How is a commercial bank different from a savings and loan association?
What will be an ideal response?
A commercial bank differs from a savings and loan association primarily in the type of loans each is allowed to make. Savings and loan associations were originally established to act as lending institutions for home buyers. Thus, most of their assets were mortgages. Commercial banks, on the other hand, dealt with business loans and short-term consumer and installment loans. Banks were allowed to have checking accounts whereas S&Ls were not. Today, the difference between the two institutions is blurred as S&Ls offer check able deposits and make short-term consumer loans. They still exist primarily to make home mortgage loans. Commercial banks are still the major source of business short-term borrowed funds and offer commercial checking accounts. While banks do make some long-term home loans, they are still primarily associated with business lending and short-term consumer loans.
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