Types of Banks: What Each One Actually Does

In the European Union (EU), only a credit institution may take deposits or other repayable funds from the public. Article 9 of the Capital Requirements Directive (CRD) bars everyone else from doing so. In the United States (US), the charter determines the regulator. That is why the types of banks you read about online are not interchangeable: some can take deposits and many cannot.

This guide covers the main types of banks, who authorizes each one, and which one a business needs if it wants to hold client money. It approaches the question as a licensing decision so you can match a business model to the right authorization.

What a bank is, legally

In EU law, a credit institution is an undertaking whose business is to take deposits or other repayable funds from the public and to grant credit. The definition is in Article 4(1)(1) of Regulation (EU) No 575/2013, the Capital Requirements Regulation (CRR), and Article 3(1) of Directive 2013/36/EU (the CRD) points back to it. Article 9 of the CRD prohibits any person or undertaking that is not a credit institution from taking deposits or other repayable funds from the public. Both texts are on EUR-Lex.

That prohibition is the legal reason an electronic money institution (EMI) is not a bank, and the rest of this guide builds on it.

Only a licensed credit institution can take deposits from the public. Everything else in the “bank” family is a different license doing a different job.

Central banks are a separate category. A central bank, such as the European Central Bank (ECB) or the Federal Reserve, sets monetary policy and oversees the system the other institutions work in. The Bank for International Settlements (BIS) is where central banks cooperate.

A bank is also different from a bank account. An account is a product a bank offers, and this guide is about the institutions, not the accounts. For accounts, see our page on a business bank account.

Many institutions marketed as banks are not deposit-taking credit institutions, and the sections below sort out which are which.

Types of banks compared

The table below compares the different types of banks by what they do, who authorizes them, and whether they can hold client money. Costs and timelines depend on the project, so the last column describes the route and gives no price.

These bank types overlap. A universal bank is also a commercial bank, for example. For a founder, the deposit and client funds columns do most of the sorting. Among the types of bank listed, only a licensed credit institution can take deposits from the public in the EU. Neobank, offshore bank, and sandbox bank are in the table because people search for those labels, but none of them is a charter type. This guide does not rate any jurisdiction or institution.

Bank types in the United States

In the US, the charter decides who regulates an institution. The Congressional Research Service (CRS) report R47014, An Analysis of Bank Charters and Selected Policy Issues, gives a clear map of charters and agencies.

Supervision follows the charter. According to the OCC’s Financial Institution Lists page, the OCC charters and regulates national banks, federal savings associations, and trust banks. The NCUA supervises federal credit unions and insures state credit unions. The FDIC supervises state non-member banks and state savings associations and insures deposits. The Federal Reserve Board supervises state-chartered member banks.

The Federal Financial Institutions Examination Council (FFIEC) Institution Types glossary is the authoritative US list. It groups institutions into commercial banks (national, non-member and state member), cooperative banks, covered savings associations, credit unions, Edge and Agreement corporations, Farm Credit System institutions, financial holding companies, industrial banks, non-depository trust companies, thrifts, and uninsured agencies of foreign banking organizations.

Industrial banks are FDIC-supervised and chartered in seven states: California, Colorado, Hawaii, Indiana, Minnesota, Nevada, and Utah. Per the FFIEC, they accept deposits as well as make loans, which separates them from commercial loan companies, and some do not offer demand deposit accounts.

A founder building a custody, payments, or token business can usually set credit unions, thrifts, and industrial banks aside. The charter that matters most for that founder is in the limited-purpose row.

National trust banks

A national trust bank is the type of bank that crypto and FinTech firms are getting right now. It is chartered under 12 U.S.C. 27(a) and restricted to trust company operations and activities related thereto. It is uninsured unless it separately holds insured deposits. Under OCC practice, trust companies are a bank type with special-purpose operations.

The OCC’s proposed National Bank Chartering rule (docket OCC-2025-0768) states that the OCC supervises approximately 60 national trust banks. Most are uninsured, and a few hold FDIC-insured deposits. Together, they hold nearly USD 2 trillion in assets in custody or safekeeping accounts. The rule adds that the OCC treats custody and safekeeping as generally non-fiduciary activity, authorized for national banks as part of the business of banking under 12 U.S.C. 24(Seventh).

On December 12, 2025, the OCC announced conditional approval of five national trust bank charter applications (News Release 2025-125). Two were de novo applications: First National Digital Currency Bank (Circle) and Ripple National Trust Bank. Three were conversions from state trust company to national trust bank: BitGo Bank & Trust, N.A., Fidelity Digital Assets, N.A., and Paxos Trust Company, N.A. The OCC noted that they join the approximately 60 national trust banks it already supervised.

Circle then received final OCC approval on July 10, 2026, to establish First National Digital Currency Bank, N.A., operating as Circle National Trust. On opening, it will offer fiduciary digital asset custody to Circle and its affiliates. Circle describes USD Coin (USDC) reserve management as a future capability. These details come from Circle’s press release and the OCC decision letter. For the wider stablecoin context, read our explainers on stablecoin regulation and the Guiding and Establishing National Innovation for U.S. Stablecoins Act, known as the GENIUS Act.

For a crypto client, fiduciary custody means a regulated trust institution holds digital assets for the client and has a duty to act in the client’s interest. A deposit is different: the bank owes the client a debt. Our guide to crypto custody covers what client-asset holding requires. For the full story of the approval, see Circle’s national trust bank approval.

Bank types in the European Union

In the EU, the baseline is the credit institution described above. It is the only type that can take deposits from the public. Authorization runs through the national competent authority, and the ECB decides on authorization for credit institutions in the euro area. Our guide to a banking license in Europe covers the route, and our coverage of Revolut’s French banking license is a worked example of a firm taking it.

Founders more often run into the non-bank alternatives. An EMI issues electronic money, and a payment institution provides payment services. Neither can take deposits, because CRD Article 9 reserves that activity to credit institutions. They can handle client funds for payment purposes, but those funds are not deposits. The e-money and payment services frameworks let a firm move and hold money for clients without becoming a credit institution. Requirements are on our pages for the EMI license and the payment institution license.

The United Kingdom is a third model, with its own authorization regime outside the EU framework. The Financial Conduct Authority (FCA) publishes the authorization routes for firms there, and it is worth reading them before assuming EU rules apply.

Neobanks and challengers are not a charter type

A neobank, or challenger bank, is a business model. It describes how a firm reaches customers, usually through an app, and says nothing about which license it holds. No regulator issues a neobank charter. Most neobanks operate as an EMI or payment institution partnered with a licensed bank, or sit inside a bank holding company structure.

Two neobanks can look identical in an app store and stand on different legal footings. One may be a credit institution that can take deposits. Another may be an EMI that cannot. Our coverage of Revolut’s French banking license is a factual example of a fintech on the credit institution route. The brand does not tell you the status, so check the license behind it. For the EMI route, read our EMI license page.

Types you can mostly ignore

Searchers expect credit unions, savings and loans, thrifts, co-operative banks and development banks in any list of the types of banks, so this guide covers them briefly. Credit unions are member-owned cooperatives, and co-operative banks follow the same logic. Savings and loan associations and thrifts can be mutual or shareholder-owned.

These differences are about ownership and who the institution serves. They do not change what a business can do with client money. A founder building a payments, custody, or token business is choosing between a bank charter, a trust charter, and a non-bank license, and ownership structure rarely enters into it. Development and multilateral banks are public-purpose lenders that a private business does not apply to become.

Islamic banks need one line. They are licensed under the same banking regulation as any other bank and follow Sharia governance principles, so the route is the ordinary bank route with an added governance layer.

Which type of bank does your business need

Match the activity to the authorization. The table shows the route to look at first, and the linked pages offer the detail.

General guides cannot quote costs or timelines, because they depend on the project, the jurisdiction, and the structure. We scope both in a consultation.

How LegalBison helps

LegalBison advises on licensing and entity structuring across the bank, EMI, payment institution, and trust routes. We help you decide which authorization fits your model before you commit to an application. See our legal services or contact LegalBison to discuss your project.

Frequently asked questions

What are the types of banks?

For legal purposes, institutions fall into two groups. Credit institutions can take deposits from the public. Other licensed institutions in the bank family, such as trust banks, EMIs and payment institutions, generally cannot. The table above lists the common types of banks by function and by license.

What are the four main types of banks?

Most lists name retail, commercial, investment and central banks. The first three describe what an institution does for clients, while central banks set conditions for the whole system. No law defines four main types, so treat such a list as a teaching aid.

What are the 7 types of banks?

There is no legal list of seven. Counts of four, seven, ten, or twelve are editorial choices that slice the same institutions differently. The legal questions stay the same: who authorized the institution, and can it take deposits?

Is a neobank a bank?

Not by default. A neobank is a business model. It is a bank only if the entity behind it is a licensed credit institution or chartered bank. Many operate as an EMI or payment institution partnered with a licensed bank.

What is the difference between a bank and an EMI?

A bank is a credit institution that can take deposits from the public. An EMI issues electronic money and cannot take deposits, because CRD Article 9 reserves that activity to credit institutions. Our EMI license page covers the requirements.

Can a trust bank hold client money?

A national trust bank can hold client assets in custody or in a fiduciary capacity. It is generally uninsured and does not take insured deposits unless it separately holds them. Whether that fits a given business depends on the activity, so confirm the route in a consultation.