A function that the commercial bank shares with a number of other financial institutions in that of accumulation and investing savings funds. The savings process takes place when a holder of money elects to defer spending it for current consumption until some' funture.date. The saver exchanges his money for a claim on money subject to varying but specific conditions. These claims on money range in liquidity from savings deposits and savings and loan share accounts, which are normally payable virtually on demand, through securites of various maturities, to equities with no fixed payment'date, the liquidity of which depends upon their marketability.
Through the savings process, purchasing power is diverted from current consumption into the market for capital goods. As savings are invested in plant and equipment, in homes, or, through government, in schools, roads, and exploration of space, the productive capacity and therefore the real wealth of the economy are increased. In this vital process, commercial banks play two roles: they themselves help to channel savings into productive uses and, through their short-term lending, they supplement or provide liquidity to other savings institutions and investment media.
