What is commercial bank and central bank?
Commercial bank is an institution which accepts deposits, makes business loans, and offers related services. Commercial banks also allow for a variety of deposit accounts, such as checking, savings, and time deposit. These institutions are run to make a profit and owned by a group of individuals, yet some may be members of the Federal Reserve System. While commercial banks offer services to individuals, they are primarily concerned with receiving deposits and lending to businesses.
Central bank is the generic name given to a country’s primary monetary authority, such as the Federal Reserve System in the U.S. Usually has responsibility for issuing currency, administering monetary policy, holding member banks’ deposits, and facilitating the bank of bank.
the fee it is adjusted with the aid of the significant financial organization, such because of the fact the Federal Reserve, is the fee used in the pass of money between advertisement banks and that significant financial organization. whilst it is adjusted, advertisement banks will regulate their fees for this reason. to illustrate, a advertisement financial organization could lend money at 5% excessive cost (cost set with the aid of the significant financial organization). If the significant financial organization will enhance the top cost from shall we say 2.5% to 3%, then the financial financial organization might develop its interest cost from 7.5% to eight% so as that they nevertheless get the comparable proportion of interest on money lended to its clientèle. Thats how banks make salary, from expenses and interest.