Why are there so many different types of banks?

Not all banks are exactly the same. There are commercial banks, savings banks, savings and loan
associations (S&Ls), cooperative banks, and credit unions.

Today they offer many of the same services, but at one time, they were very different from one another.

Commercial banks originally concentrated on meeting the needs of businesses. They served
as places where a business could safely deposit its funds or borrow money when necessary.

Many commercial banks also made loans and offered accounts to individuals, but they put most
of their effort into serving business (commercial) customers.

Savings banks,S&Ls,cooperative banks, and credit unions are classified as thrift institu-tions or “thrifts,” rather than banks. Originally, they concentrated on serving people whose
banking needs were ignored or unmet by commercial banks.

The first savings banks were founded in the early 1800s to give blue-collar
workers, clerks, and domestic workers a secure place to save for a “rainy day.” They were started by public-spirited citizens who wanted to encourage efforts at saving among people who did not earn
much money.

Savings and loan associations and cooperative banks were established during the 1800s
to help factory workers and other wage earners become homeowners. S&Ls accepted savings
deposits and used the money to make loans to home buyers. Most of the loans went to people
who did not make enough money to be welcome at traditional banks.

Credit unions began as a 19th-century solution to the emergency needs of people who
were unable to borrow money from traditional lenders. Before the opening of credit unions,
ordinary citizens had no place to turn when they faced unexpected home repairs, medical
expenses, or other emergencies.

Credit unions were started by people who shared a common bond such as working in the same factory, belonging to the same house of worship, or farming
in the same community. Members pooled their savings and used the money to make small loans
to one another.

Although there are still differences between banks and thrifts, they now offer many of the same
banking services to their customers. Most commercial banks now compete to make car loans.
Many thrift institutions have begun to make commercial loans, and some credit unions make
loans to home buyers.

Credit unions were started by people who shared a common bond. Members pooled
their savings and used the money to make small loans to one another.

Source from : http://www.bos.frb.org