Money & Finance › Banks & credit
Commercial banks: taking deposits, making loans
· Institution or agency
Fact, law or dataA rule, statute, definition or measured number.
Banks that take deposits and make loans, earning the spread between the two.
See it on the Money & Finance map →How it works
A commercial bank takes deposits and makes loans: mortgages, business loans, credit lines and commercial real estate loans. It profits on the net interest margin, typically about 3 points between what loans earn and what deposits cost. The US has fewer than 4,500 FDIC-insured banks and savings institutions, down from about 18,000 in the mid-1980s. JPMorgan Chase is the largest, with more than $4 trillion in assets. Banks are the biggest lenders on commercial property.
Why it matters
They create most of the money people use, carry Fed rate moves through to borrowers, and are the main lenders to small businesses and property owners. FDIC insures up to $250,000 per depositor, per bank.
Think of it like
Like borrowing short to own long: deposits can leave any day while loans run for years. That mismatch is both the business and the risk.
Facts, rules and data
FDIC Quarterly Banking Profile and the quarterly call reports every insured bank files; Fed weekly data on bank assets and lending (H.8).
Debates and risks
Whether fintech apps, stablecoins and private credit funds will pull deposits and loans away from banks is a live question in 2026.
Inside this (10)
- Investment banks: underwriting, deals and trading
- FDIC deposit insurance (up to $250,000)
- Glass–Steagall Act (1933) and its 1999 repeal
- Dodd–Frank Act (2010)
- Consumer credit: credit cards, auto and student loans
- Mortgages and the 30-year fixed-rate loan
- Basel capital rules (Basel I, II, III)
- Community banks and credit unions
- Insurance companies: pooling risk and investing premiums
- Business loans: credit lines, C&I term loans, equipment and ABL
Connections (16)
▸Interest on reserve balances (IORB) is paid to Commercial banks: taking deposits, making loansFact, law or data
The connection
Banks hold reserve balances at their regional Reserve Bank, and the Fed pays IORB on them daily, so spare cash parked at the Fed earns a risk-free return. That sets the minimum a bank wants from other uses, such as loans or T-bills, and shapes what it pays depositors.
When and why
Paid to banks, thrifts and credit unions with Fed accounts since October 2008; reserves totaled about $3 trillion in 2025.
How we know
The Fed reports reserve balances weekly and its interest expense in audited annual financial statements.
Debates and risks
Critics say banks collected over $100 billion a year at the 2023 peak for doing nothing; supporters call it the cost of controlling rates with ample reserves.
▸Commercial banks: taking deposits, making loans operate on How banks create money: lending and fractional reservesFact, law or data
The connection
A bank's business model is fractional reserve banking: it keeps a slice of deposits as liquid reserves and makes loans that run for years at higher rates. Each new loan creates a matching deposit. The bank profits from the spread but must keep enough cash and capital to survive withdrawals and losses.
When and why
Practiced since Renaissance Italy and 1600s London goldsmiths; US reserve rules began in 1863 and were cut to zero in March 2020.
How we know
Bank balance sheets in FDIC call reports show loans far exceeding the cash and reserves on hand.
Debates and risks
Whether post-2008 liquidity rules are enough when deposits can leave in hours, as at Silicon Valley Bank, is debated.
▸Basel capital rules (Basel I, II, III) set capital minimums for Commercial banks: taking deposits, making loansFact, law or data
The connection
Capital is the owners' equity that absorbs losses before depositors are hurt. Basel rules, adopted by US regulators, require equity equal to a set share of risk-weighted assets: about 7% common equity plus extra for large banks. Riskier loans weigh more; many construction and development loans, classed as high-volatility CRE (HVCRE), carry 150%, so they need more capital.
When and why
Basel I in 1988, in force in the US by 1992; Basel III agreed in 2010 and phased in through 2019, all from the Basel Committee in Switzerland.
How we know
The published accords; US capital rules in the Code of Federal Regulations; banks' quarterly call reports show each bank's ratios.
Debates and risks
How much capital is enough is debated: economists Anat Admati and Martin Hellwig argue for far more equity; banks say more capital means less lending.
▸Community banks and credit unions compete with larger Commercial banks: taking deposits, making loansFact, law or data
The connection
Both take deposits and make loans in the same towns. Credit unions, tax-exempt and member-owned, often pay a little more on savings and charge less on auto loans. Big banks have scale and technology; community banks win on local knowledge. Bankers call the credit-union tax exemption unfair now that credit unions buy community banks outright.
When and why
Nationwide; federal credit union charters date from the Federal Credit Union Act of 1934, and credit-union purchases of banks picked up from the late 2010s.
How we know
FDIC and NCUA quarterly data on rates, deposits and market share; dueling studies from bankers' and credit unions' trade groups.
Debates and risks
Whether the tax exemption still fits credit unions as large as Navy Federal, with well over $150 billion in assets, is debated in Congress.
▸Commercial banks: taking deposits, making loans if national, are chartered by Office of the Comptroller of the Currency (OCC)Fact, law or data
The connection
A bank chooses its charter. A national bank, marked 'N.A.' in its name, is chartered and examined by the OCC; state banks are chartered by their state and examined by the Fed or the FDIC. National status lets a bank follow one federal rulebook and override some state laws.
When and why
Since 1863; today JPMorgan Chase Bank, Bank of America, Wells Fargo Bank and Citibank are all national banks among about 1,000 the OCC oversees.
How we know
The National Bank Act and OCC charter records; public bank-regulator databases list each bank's charter type and primary regulator.
Debates and risks
Critics say banks shop for the most lenient regulator by switching charters; how much state consumer law national banks can override remains disputed after the 2024 Cantero ruling.
▸Commercial banks: taking deposits, making loans must file reports under Bank Secrecy Act and anti-money-laundering rulesFact, law or data
The connection
Because nearly all money passes through bank accounts, the law makes banks the checkpoint. They verify customers' identities, keep records, file Currency Transaction Reports on cash over $10,000 and Suspicious Activity Reports on odd patterns, and train staff. Examiners test these programs, and failures bring fines, growth limits or criminal charges.
When and why
Every US bank and credit union since 1970, with expansions in 1986, 1992, 2001 and 2020. TD Bank pleaded guilty in 2024 and accepted a cap on its US assets.
How we know
Federal regulations at 31 CFR Chapter X, bank examiner manuals, and enforcement orders such as HSBC's $1.9 billion settlement in 2012 over laundering cartel money.
Debates and risks
Banks spend heavily on compliance, yet some argue most reports go unread. 'De-risking', closing accounts deemed risky, also cuts off some legitimate customers.
▸The yield curve: interest rates across maturities shapes the profit margin of Commercial banks: taking deposits, making loansMainstream view
The connection
Banks pay depositors short-term rates and lend at longer-term rates, so a steep curve, with long rates well above short ones, widens their margin. When the curve flattens or inverts, deposit costs climb toward loan yields, lending earns less, and credit tends to tighten.
When and why
Visible throughout US banking history; acute in 2022–24, when the curve stayed inverted for a record stretch.
How solid is the link?
Fed and FDIC research links net interest margins to the curve's slope, though banks hedge and reprice loans to soften the effect.
Debates and risks
The link is looser than often claimed: many loans float with short rates and deposit rates lag. How much the slope matters is debated.
▸Commercial banks: taking deposits, making loans hold the largest share of Commercial real estate loans: how income property is financedFact, law or data
The connection
Banks take deposits and lend them out, and property loans suit them: the building is collateral and the rents repay the loan. Banks held about 37%, roughly $1.9 trillion, of commercial and multifamily mortgage debt at end-2025 (MBA); counting construction and owner-occupied loans, bank CRE loans total about $3 trillion.
When and why
Across US commercial banks, with the heaviest exposure at community and regional banks rather than the biggest Wall Street firms.
How we know
MBA quarterly debt-outstanding reports, the Fed's weekly H.8 bank data, and the call reports each bank files with regulators.
Debates and risks
Data sources count CRE differently, so the bank share runs from under 40% to about half depending on whether owner-occupied and construction loans are included.
▸Bank balance-sheet loans from community and regional banks are made and held by Commercial banks: taking deposits, making loansFact, law or data
The connection
A bank funds the loan from deposits and keeps it as an asset, earning the gap between the loan rate and what it pays depositors. Because it keeps the risk, it judges the owner as well as the building, and it can modify the loan itself instead of asking bondholders.
When and why
At thousands of US community and regional banks, which make much of the lending on smaller suburban buildings.
How we know
Bank call reports list each bank's CRE loans; MBA data show banks as the largest holders of CRE mortgage debt.
Debates and risks
Whether deposits, which can flee fast as in 2023, are a stable base for 10-year property loans is debated.
▸Business loans: credit lines, C&I term loans, equipment and ABL are a core product of Commercial banks: taking deposits, making loansFact, law or data
The connection
Commercial banks make most business loans because they pair them with the borrower's deposit and cash-management accounts. The deposits help fund the loans and show the bank the firm's cash flow. Many banks require the operating account as a loan condition, so switching lenders often means moving the whole banking relationship.
When and why
US banks of all sizes; business lending has been a core bank activity for well over a century.
How we know
Fed H.8 data on bank C&I balances and FDIC call reports show the loans and deposits side by side.
Debates and risks
How much ground banks will lose to private credit and fintech lenders, which compete on speed but hold no deposits.
▸Interchange 'swipe' fees merchants pay on card sales are mostly paid to card-issuing Commercial banks: taking deposits, making loansFact, law or data
The connection
Interchange is revenue for the bank that issued the card, such as Chase, Capital One or Citi. It pays for rewards, fraud losses and the interest-free grace period, and it is a key profit source. Issuers under $10 billion in assets are exempt from the debit cap and earn roughly twice as much per debit swipe.
When and why
US card-issuing banks and credit unions; the debit cap took effect in October 2011.
How we know
Fed Regulation II data (exempt debit transactions averaged about 52 cents in 2023, versus about 22–24 cents for covered ones) and bank earnings reports.
Debates and risks
Whether a credit-card version of the cap, proposed in the Credit Card Competition Act, would lower prices or mostly cut rewards is debated.
▸Who may issue payment stablecoins, and who supervises them include subsidiaries of Commercial banks: taking deposits, making loansFact, law or data
The connection
Insured banks and credit unions may issue stablecoins through subsidiaries approved by their usual regulator. That lets banks compete with crypto firms and keep customers' money inside the bank's group. Several big banks prefer 'tokenized deposits', such as JPMorgan's JPMD, which remain bank deposits and can pay interest.
When and why
From 2025; large US banks discussed a joint stablecoin, while regional banks explored their own.
How we know
The act's text, the FDIC's and NCUA's proposed rules for subsidiaries, and banks' own announcements.
Debates and risks
Whether stablecoins pull deposits from banks, especially community banks that use them to fund local loans.
▸Petrodollar recycling: oil surpluses lent back to the world flowed through big Western Commercial banks: taking deposits, making loansFact, law or data
The connection
OPEC governments deposited billions with Citibank, Chase, Bank of America and big London banks. With deposits piling up, the banks lent heavily to Latin American and other developing governments. When US rates soared after 1979, borrowers could not pay, and Mexico's 1982 crisis left several major banks facing dangerous losses.
When and why
1974–1982, New York and London, led by bankers such as Citibank's Walter Wriston.
How we know
Bank regulatory records, IMF studies and histories of the 1980s debt crisis.
Debates and risks
How close the big US banks came to insolvency; regulators allowed slow write-downs until the 1989 Brady Plan.
▸Commercial banks: taking deposits, making loans issue and pay Commercial letters of credit (UCP 600) and confirmed LCsFact, law or data
The connection
The importer's bank issues the credit as a loan-like exposure: it checks the importer's credit, often requires a credit line or cash collateral, and charges fees. Other banks advise, confirm or pay. Regulators treat the promise as an off-balance-sheet commitment that needs capital, though less than a loan.
When and why
Large trade banks such as HSBC, Citi, JPMorgan, Standard Chartered and Korea's Hana Bank are leading issuers; many US community banks issue domestic standbys.
How we know
Bank call reports listing letters of credit outstanding, Basel capital rules, and ICC Banking Commission trade surveys.
Debates and risks
Whether rising capital and compliance costs push banks out of trade finance for small firms and poorer countries.
▸Documentary collections: banks swap shipping papers for payment are handled, without a guarantee, by Commercial banks: taking deposits, making loansFact, law or data
The connection
Collections are a low-risk fee business for banks: they act only as agents, following the exporter's instructions on when to release documents. Under URC 522, banks have no duty to pay, inspect the goods or chase the buyer. That keeps fees low but leaves the exporter's credit risk unprotected.
When and why
In the trade departments of commercial banks worldwide, including US regional banks serving importers around Los Angeles.
How we know
URC 522 articles on bank duties and liability, and banks' collection service terms.
Debates and risks
When banks are liable for releasing documents by mistake; disputes turn on the exact instructions and local law.
▸CHIPS: the big banks' private dollar wire system is owned, through The Clearing House, by big Commercial banks: taking deposits, making loansFact, law or data
The connection
CHIPS belongs to The Clearing House Payments Company, owned by about two dozen of the largest commercial banks. Those banks and big foreign banks with New York branches are its participants. Owning the network lets them clear dollar payments at low liquidity cost, and the same owners run the RTP network.
When and why
The New York Clearing House Association dates to 1853; CHIPS launched in 1970.
How we know
The Clearing House's ownership disclosures and the Financial Stability Oversight Council's 2012 systemic designation.
Debates and risks
Whether bank ownership of key payment networks favors big banks over small ones, an argument raised in the debate over FedNow.