Bank is a commercial institution which performs various financial activities, e.g. accepting and handling of deposits of its customers. It is a body of persons who carry on the business of banking. Banks are institutions that create money and give out loans to people. In a summary, a bank is a place where money and other valuables like will, jewellery etc. are kept.


Origin of Banking

Banking had its origin with the goldsmiths in London in the seventeenth century. The goldsmith had facilities for storing valuables, therefore, they accepted money and other valuables from merchants for safekeeping.

The first banking function was accepting deposits of cash from merchants who had no safe place to keep their money. The goldsmith at first demanded a charge for looking after their money. The second stage came when receipts for these deposits began to be used as means of payment by merchants. This made the early bankers to issue bank notes of fixed denominations which were more generally acceptable.

The next stage in the development of the banking system was the development of money lending to customers with interest charged on it. This provided a profitable business, hence bankers began to offer the inducement of interest to encourage merchants and others to increase their deposits.

In recent times, banks have introduced more sophisticated systems of banking into the industry.



  1. Commercial Bank.
  2. Central Bank.
  3. Merchant Bank.
  4. Savings Bank.
  5. Development Bank.



Commercial banks are financial institutions which accept deposits and other valuables from the public for safekeeping with the sole aim of making profit. They are owned by private individuals, institutions or governments. Commercial banks are limited liability companies.


Some examples of Commercial Banks in Nigeria are United Bank for Africa (UBA) Plc, Polaris Bank Plc, Union Bank of Nigeria (UBA) Plc, Guaranty Trust Bank Plc, Sterling Bank Plc, First Bank of Nigeria Plc, Zenith Bank Plc, Access Bank Plc, Ecobank Plc, etc.


Characteristics of Commercial Bank

  1. Commercial bank is a limited liability company.
  2. The motive for its establishment is profit making.
  3. They are members of the money market.
  4. Commercial banks are incorporated.
  5. They accept deposits and other valuables.


Functions of Commercial Banks

  1. Accepting Deposit: Commercial banks accept deposits from the public for safekeeping. This is the oldest function of banks which helps in taking care of people’s money. Money can be kept in current, fixed and savings accounts.
  2. Lending to Customers: This is perhaps the most profitable function of a commercial bank. Deposits from different customers are pooled together and given out as loans with interest to people and firms for profitable investment.
  3. Agent of Payment: Commercial banks can act as agent of payment on behalf of their customers. They encourage and permit customers to have current account in which they can draw without notice by cheque. Money can also be transferred from one account to another, e.g. credit transfer.
  4. Safekeeping of Valuables: One of the functions of commercial banks is to keep customers’ valuables such as jewellery, certificates, will etc.
  5. Discounting Bill of Exchange: Creditors can be paid by the bank immediately by discounting bill of exchange for their customers. This enables the creditor to be paid instantly, and the debtor is allowed a period of credit.
  6. Issuance of Bank Statement: At regular intervals, the bank will prepare and send bank statements to their customers to show their transactions with them.
  7. Investment and Stock Exchange Transaction: Banks act as agents for their customers in the purchase or sale of securities, e.g. share in the stock exchange.
  8. Issuance of Travellers Cheque: Travellers cheques are often issued to those travelling overseas in order to facilitate their commercial transactions.
  9. Foreign Exchange Transaction: Commercial banks make foreign currencies available to their customers. They participate in foreign exchange market and help in solving any problem relating to foreign exchange.
  10. Provide Financial Advice: Commercial banks encourage and advise businessmen on the type of project they should invest their money in.
  11. Facilitate International Trade: Commercial banks provide credits to exporters, and this facilitates payment in foreign trade.
  12. Act as Executor for their Customers: Commercial banks can act in the capacity to execute the will of its customers.

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