Primary Functions:
- Investment Bank: Focuses on assisting companies and governments in raising capital, either by issuing securities in the capital markets or providing advisory services for mergers, acquisitions, and other major corporate actions.
- Commercial Bank: Primarily deals with deposits and loans for individuals and businesses. When you open a commercial bank account or apply for a commercial bank loan, it’s typically with a commercial bank.
Clientele:
- Investment Bank: Their clients are corporations, institutional investors, and governments.
- Commercial Bank: Serves a broad clientele, including individual consumers, small businesses, and large corporations.
Services:
- Investment Bank: Services include underwriting, mergers and acquisitions advisory, asset management, and proprietary trading.
- Commercial Bank: Offers services like accepting deposits, granting loans, mobile banking features, and other traditional banking services.
Revenue Generation:
- Investment Bank: Earns primarily from fees for their advisory services, trading commissions, and investment profits.
- Commercial Bank: Earns interest from loans, mortgages, and fees for various banking services.
Regulatory Environment:
- Investment Bank: Generally subject to different regulatory guidelines focused on securities trading and corporate finance activities.
- Commercial Bank: Comes under stringent regulatory scrutiny, especially concerning the safety of deposited funds and the integrity of their lending practices.