Commercial bank

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Commercial banks and financial institutions differ from investment banks in earning most of their income from lending from their pool of deposits rather than by charging investment-service fees on brokerage and underwriting. Because a commercial bank is required to hold only a fraction of its deposits as reserves, it can use some of the money on deposit to extend loans. When a borrower receives a loan, his checking account is credited with the amount of the loan; total demand deposits are thus increased until the loan is repaid. As a group, then, commercial banks are able to expand or contract the money supply by creating new demand deposits.

Most commercial-bank loans are short-term to their mostly business customers, to whom they offer additional business-based banking services.

Some commercial banks may be members of the Federal Reserve System.

In 2011, Fortune Magazine ranked Bank of America Corp. as the top U.S. bank by revenue, followed by JPMorgan Chase & Co., Citigroup, Wells Fargo, Goldman Sachs, Morgan Stanley and American Express.