What Is The Difference Between Investment Bank And Commercial Bank?

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    Investment Bank and Commercial Bank are two distinct type of banks performing different set of functions for different set of people in the banking industry. Now, let us understand how they both differ based on service they provide. 

    Investment Bank

    An Investment Bank provides services to corporates, HNI's and large firms. The major services provided by investment banks is helping companies issuing initial public offerings(IPO) and help businesses raise funds such as underwriting share issues and promoting sales of shares. Investment banks deal mainly with complex derivatives product. Click to know What Does Investment Banking In India Mean?

    Difference Between Investment Bank And Commercial Bank

    Investment banks also offer services in major business activities like mergers, acquisitions, and IPOs. They are also responsible for the investments of hedge funds, mutual funds, investment groups, and pension funds.

    Investment banks have a higher risk tolerance due to their process and the relative less regulation imposed.

    Some of the largest investment banks include, Goldman Sachs, Morgan Stanley etc

    Commercial Bank

    Commercial banks offer services directly to individuals and other entities. The main services provided by a retail bank is accepting deposits, providing loans, maintaining savings accounts, but they do not deal with securities trading.

    Commercial banks earn income from fees charged and interest that is charged on the principal loan amount. Commercial banks are much less tolerant of risk as most of them are common investors with medium risk aversion.

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