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Central Bank vs. Commercial Bank: What's the Difference?

Edited by Sara Rehman || By Sawaira Riaz || Published on December 6, 2023
A central bank is a nation's primary monetary authority, while a commercial bank offers banking services to the public and businesses.

Key Differences

A central bank acts as the primary monetary authority in a country, responsible for monetary policy and stability, issuing currency, and regulating the money supply. In contrast, a commercial bank is a financial institution that offers a range of banking services to individuals and businesses, including deposit accounts, loans, and other financial services.
Sawaira Riaz
Dec 06, 2023
Central banks are typically government-owned entities or institutions that operate under government mandate, playing a key role in a country's economic policy. Commercial banks, on the other hand, can be privately owned or publicly traded companies focusing on profitability and providing financial services to their customers.
Sawaira Riaz
Dec 06, 2023
The central bank's services include managing the country's currency, controlling inflation, and acting as a lender of last resort to other banks. While, commercial banks offer services like accepting deposits, granting loans, offering mortgages, and providing wealth management and investment services to the public and businesses.
Sara Rehman
Dec 06, 2023
The central bank also serves as a regulatory body, overseeing the banking system and ensuring financial stability and integrity. Whereas, commercial banks are subject to these regulations, adhering to the guidelines and requirements set by the central bank and other regulatory authorities.
Sawaira Riaz
Dec 06, 2023
The central bank influences the economy through policies like setting interest rates and reserve requirements for commercial banks. Commercial banks directly impact the economy by providing loans and credit, thereby influencing consumer spending and business investment.
Harlon Moss
Dec 06, 2023
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Comparison Chart

Primary Function

National monetary policy and regulation
Providing banking services to public/businesses
Sawaira Riaz
Dec 06, 2023

Ownership

Generally government-owned or mandated
Privately owned or publicly traded
Sawaira Riaz
Dec 06, 2023

Key Services

Issuing currency, controlling money supply
Accepting deposits, granting loans
Sawaira Riaz
Dec 06, 2023

Regulatory Role

Regulatory authority for banking system
Regulated by central and other authorities
Aimie Carlson
Dec 06, 2023

Economic Impact

Sets monetary policy affecting the economy
Directly impacts consumer/business finance
Harlon Moss
Dec 06, 2023
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Central Bank and Commercial Bank Definitions

Central Bank

Provides funds to banks in financial distress.
As a lender of last resort, the central bank played a crucial role during the financial meltdown.
Sawaira Riaz
Nov 24, 2023

Commercial Bank

Accepts deposits and extends loans to individuals and businesses.
Many people rely on their commercial bank for home mortgages and personal loans.
Sawaira Riaz
Nov 24, 2023

Central Bank

The official authority for issuing and managing the country’s currency.
The central bank introduced new currency notes last year.
Sawaira Riaz
Nov 24, 2023

Commercial Bank

Provides credit facilities like credit cards and overdrafts.
I got my first credit card from my local commercial bank.
Sawaira Riaz
Nov 24, 2023

Central Bank

The primary institution responsible for monetary policy and financial stability.
The central bank adjusted interest rates to control inflation.
Sara Rehman
Nov 24, 2023

Commercial Bank

Contributes to economic growth by lending to businesses and consumers.
The commercial bank's loan program helped small businesses grow.
Janet White
Nov 24, 2023

Central Bank

Acts as a bank to other banks, providing financial services to the government and banking sector.
The central bank provided emergency funds to commercial banks during the crisis.
Sawaira Riaz
Nov 24, 2023

Commercial Bank

Offers banking services to the public and businesses.
The commercial bank opened a new branch downtown to serve more customers.
Sawaira Riaz
Nov 24, 2023

Central Bank

Regulates and supervises the national banking and financial system.
The central bank implemented new regulations to enhance financial stability.
Aimie Carlson
Nov 24, 2023

Commercial Bank

Offers investment and wealth management services.
The commercial bank advised me on my investment portfolio.
Sara Rehman
Nov 24, 2023

FAQs

How do central banks influence the economy?

Through policies like setting interest rates and controlling money supply.
Sawaira Riaz
Dec 06, 2023

Are commercial banks regulated by central banks?

Yes, they operate under regulations set by the central bank and other financial authorities.
Aimie Carlson
Dec 06, 2023

What does a commercial bank do?

Offers banking services like accepting deposits, granting loans, and providing investment services.
Sara Rehman
Dec 06, 2023

What is a central bank?

A nation's primary monetary authority, responsible for monetary policy and financial stability.
Sawaira Riaz
Dec 06, 2023

How do commercial banks make profits?

Mainly through interest on loans and investments, and fees for services.
Janet White
Dec 06, 2023

What is the role of a central bank in a financial crisis?

Acts as a lender of last resort and implements policies to stabilize the economy.
Janet White
Dec 06, 2023

Can a central bank lend money to the government?

Yes, it can provide financial services to the government.
Janet White
Dec 06, 2023

Do commercial banks create money?

Yes, through lending activities and credit creation.
Harlon Moss
Dec 06, 2023

Is the central bank part of the government?

It's a government-mandated authority but often operates independently.
Harlon Moss
Dec 06, 2023

How does a central bank control inflation?

By adjusting interest rates and controlling the money supply.
Aimie Carlson
Dec 06, 2023

Do commercial banks issue currency?

No, that's the role of the central bank.
Sawaira Riaz
Dec 06, 2023

What kind of loans do commercial banks offer?

Various types, including personal, mortgage, and business loans.
Janet White
Dec 06, 2023

How does a central bank set interest rates?

Based on economic conditions, to control borrowing and spending.
Sawaira Riaz
Dec 06, 2023

What is the difference in the customer base of central and commercial banks?

Central banks deal with the government and financial institutions, while commercial banks serve the general public and businesses.
Sawaira Riaz
Dec 06, 2023

Can central banks go bankrupt?

It's highly unlikely due to their role and government backing.
Harlon Moss
Dec 06, 2023

Do commercial banks offer mortgages?

Yes, they are a key provider of mortgage loans.
Sawaira Riaz
Dec 06, 2023

Can commercial banks invest in securities?

Yes, they engage in various investment activities.
Harlon Moss
Dec 06, 2023

Can individuals open accounts in a central bank?

No, central banks do not offer services to the general public.
Sawaira Riaz
Dec 06, 2023

Are savings accounts offered by commercial banks?

Yes, they offer a range of deposit accounts including savings accounts.
Sawaira Riaz
Dec 06, 2023

What is quantitative easing by a central bank?

It's a monetary policy where the central bank buys securities to increase the money supply.
Harlon Moss
Dec 06, 2023
About Author
Written by
Sawaira Riaz
Sawaira is a dedicated content editor at difference.wiki, where she meticulously refines articles to ensure clarity and accuracy. With a keen eye for detail, she upholds the site's commitment to delivering insightful and precise content.
Edited by
Sara Rehman
Sara Rehman is a seasoned writer and editor with extensive experience at Difference Wiki. Holding a Master's degree in Information Technology, she combines her academic prowess with her passion for writing to deliver insightful and well-researched content.

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