It traditionally restricts the loans it makes to housing-related purposes including mortgages, home improvement, and construction, although, some S and Ls have entered into educational loans for their customers. S and Ls have their own system that functions in a manner similar to that of the Federal Reserve System, called the Federal Home Loan Banks System. A building and loan association is a special type of S and L that restricts its lending to home mortgages. The distinctions between these financial organizations has become narrower as federal legislation has expanded the range of services that can be offered by each type of institution. Banking laws specify that banks must maintain a minimum amount of capital.
Banks acquire capital by selling capital stock to shareholders.
The money shareholders pay for the capital stock becomes the working capital of the bank. The working capital is put in a trust fund to protect the bank's depositors. In turn, shareholders receive certificates that prove their ownership of stock in the bank. The working capital of a bank cannot be diminished. Dividends to shareholders must be paid only from the profits or surplus of the bank.