(a) FUNCTIONS OF COMMERCIAL BANKS
(i) They make loans available to individuals, organisations and governments.
(ii) They provide advisory services to corporate institutions and investors about mergers, re-organisations and project financing.
(iii) They act as brokers, issuers and dealer of negotiable certificates, selling their shares to members of the public.
(iv) They lease costly equipment for the duration of its life to user companies.
(v) They offer foreign exchange transactions involving letters of credit.
(vi) They provide pension fund management to corporate customers.
(vii) They finance and advise on real estate agricultural, industrial and related projects.
(viii) They accept deposits from their customers.
(ix) They accept and discount bills for customers, thereby making much fund available for their business activities.
(x) They make payments on behalf of their customers.
(xi) They provide e-banking services as a convenient means of payments.
(xii) They provide safe custody services for valuable items such as wills and certificates
(b) WAYS THE CENTRAL BANK CONTROLS COMMERCIAL BANKS
i. Special Directives;
ii. Regulating the Bank rate
iii. Open Market Operation
iv. Liquidity Ratio
v. Special deposit
vi. Moral suasion/persuasion.
(i) Special Directives: The central bank issues specific instructions to the commercial banks for lending and saving policies, e.g. commercial banks may be directed to convert their short-term loans to long-term or medium-term-loans, especially in a depressing economy.
(ii) Regulating the Bank rate: When the Central Bank raises the bank rates, it signifies a reduction in loans granted by commercial banks while a fall in the bank rates encourages the commercial banks to give more loans.
(iii) Open Market Operation: Central Bank uses treasury bills which it sells to commercial banks when cash flow is to be restricted and purchase them when cash-flow is to be enhanced.
(iv) Liquidity Ration: Central bank requires commercial banks to maintain certain proportion or ratio of deposit in liquid form to control their propensity to lend.
(v) Special deposit: This is the additional deposit which the central bank requires commercial banks to keep with it from time to time to influence the level of their loanable funds.
(vi) Moral suasion/persuasion: This is an appeal by the central bank to commercial banks to adhere to directives on government monetary policies.