts in the credit union are its
members and actual owners. These member-owned financial cooperatives
are democratically controlled by its members, and operated for the
purpose of offering its members economical financial services.

Investment Banks - Unlike commercial banks, investment banks do not

take deposits. Their focus is assisting individuals, corporations, and
governments in raising capital by underwriting and/or acting as the
client's agent in the issuance of securities. An investment bank may also
assist companies involved in mergers and acquisitions.

Mutual Fund Companies Sometimes called investment companies,

these are companies that pool money from many investors to purchase
securities. Each fund invests in a different group of securities for the
investors. They serve the general public. If you own a 401 (k) or similar
account, you are probably served by a mutual fund company.

Brokerage firms Often simply called a brokerage, this is a financial

institution that facilitates the buying and selling of securities between
investors. They serve a clientele that trades public stocks and other
securities. The firm's agents, commonly called stockbrokers, research the
markets to provide appropriate recommendations.

Insurance Companies - These are corporate entities that insure people

against loss. The client pays a fee, known as a premium, in exchange for
the promise of the company to protect the client financially in the event of
certain potential misfortunes. The different types of insurance include life,
vehicle, health, liability and homeowners.
Mortgage Companies These are companies engaged in the business of
originating and/or funding mortgages for residential or commercial
property. A mortgage company is often just the originator of a mortgage;
they typically have access a network of lending institutions that provide
the capital for the mortgage itself.

Benchmark Community Bank tries to make the advice on its Financial Answer Center as useful and reliable as possible.
Information has been gleaned from a number of expert resources. However, the purpose of this advice section of the website is
to provide customers and visitors with general guidance and useful tips only. It doesn't necessarily deal with every important
topic or cover every aspect of the topics with which it deals and might not be relevant or appropriate in all circumstances. It is
not designed to provide professional advice and should not be relied on as such. If in any doubt, you should consult an
appropriately qualified expert for specific advice before acting on any of the information contained in the Answer Center.