In modern practice the distinction between the investment of deposits and the lending of the bank's credit is not drawn. The term deposits is applied indifferently to credit balances originating in deposits of money or to those having their origin in the discounting of notes, and may, therefore, be defined as the aggregate amounts standing to the credit of customers on the bank's books. This is the meaning of the term as used in bank accounts, and it must not, therefore, be assumed that a bank has actually received money to the amount represented by the figures standing opposite the word deposits. The term discounts has also acquired a technical meaning, and is applied to the aggregate of the mercantile securities maturing in short periods of time owned by the bank, as well as to the mathematical process described under that head in our arithmetics. Indeed, the terms discounts and loans are used synonymously in bank parlance, and are employed indifferently in their accounts to designate the securities above mentioned.

The terms discount and deposit may also be considered as generally descriptive of the processes which are technically called banking. Whatever other functions an institution may perform, the discounting of mercantile securities and the keeping of book-accounts with customers, to be used in the manner above indicated, are necessary to constitute it a bank in the modern sense of that term. The issue of notes is a process of essentially the same nature as the keeping of book-accounts, and may or may not be connected with it. The keeping of savings, though to a certain extent necessarily involved in the other functions, need not be a special branch of the business, and the safe-keeping of securities may be entirely omitted or reduced to a minimum. The performance of other functions, such as the conduct of foreign exchanges, the purchase and sale of bullion, the exchange of coins, the making of loans on special classes of securities, like stocks or bonds or farm mortgages, may or may not be added, and their presence or absence usually depends upon the peculiar needs of the locality in which the bank is located. Essentially, then, a bank is an institution which trades its own credit for money and interest-bearing securities, and the explanation and reason for its existence must be sought in the mutual advantages of this trade.