Answer ... Retail banks: Retail banks are structured to provide financial services to individuals and small businesses. The financial services that they offer include:
- savings and current accounts;
- loans;
- mortgages; and
- credit card facilities.
They have a large network of branches and automatic teller machines so that their services are easily accessible to customers.
Commercial banks: Commercial banks provide financial services to businesses, corporations and other large organisations. The services provided by commercial banks include:
- loans;
- lines of credit;
- cash management; and
- investment services.
They also provide services to retail customers; however, much of their focus is on the needs of larger organisations.
Investment banks: Investment banks are structured in a way that facilitates services in respect of the management of financial assets, such as underwriting, mergers and acquisitions, and securities trading. They also provide advisory services to clients in respect of investment opportunities and risk management.
Development banks: Development banks generally engage in development finance activities such as infrastructure projects, as well as assisting small and medium-sized enterprises.
Cooperative banks: Cooperative banks are owned and operated by their members, who are typically small business owners, farmers or consumers. The services provided by cooperative banks are quite similar to those of retail banks as referred to above, but cooperative banks focus on serving their members’ needs rather than maximising profits.
Mutual banks: Mutual banks in South Africa are structured similarly to other types of banks, with a few key differences. Unlike traditional banks, mutual banks are owned by their depositors, rather than by shareholders. Ownership in this type of bank is attained through opening an account with the bank and becoming a member. Mutual banks in South Africa are also subject to regulations and requirements set by the South African Reserve Bank (SARB), which oversees the country’s banking industry. These regulations are designed to ensure that mutual banks:
- operate in a safe and sound manner; and
- protect the interests of their customers.
This structure is created to promote transparency and accountability, with a keen focus on the customer, as opposed to shareholders.
Islamic banks: Islamic banks are conventional banks for Islamic customers but are not structured to provide fixed interest on loans and deposits, unlike conventional banks. The returns from Islamic bank activities are distributed through profit sharing, meaning that each client is considered a shareholder in the bank.