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

The banking sector is highly regulated because of its importance to the economy.

The banking sector is highly regulated because of its importance to the economy.

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. 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.

Banking System

The term "bank" seems interchangeable today given that there are credit unions, commercial banks and savings banks, which are also called savings & loans. Banks make loans to consumers for mortgages, cars, personal loans and credit cards. Banks also make loans to businesses and government agencies. Banks operate under a federal charter, a state charter or both.

Commercial Banks

Commercial banks and savings & loans both provide banking and loan products to consumers. However, there are differences. Commercial banks, also called national banks, tend to place a greater emphasis on business customers than S&Ls, underwriting 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.

Savings & Loans

A savings & loan focuses mainly on mortgages and other kinds of consumer loans. By law, savings and loans are mandated to have at least 70 percent of their assets in 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

Another difference between commercial banks and S&Ls 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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