Commercial bank liabilities usually include several types of nondeposit sources of funds, while

their loans are broader in range, including consumer, commercial, and real estate loans.
Commercial banking activity is also regulated separately from the activities of savings
institutions and credit unions. Within the banking industry the structure and composition of
assets and liabilities also vary significantly across banks of different asset sizes. For example,
small banks make proportionately fewer commercial and industrial (C&I) loans and more real
estate loans than do big banks.

smaller or community banks under $1 billion in asset size—tend to specialize in retail or

consumer banking, such as providing residential mortgages and consumer loans and accessing
the local deposit base. Clearly, this group of banks is decreasing in both number and importance.

The relative asset share of the largest banks (over $1 billion in assets), on the other hand,
increased from 63.4 percent in 1984 to 87.6 percent in 2007. The majority of banks in the two
largest size classes are often either regional or superregional banks.They engage in a more
complete array of wholesale commercial banking activities, encompassing consumer and
residential lending as well as commercial and industrial lending (C&I loans), both regionally and
nationally. In addition, the big banks access markets for purchased funds—such as the interbank
or federal funds market to finance their lending and investment activities.

The bigger banks tend to fund themselves in national markets and lend to larger corporations.
This means that their spreads (i.e., the difference between lending and deposit rates) in the
past (the mid-1990s) often were narrower than those of smaller regional banks, which were more
sheltered from competition in highly localized markets. As a result, the largest banks’ return on
assets (ROA) was below that of smaller banks (see T able 2–4) . However, as the barriers to
interstate competition and expansion in banking have fallen in recent years and as large banks
have focused more on off-balance-sheet activities to generate income (see below), the largest
banks’ ROAs as well as returns on equity (ROEs) have outperformed those of the smallest banks,

Small banks focus more on relationship banking, often basing decisions on personal knowledge
of customers’ creditworthiness and an understanding of business conditions in the communities
they serve.
Community Bank BD Ltd.
Real
Estat
e
1% Indus
tries
34%

Othe Cons
Trade
rs umer
&
64% s
Com
1%
merc
e
1%

Janata Bank
Real
Estat
e
10% Indu
stry
36%
Oth
ers
30%
Cons
Trad ume
e & rs
Com 0%
mer
ce
23%

Simanto Bank Ltd.

Industr
Others y
Real 18% Agricult
18%
Estate ure
0% 0%

Consum
ers
64%