What Is the Difference Between a Commercial Bank and a Savings & Loan Bank?

If you want to store your cash, you can stuff it into your mattress or, like most people, keep it in a bank. Banks are highly regulated and your deposits are insured, which means you generally don't have to worry about ending up penniless if your bank goes under.

Savings Bank Vs Commercial Bank: Key Differences

There are commercial banks and savings banks. The primary difference is the way each is regulated, which determines the type of banking products they offer. The term "bank" seems interchangeable today given that there are commercial banks and savings banks, which are also called savings & loans. Commercial banks and savings and loans issue loans to consumers for mortgages, cars, personal loans and credit cards. Both commercial banks and S&Ls also make loans to businesses and government agencies. These institutions operate under a federal charter, a state charter or both.

Commercial banks and S&Ls both provide banking and loan products to consumers. However, there are major differences. Commercial banks, also called national banks, tend to focus on business customers. These customers are seeking billions of dollars in loans for construction projects, expansion plans, acquisitions and other events. Many of their clients are large corporations and governments. A number of commercial banks also offer investment banking services. Also, a key difference between savings banks and credit unions is that credit unions are not for profit financial cooperatives, but they offer the same types of banking products found at all other financial institutions.

An S&L focuses mainly on mortgages and other kinds of consumer loans. A question often asked is, saving and loan institutions put about 70 percent of their money into which of the following: Stocks? Bonds? Actually, it's residential mortgages or mortgage-backed securities, which are assets backed by residential mortgages. You can still deposit your money in an S&L, but you would not be able to apply for a business loan such as a commercial line of credit.

Regulation of S&Ls

Something else to consider in savings bank vs commercial bank is which federal agency regulates them. The Office of Thrift Supervision is the primary regulator for S&Ls. Its main job is to ensure the financial soundness of S&Ls. An S&L also falls under the supervision and regulation of its chartering state. For example, the Mississippi Department of Banking and Consumer Finance supervises institutions, persons, firms, corporations and associations that furnish financial services to the people of Mississippi, You would't want to put your money in a bank where your deposits aren't safe, so all S&Ls are also insured by the Federal Deposit Insurance Corporation, of FDIC. It's the federal agency that insures your deposits up to $250,000.

Regulation of Commercial Banks

The Office of the Comptroller of the Currency, a bureau within the Treasury Department, is the primary regulator for commercial banks. A federally-chartered commercial bank must belong to the Federal Reserve System, placing it under the regulation and supervision of the Federal Reserve. All commercial banks are FDIC-insured. Like an S&L, a commercial bank is also regulated and supervised by state banking authority where it accepts deposits.

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