1.9 Banking, paying and finance Banks A bank is a financial institution that is authorised to receive deposits and make loans, charging an interest rate in order to earn a profit. Banks offer the financial support needed to business to be able to conduct their transactions. Types of banks The banking industry can be divided into different categories according to the products it offers and the people it serves. A provides basic banking services to ordinary people and small businesses. retail bank A or mainly serves businesses, supporting them in their daily operations. commercial corporate bank An simply provides financial consulting services, giving advice for investments and assisting in merger and acquisition processes. investment bank A is a non-profit organisation owned by its members which operates as a retail bank. It is similar to a cooperative bank, which belongs to its members who are also its customers. credit union An or operates entirely via the Internet and has no physical location. online virtual bank branch An operates in areas of reduced taxation such as , offering advantageous solutions to foreign clients. offshore bank tax havens A provides its services exclusively to very wealthy clients, helping them manage their fortune. private bank A operates together with the national postal system of a country and offers services similar to that of a retail bank. postal savings bank An acts according to ethical and moral principles and does not invest in businesses or activities which are anti-humanitarian or hazardous for the environment, preferring investments in social and environmentally friendly causes. ethical bank An follows the two main financial principles of Islamic law which are the sharing of profit and loss and the prohibition of collecting and paying interest. For these reasons, these banks make a profit by receiving a part of a company’s earnings (if any) on loans they have granted rather than by charging interest. Also, they do not invest in areas which are not approved of by the Shariah, for example or alcohol. Islamic bank gambling A is a country’s official bank (e.g. the Bank of England, the Bank of Italy, the Federal Reserve in the USA and the European Central Bank in the EU). It guarantees a stable monetary and financial policy in the country by controlling inflation and managing interest rates; it issues banknotes, coins and government , controls foreign exchange markets and gold reserves, and serves as a banker for other banks in times of crisis. central bank bonds