Which financial institution is funded largely by customer deposits and makes loans to other customers, including mortgages?

Which financial institution is funded largely by customer deposits and makes loans to other customers, including mortgages?

• A. Commercial Banks
• B. Credit Unions
• C. Insurance Companies
• D. Mutual Funds

Answer: (A)

Commercial banks are funded largely by customer deposits and use those funds to make loans to other customers, including mortgages. Deposits from individuals and businesses provide a stable source of funding, which the bank then lends out at higher interest rates, earning the difference as profit. While other institutions may also take deposits or provide loans, banks are most closely identified with this funding-and-lending model and with offering mortgage loans to households and firms.

Commercial banks are funded largely by customer deposits and use those funds to make loans to other customers, including mortgages. Deposits from individuals and businesses provide a stable source of funding, which the bank then lends out at higher interest rates, earning the difference as profit. While other institutions may also take deposits or provide loans, banks are most closely identified with this funding-and-lending model and with offering mortgage loans to households and firms.