Explain The Limitations Of Commercial Banks?


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Arianna Vaccaro answered
Commercial banks have many advantages as they control a large part of domestic savings in the USA and have a lot of power. At the same time however, there are also many limitations of commercial banks. These include the following examples:

  • It may be more difficult for a customer of a commercial bank to have a loan application approved. This is because the application will have to go through many different channels and signed by different personnel before it can be approved. This may make getting credit more difficult and could easily be very frustrating as the whole process is drawn out.
  • In the USA, all banks have to follow a set of rules and regulations set by the government authorities. Commercial banks are also able to create their own additional rules due to the sheer control and power they have within the economy. These additional standards are usually found in the loan application process which may be very difficult for many people attempting to get credit. 
  • When paying your savings into a commercial bank, there is a risk your money may not be insured. The US government created FDIC Insurance which guarantees up to $100,000 of your savings so insure against if the bank goes bust or if any other circumstances arise. Some commercial banks do not adhere to this insurance guarantee, meaning some customers have to take out their own personal insurance on their savings. 

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