The term 'banking' can be applied to a large range of financial institutions, from savings and loans organizations to the large money-centre commercial banks in the USA, or from the smallest building society to the big four clearing banks in the UK. Many European countries have large regional/cooperative banks. In Japan, the bank with the largest retail network is Sakura, but its main rival is the Post Office.

The provision of deposit and loan products is what normally distinguished banks from other types of financial firms. The deposit products pay out money on demand or after some notice. Additionally, banks are in the business of managing liabilities. In the process they lend money, thereby creating bank assets which must also be managed. Thus, one core activity of banks is to act as intermediaries between depositors and borrowers.

The second core activity of banks is to offer liquidity to their customers. Depositors and borrowers have different liquidity preferences. Typically, firms in the business sector want to borrow funds and repay them in line with the expected returns of an investment project, which may not be realized for several years after the investment. By lending funds, savers are agreeing to forgo present consumption in favour of consumption at some date in the future. However, unexpected events may cause either party to change their mind. By pooling a large number of savers and borrowers, banks can meet the liquidity requirements of both parties.

Particularly important, and separate from private banks, are central banks, government institutions responsible for monetary control, prudential control and/or government debt control. There is at time of writing considerable debate over the degree of independence from government that should be given to central banks.