A bank is an institution organized for the purpose of receiving deposits of money, making loans, discounting paper, making collections, and effecting the transmission of money from one place to another.
Banks are divided generally to five classes: Banks of deposit, of discount, of circulation, of exchange, and savings banks. Banks of deposit receive money to keep for the depositor until he draws it out, by checks payable to himself or to others. Banks of discount are occupied in discounting promissory notes and bills of exchange, or in lending money on security. Banks of circulation issue bills or notes of their own, intended to be the circulating currency or medium of exchange, instead of gold and silver. The notes or bills of national banks are guaranteed by the government, which holds as security bonds belonging to the bank to a still larger amount than their issue of bills, or, as commonly termed, their "circulation." The government also retains a five per cent fund for immediate redemption. Banks of exchange receive money on deposit, and, instead of paying it back to the depositors, make payments by drafts on other banks. They keep money on deposit at the principal trade centers; thus money can be sent to different points at small expense and without risk. They charge one who desires to remit, a small amount for their services, and sell him their draft on the place to which the remittance is to be sent. Savings banks make a specialty of receiving for deposit relatively small sums of money, paying a small rate of interest thereon.
A bank may combine two or more functions of banks described above, being at the same time a bank of deposit and discount, etc. Savings banks are usually a department of a bank of circulation or exchange.