A bank is a financial institution that is based on financial intermediation, which consists of attracting savings, in the form of deposits, which are later used to finance the needs of economic operators, in the form of credit.
The main functions of banks are:
- Manage deposits, i.e., current or term accounts applied by customers;
- Make transactions, i.e., receipt and payment of checks, transfers between current accounts or payments and receipts;
- Grant credits to individuals, companies and the State;
- Conduct leasing and factoring operations;
- Issue guarantees and other commitments;
- Perform operations in the capital market through brokerage companies;
- To promote saving and investment for the economic development of the country;
- Provide consultancy, custody, administration and management of securities portfolio;
- Ensure the functioning of the payments system and promote its development and modernization;
- Provide foreign currency exchange service, including purchase and sale of notes, foreign currency or travelers checks;
- Provide safe deposit box hire, among other services.
Banks that lead business under these functions are designated "commercial banks" or "retail banks", since they have a network of branches distributed throughout the country and serve both private customers and companies. The financial intermediation activity can be exercised only by banks, according to the exclusivity principle guided by Law No. 13/2005 – Financial Institutions Law.
Usually, bank customers are divided into three distinct segments, namely, the public sector, the business sector and individuals, which allow banks to adjust its instruments and services to the specific needs of each segment.