The banking industry has changed dramatically in the past century. The expansive list of services that banks offer now, including loans, bonds, mutual funds, ATMs, and more, results in increased competition for customer loyalty. Banks are required to meet a certain number of regulations and requirements to maintain their banking licenses. The Federal Reserve System, the organization that regulates and monitors regional banks, is the Federal Reserve Board that has imposed new regulations on banks designed to protect consumers from unknown banking services and products thus promoting safety.


What to Look for in a Bank
There are two basic types of banks: Savings banks and commercial banks. There is a third type of bank known as a credit union. Credit unions are not chartered by the Federal Reserve but rather by the state government and are more localized than commercial banks. (credit union) To learn what to look for when selecting a bank, it is essential to understand the differences between savings banks, commercial banks, and credit unions.

Savings Banks
A savings bank is also known as a mutual savings bank. Customers of savings banks are shareholders or member-owners of the bank. Shareholders can elect the board of directors and serve as directors themselves. Savings banks earn income from interest paid on deposits and fees for services such as safe deposit boxes, overdrafts, and loans. They are governed by the Office of Thrift Supervision the organization that regulates and monitors regional savings banks rather than the Federal Reserve Board. The amount of regulations savings banks must meet to maintain their licenses is extensive. (savings bank)

 
Commercial Banks
Commercial banks are chartered by the Federal Reserve and subject to federal regulations at the national level as well as regulations from state and local banking authorities. Commercial banks accept deposits from customers and make loans. They earn income from interest on loans and fees for services, including safe deposit boxes, overdrafts, and debit cards. The Federal Reserve Board governs commercial banks. (commercial bank)
Commercial banks are subject to extensive regulations. They are required to maintain reserve accounts with the Federal Reserve System. These reserve accounts hold cash that one can use to make loans or pay depositors when they want their money back. They must meet a minimum net worth requirement based on a standardized formula that determines how much they can lend out based on their assets.
In a velocity bank, consider the money flow from the client to the client during the day. If all transactions co-occur, it is called a net. The bank must pay out the net at the end of each business day. It can be difficult, especially in a system that is dependent on all transactions taking place at the same time. To maintain reliability, the velocity bank must shift funds between accounts according to a preplanned formula that considers when deposits arrive and when customers pay them back.


With the many financial services banks offer, consumers need to understand what to look for when choosing a bank. So make sure you consider these things if you are looking for a new bank: investment options and yield, interest rates and fees, safe deposit boxes, debit cards, and loan options. It is also essential to understand the differences between savings banks, commercial banks, and credit unions.