What Is the Difference Between a Money Center Bank and a Traditional Bank?


Quick Answer

The main difference between an ordinary bank and a Money Center is that a Money Center doesn't offer banking services to individual costumers, dealing only with larger transactions for regular banks, governments and large corporations. They work on a much larger scale than regular banks.

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Full Answer

Also known as Money Markets, these banks are very important parts of national and international financial systems. They tend to be located in the major economic centers of the world, such as New York, London, Tokyo and Hong Kong. They are considered a form of wholesale banking, while traditional banks are at a retail level. Examples of Money Center banks are Citibank, J P Morgan Chase, Wells Fargo and Bank of America.

While traditional banks focus on making deposits, writing checks and dealing with small loans, Money Markets deal mostly with other activities, such as trading, distribution, and corporate finance. Trading is the traditional strategy of making loans at a slight markup in order to generate profits on the long term, in a way similar to ordinary banks but on a much larger scale. Distribution is related to the bank selling its own securities, such as treasuries, agencies and other money market paper. Corporate finance consists of assisting the client in obtaining the funds they need in exchange for a monetary reward.

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