Investment and commercial banks serve unique functions in the financial ecosystem. Commercial banks are the go-to for everyday banking needs, offering services like loans, deposits, and foreign exchange. They cater to a wide range of clients from individuals to large corporations, providing tailored services such as retail, business, and corporate banking, along with wealth management. Investment banks, on the other hand, focus on serving a smaller, more specialized clientele, including corporations, institutional investors, and governments. They assist with raising capital, managing assets, and advising on mergers, acquisitions, and initial public offerings (IPOs). Their operations are divided into investment banking, sales and trading, and research divisions, each offering distinct services to support their clients' financial goals. The revenue models and risk tolerance of these banks differ significantly. Investment banks rely on fees from advisory services and transactions, making their income dependent on market activities and deal flows. Commercial banks earn mainly from interest on loans and deposits, leading to a more stable revenue stream. Additionally, commercial banks typically have a lower risk tolerance due to regulatory protections, whereas investment banks operate with higher risk tolerance, influenced by market volatilities.
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Understanding the Distinct Roles of Investment and Commercial Banks

Investment and commercial banks serve unique functions in the financial ecosystem. Commercial banks are the go-to for everyday banking needs, offering services like loans, deposits, and foreign exchange. They cater to a wide range of clients from individuals to large corporations, providing tailored services such as retail, business, and corporate banking, along with wealth management.

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