Category: 

What Is a Joint Stock Commercial Bank?

Article Details
  • Written By: Helen Akers
  • Edited By: Jessica Seminara
  • Last Modified Date: 24 November 2016
  • Copyright Protected:
    2003-2016
    Conjecture Corporation
  • Print this Article
Free Widgets for your Site/Blog
The mongoose was introduced to Hawaii in order to kill rats, but mongooses hunt in the day, while rats are nocturnal.  more...

December 7 ,  1941 :  Japanese bombers attack Pearl Harbor.  more...

A joint stock commercial bank is owned by several different investors. These investors may be private companies located in foreign countries, governments, or individuals. Ownership is typically obtained through the purchase of bank stock or equity. Each investor owns a certain percentage of the bank's overall equity, which is a large enough amount to acquire substantial voting rights and influences the financial institution's strategic policies.

When several primary investors have a significant equity ownership in a financial institution it is considered a joint stock commercial bank. These banks often have large portions of their available equity or stock purchased by foreign investors. For example, a bank in China may have an investor from the United States that owns 20 percent of its stock and another investor from Japan that owns 15 percent. The remaining 65 percent may be owned by the bank's founders and common shareholders.

Ad

A key characteristic of a joint stock commercial bank is that it sells a certain amount of equity shares in exchange for ownership and strategic control. By purchasing equity, investors infuse capital into the bank and hope to get a return on their investment by ensuring that it turns a profit. The joint stock model means that several significant investors must partner with each other to formulate the bank's market strategy, future development, and customer policies. It is similar to the idea of a joint venture, where two major corporations partner to create a new company, product, or service, or to distribute a product in a foreign country.

Commercial banks are financial institutions that primarily deal with business clientele. These customers tend to maintain larger account deposits and take out loans that would qualify as a capital expense, which means that the loan's balance would usually be amortized or expensed over a period greater than one year. A joint stock commercial bank's primary investors tend to be large entities, such as corporations and government agencies.

Some countries that have government-controlled banks are moving towards a joint stock commercial bank system. This is largely because this type of banking system encourages free enterprise and loosens restrictions on the money supply. Tighter money supply control may shrink an economy's potential development and put restraints on the country's access to global resources. By opening up ownership and control to outside investors, a business bank can develop new market strengths and create employment opportunities for local citizens.

Ad

You might also Like

Recommended

Discuss this Article

Post your comments

Post Anonymously

Login

username
password
forgot password?

Register

username
password
confirm
email