Final answer:
Depository institutions consist of commercial banks, savings and loan associations, and credit unions. Commercial banks serve businesses and individuals with various accounts and services, while thrifts traditionally focus on real estate lending. Credit unions are member-owned institutions offering competitive rates and personalized services, with all types protected by the FDIC.
Step-by-step explanation:
Types of Depository Institutions
Depository institutions are financial entities where people can deposit their money for safekeeping. The three main types of depository institutions are: commercial banks, savings and loan associations (thrifts), and credit unions.
Commercial banks were some of the earliest financial institutions established to assist businesses by facilitating financial transactions through the issuance of checks and payment processing. They offer deposit accounts, loans, and various financial services to individuals and businesses. Over time, these institutions began providing checking accounts or demand deposit accounts for individuals, enabling them to write checks and access funds without prior approval from the bank.
Savings and loan associations, often referred to as thrifts, traditionally focused on accepting deposits and making housing-related loans. Due to historical regulations, savings and loans have been limited in the interest rates they could offer on deposits and were required to allocate most of their lending to the housing market. Today, they still largely emphasize on real estate financing but also offer similar banking services as commercial banks.
Credit Unions are not-for-profit institutions owned by their members, who are also clients. These institutions prioritize servicing their members often with better interest rates and lower fees than their for-profit counterparts. Credit Unions are also known for providing personalized customer service and community involvement.
Each type of institution operates under different structures and regulations, but they offer similar financial products such as checking accounts, savings accounts, and loans. They also purchase insurance from the Federal Deposit Insurance Corporation (FDIC) to protect depositors against bank failures, up to a specified limit.