Commercial banks in the 21st century have grown to become complex, multi-layered financial organizations. At the top of the list are the mega-banks like Bank of America, CitiGroup, Wells Fargo, and JPMorgan Chase & Co. Below the top-tier banks in the world’s financial centers are regional banks with offices in several states, and below the regionals are the smallest banks—community banks serving customers in their local community.
According to Statista.com, the largest banks in the United States (by number of employees) as of December 31, 2018 were:
- Wells Fargo: 230,338 employees
- JPMorgan Chase Bank: 194,680 employees
- Citibank: 163,581 employees
- Bank of America: 136,502 employees
- U.S. Bank: 72,144 employees
- PNC Bank: 52,319 employees
- The Bank of New York Mellon: 40,742 employees
- Branch Banking and Trust Company: 33,401 employees
- State Street Bank and Trust Company: 33,004 employees
- Capital One: 27,679 employees
Looking at the organizational structure in a bank, most have a holding company structure. The holding company is basically a shell corporation that issues common stock, the bank’s equity capital, financing the bank’s activities. The bank’s equity capital is also a financial cushion against any write-offs from bad loans or investments.
The biggest commercial banks are owned by financial holding companies, a structure allowing them to take on, in addition to a bank’s traditional deposit taking and lending activities, a broad range of closely related functions like securities underwriting and trading, insurance agency and underwriting, and merchant banking. In the years since the 2008 financial crisis a growing number of regional banks have also switched to become financial holding companies, essentially to take advantage of the added flexibility and greater range of services they can offer as financial holding companies.
The typical organizational structure in a commercial bank is the following: a financial holding company (or bank holding company) at the top of the pyramid; below the holding company is the bank itself; finally, the bank may own subsidiary companies involved in credit card lending, commercial finance, and equipment leasing and so forth. Financial holding companies have the ability to take on a more expansive menu of activities, such as securities and commodities trading or real estate leasing.
As a result of deregulation, commercial banks have become more like investment banks and investment banks more like commercial banks. This transformation came about through enabling legislation, the Financial Modernization Act (also called the Gramm-Leach-Bliley Act) of 1999, which gave the legal okay for commercial banks to affiliate with investment banks and insurance companies. Financial holding companies are supervised by the Federal Reserve, the federal agency overseeing activities of bank holding companies and banking subsidiary companies. Non-bank subsidiaries are subject to functional regulation. For example, the Securities and Exchange Commission oversees a baking company’s broker-dealer subsidiary. By regulation, a financial holding company must have at least 85 percent of its assets in financial services; they have to divest all non-financial services within 10 years of the date they switch to a financial holding company. According to the Federal Financial Institutions Examination Council, the largest U.S. bank holding companies as of March 31, 2019, with total assets (billions of U.S.$), were:
- JPMorgan Chase & Company ($2,737 billion)
- Bank of America Corporation ($2,377 billion)
- Citigroup Incorporated ($1,958 billion)
- Wells Fargo & Company ($1,887 billion)
- Goldman Sachs Group, Incorporated ($925 billion)
The top 15 largest banks in the United States now hold a combined total of $13.7 trillion in assets, according to BankRate.com.
Departments in a Commercial Bank
Commercial banks hire both front office workers, who work directly with customers, and back office workers who perform internal duties that support the overall operation of the bank. Customer contact is a high priority in banking. About two-thirds of occupations in the industry are front-office positions servicing customers in branch offices, opening accounts, or originating loans.These workers are employed in a variety of departments, which vary by the size and type of bank. A large bank such as Bank of America has the following departments:
- Accounting/Finance
- Administrative/Clerical
- Credit/Lending
- Customer Service
- Enterprise Services/Facilities Management
- Human Resources
- Information Technology
- Investment Banking & Markets
- Legal
- Marketing/Communications/Philanthropy
- Operations
- Personal Banking
- Project Management/Analysis
- Relationship Management
- Risk/Compliance/Audit
- Sales
FAQs
The typical organizational structure in a commercial bank is the following: a financial holding company (or bank holding company) at the top of the pyramid; below the holding company is the bank itself; finally, the bank may own subsidiary companies involved in credit card lending, commercial finance, and equipment ...
What is the hierarchy of a commercial bank? ›
They are of, broadly, two categories – Scheduled and Non-Scheduled. While there is no major Non-Schedule Commercial Bank in India, there are various types of Scheduled Commercial Banks viz – Public Sector Banks (PSBs), Private Sector Indian Banks, Private Sector Foreign Banks, and Regional Rural Banks (RRBs).
What is the asset structure of a commercial bank? ›
The bank's assets include cash; investments or securities; loans and advances made to customers of all kinds, though primarily to corporations (including term loans and mortgages); and, finally, the bank's premises, furniture, and fittings.
What is the structure of a commercial banks balance sheet? ›
The document discusses general principles of bank management including: - The bank balance sheet lists assets and liabilities, with total assets equaling total liabilities plus capital. - Banks manage liquidity, asset risk, liability costs, and capital adequacy.
What falls under commercial banking? ›
Commercial banking is a type of banking that serves government agencies, businesses, and institutions like colleges and universities. These banks provide a variety of services to these institutions, including checking and savings accounts, lines of credit, and payment processing.
What is commercial bank capital structure? ›
Capital structure of commercial banks measured by Total Debt to Total Asset ratio with the concept that financing decisions through both the deposit and non-deposit liabilities of banks have impact on banks profitability.
What is the organizational chart of a bank? ›
A bank organizational chart is a diagram, visualizing the ownership structure of a finance bank. It is an active directory that improves employees' communication. Plus, it helps the governor's managing committee to monitor the bank's internal framework. The visual interface of the chart can vary with the detail in it.
What are the hierarchy levels in banking? ›
Junior Management – Scale I (Officer) Middle Management – Scale II (Manager) & Scale III (Senior Manager) Senior Management – Scale IV (Chief Manager) & Scale V (Assistant General Manager) Top Management – Scale VI (Deputy General Manager) & Scale VII (General Manager)
What is 4 tier hierarchy of the banking structure? ›
The correct option is A. It recommended the introduction of a four tier banking system in the country: I tier: 3 or 4 International Banks; II tier: 8 to 10 National Banks; III tier Regional Banks; and IV tier: Rural Banks. The Narasimham Committee (1991) on financial reforms proposed for esta...
What is the business model of a commercial bank? ›
Commercial banks provide services for businesses, government agencies, and institutions like colleges and universitiesm to help them grow and profit. They make money mainly by loaning money to businesses and earning back interest and fees from these loans.
Loans, advances, and bills discounted or purchased: The primary element of financial assets and the primary source of income for commercial banks are loans, advances, and subsidized or acquired bills.
What is the largest asset category for a commercial bank? ›
Loans comprise the single largest asset category for a bank. Banks have an average total debt ratio of about 90%. On average, bank liabilities tend to have shorter maturities and greater liquidity than bank assets. Nontransaction deposits at banks include NOW accounts and demand deposits.
What are the liquid assets of a commercial bank? ›
Examples of liquid assets may include cash, cash equivalents, money market accounts, marketable securities, short-term bonds, or accounts receivable.
What does commercial bank consist of? ›
What is Commercial bank? A commercial bank is a financial institution that provides services like loans, certificates of deposits, savings bank accounts bank overdrafts, etc. to its customers. These institutions make money by lending loans to individuals and earning interest on loans.
What is the financial structure of a bank? ›
Financial structure refers to the mix of debt and equity that a company uses to finance its operations. It can also be known as capital structure. Private and public companies use the same framework for developing their financial structure but there are several differences between the two.
What is structuring in the banking industry? ›
Structuring, also known as smurfing in banking jargon, is the practice of executing financial transactions such as making bank deposits in a specific pattern, calculated to avoid triggering financial institutions to file reports required by law, such as the United States' Bank Secrecy Act (BSA) and Internal Revenue ...
What is the structure of merchant banking industry? ›
Private Sectors merchant banking firms have come up either as sole proprietorship, partnership, private limited or public limited companies.
What is a banking structure? ›
The banking structure refers to the organization and hierarchy of the banking industry within a country or region. It involves the different types of banks and financial institutions, their roles, functions, and how they are regulated.
