In 2000, Governor Gray Davis signed Senate Bill 2148 into law, thus transforming industrial loan companies into a new class of financial institutions termed “industrial banks.” These banks differ from commercial banks in that they may not accept demand deposits and, thus, their parent companies are exempt from the Bank Holding Company Act. Otherwise, industrial banks are subject to the same laws, regulations, and examinations as commercial banks.

Commercial Banks

A commercial bank is a type of financial institution that accepts deposits, while offering checking account services, loans, and offers basic financial products such as certificates of deposit (CDs) and savings accounts for individuals and small businesses. Most Californians do their banking at a commercial bank.

Commercial banks turn profits in the form of interest income from the interest-bearing loans that they offer customers. These loans typically include mortgage loans, automobile loans, personal loans, and business loans. Some commercial banks specialize in only a few types of loans.

Commercial banks derive capital from customer deposits through checking, savings, money market accounts, and certificates of deposit. Customers are paid interest for providing banks with the working capital necessary to make loans. Of course, the interest rate paid by banks on money borrowed from customers is less than the interest rate charged on money loaned to customers.

Industrial Banks

An industrial bank is a type of financial institution that offers only a limited range of services. Industrial banks accept customer deposits and sell certificates, also known as investment shares. Industrial banks then use the proceeds to make installment loans for consumers and small businesses. Industrial banks do not offer checking accounts.

Examples of industrial banks include the Industrial Bank of China, Industrial Bank of Iraq, and Industrial Bank of Korea. IN the U.S, industrial banks only exist in a few states, with the most presently in the state of Utah. In 2017, there were 29 industrial banks with combined assets of more than $120 billion in Utah.

Commercial Banks Industrial Banks
Commercial Banks provide financial facilities for commercial activities. Industrial Banks provide financial facilities for industrial or productive activities.
Commercial Banks provide short-term loans to meet working capital needs. Industrial Banks provide long-term loans to meet fixed capital needs.
Commercial Banks provide financing for repayment periods of short duration. Industrial Banks provide financing for longer repayment periods such as 15 or 20 years.
Commercial Banks provide agency and general utility services to their clients. Industrial Banks provide underwriting, promotional, and consultancy services to their clients.


The attorneys at Glass & Goldberg in California provide high quality, cost-effective legal services and advice for clients in all aspects of commercial compliance, business litigation, and transactional law. Call us at (818) 888-2220, send an email inquiry to or visit us online at to learn more about the firm and to sign up for future newsletters.

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