Which statement about banks is true?

Which statement about banks is true?

• A. A financial institution licensed as a receiver of deposits; there are two types: commercial/retail banks and investment banks; regulated by the national government or central bank
• B. A credit union
• C. An insurer
• D. A brokerage firm that trades only stocks

Answer: (A)

Banks are financial institutions licensed to receive deposits and make loans, and they operate under oversight by the government or a central bank to keep the financial system safe and protect depositors. The statement captures this idea by calling banks deposit-taking institutions that are regulated by national authorities or central banks. It also divides the banking world into two broad kinds—commercial/retail banks that serve everyday customers and businesses, and investment banks that work in capital markets—highlighting the main functions you’d expect to see in the sector. This deposit-taking role and regulatory supervision differentiate banks from other financial firms like credit unions, insurers, and brokerages, which do not operate as banks in the same sense.

Banks are financial institutions licensed to receive deposits and make loans, and they operate under oversight by the government or a central bank to keep the financial system safe and protect depositors. The statement captures this idea by calling banks deposit-taking institutions that are regulated by national authorities or central banks. It also divides the banking world into two broad kinds—commercial/retail banks that serve everyday customers and businesses, and investment banks that work in capital markets—highlighting the main functions you’d expect to see in the sector. This deposit-taking role and regulatory supervision differentiate banks from other financial firms like credit unions, insurers, and brokerages, which do not operate as banks in the same sense.