What is Thrift Bank?
A thrift bank, also known as a savings and loan association, is a form of a financial institution that provides basic banking services by offering a variety of savings options and mortgage loan services and just like commercial banks these too qualify as a depository institution and may even provide a range of other products and services.
Earlier thrift bank was confined to offering time deposits and savings accounts but with the change in customer behavior, preferences, needs and expectations, these banks started offering various types of products and services that are offered by both commercial banking firms and credit unions.
Functions
- These banks are financial institutions that function for the purpose of relieving the monopoly stress and offering their account holders with facilities like savings accounts, mortgage loans, etc. The functions are to accept deposits and offering mortgage loans to their customers.
- The interest on the savings deposited by the customers in the bank is high whereas the interest on the mortgage loan availed by the customers is relatively lower as compared to commercial banks and credit unions.
- The thrift banks are formed with the purpose of offering their customers with mortgage loan facilities and enabling them to make savings from time to time. It also focuses on relieving the mortgage and lending market from a monopoly of domestic or foreign banking institutions.
- These banks also function to offer mortgages at lower cost and savings accounts that pay a higher rate of interest in comparison to national and international banking institutions. These banks function in the best interest of the local people and for this reason, they offer savings accounts and mortgage loans that could benefit the locals.
Types
The types are provided and discussed below:
- Savings Bank- These types of banks generate funds from the sale of saving deposits to the customers and investing the same in offering mortgage loans.
- Private Development Bank- These types of banks are formed for supporting government policies.
- Stock Savings and Loan Associations- It is a locally or privately managed financial banking institution that takes long term deposits into use for providing amortized home loans.
Examples of Thrift Bank
There are various banks that are operating as thrifts. A few of them are mentioned below:
- Allied Savings Bank
- City Savings Bank
- Business and Consumers Bank (A Dev’t. Bank)
- Citystate Savings Bank, Inc
- Bank One Savings and Trust Corporation
- Legazpi Savings Bank, Inc.
- Luzon Development Bank
- Dumaguete City Development Bank
- EIB Savings Bank, Inc.
- LBC Development Bank
- Lemery Savings and Loan Bank, Inc.
- Cordillera Savings Bank, Inc.
- Sampaguita Savings Bank, Inc.
- GSIS Family Bank
- Liberty Savings Bank Inc.
- BDO Elite Savings Bank, Inc.
- Inter-Asia Development Bank
- ISLA Bank, Inc.
- Life Savings Bank, Inc.
Thrift Bank vs Commercial Bank
Thrift banks and commercial banks are totally different from one another even though the former now offers a similar line of services to that of commercial banking institutions and credit unions.
#1 – Commercial Banks
- Commercial banks are profit-oriented that is they operate mainly for the purpose of earning profits and it is not mandatory for these banks to maintain asset class.
- Commercial banking institutions are mostly owned by the shareholders and as a result of this reason, these banks function with an objective to earn more and more profits so that they can successfully maximize the wealth of their shareholders.
- The state and federal law determines the powers of commercial banks.
- Commercial banks operate under the FRS (Federal Reserve System) and such banking institutions procure deposit insurance from FDIC (Federal Deposit Insurance Corporation).
#2 – Thrift Bank
- Thrift banks are such types of banking institutions that are way different from commercial banks when it comes to goals and objectives and similar only in the case of offering products and services.
- Thrift banks, unlike commercial banks, are not profit-oriented. It is mandatory for the thrifts to be a member of the FHLBS (Federal Home Loan Bank System).
- It emphasizes more on assets that are related to housing and unlike commercial banks these offer loans at a lower interest rate and offers higher returns on savings to its customers.
- These banks are not profit-oriented rather these are local people-oriented. These banks function with the purpose of assisting the local people with savings and loan facilities and ensure that the monopoly of the national and foreign banking institutions does not impact the economy.
- They are mutually owned. These are either owned by depositories or stockholders.
Conclusion
Thrifts bank can also be called as a saving and mortgage loan associations. These are often termed as a type of savings bank that offers specialized services in the real estate sector. It offers savings accounts facilities and home mortgage loan facilities to local people. These are mutually owned as some of them are owned by the stockholders while the others are held by their depositors.
These banks offer their customers a higher level of liquidity with respect to mortgage loans and also provide a higher yield for savings accounts. Thrifts initially offered facilities like time deposits and savings accounts but with the expansion of banking services and the change in customers’ expectations and requirements, these banks too started offering a similar line of products as compared to commercial banks and credit unions.
Thrift banks function with the purpose of benefiting the local people and for this reason, it offers them high returns on their deposits and charges low interest on the mortgage loans. These banks must not be confused with commercial banking institutions. The types are savings bank, private development bank, and stock savings and loan associations.
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