Functions of banks

Banks have an important function in society. Banks function is to provide and mediate credit. Commercial banks collect savings and spread its risk by having multiple people to lend to.

Banks is also responsible for the expansion of credit in the economy by lending collected savings, the same money are lent several times.

Banks must obtain permission to be able conduct its business and they are under the supervision of a authority. Commercial banks are able to borrow money from the central bank.