A
mutual savings bank is a
financial institutionIn financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries. Most financial institutions are highly regulated by...
chartered through a state or federal government to provide a safe place for individuals to save and to invest those savings in
mortgageA mortgage is the transfer of an interest in property to a lender as a security for a debt - usually a loan of money. While a mortgage in itself is not a debt, it is the lender's security for a debt...
s,
loanA loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....
s,
stocksStocks are devices used since medieval times for torture, public humiliation, and corporal punishment. The stocks partially immobilized its victims exposing them in public place to the scorn of the local people, who often took to insulting, kicking, spitting and in some cases urinating and...
,
bondIn finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest and/or to repay the principal at a later date, termed maturity...
s and other
securitiesA security is a fungible, negotiable instrument representing financial value. Securities are broadly categorized into debt securities ; equity securities, e.g., common stocks; and derivative contracts, such as forwards, futures, options and swaps. The company or other entity issuing the security...
.
The institution most frequently identified as the first modern savings bank was the “Savings and Friendly Society” organized by the Reverend Henry Duncan in 1810, in Ruthwell,
ScotlandScotland is a country that is part of the United Kingdom. Occupying the northern third of the island of Great Britain, it shares a border with England to the south and is bounded by the North Sea to the east, the Atlantic Ocean to the north and west, and the North Channel and Irish Sea to the...
. Rev. Duncan established the small bank in order to encourage his working class congregation to develop thrift.
A
mutual savings bank is a
financial institutionIn financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries. Most financial institutions are highly regulated by...
chartered through a state or federal government to provide a safe place for individuals to save and to invest those savings in
mortgageA mortgage is the transfer of an interest in property to a lender as a security for a debt - usually a loan of money. While a mortgage in itself is not a debt, it is the lender's security for a debt...
s,
loanA loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....
s,
stocksStocks are devices used since medieval times for torture, public humiliation, and corporal punishment. The stocks partially immobilized its victims exposing them in public place to the scorn of the local people, who often took to insulting, kicking, spitting and in some cases urinating and...
,
bondIn finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest and/or to repay the principal at a later date, termed maturity...
s and other
securitiesA security is a fungible, negotiable instrument representing financial value. Securities are broadly categorized into debt securities ; equity securities, e.g., common stocks; and derivative contracts, such as forwards, futures, options and swaps. The company or other entity issuing the security...
.
The institution most frequently identified as the first modern savings bank was the “Savings and Friendly Society” organized by the Reverend Henry Duncan in 1810, in Ruthwell,
ScotlandScotland is a country that is part of the United Kingdom. Occupying the northern third of the island of Great Britain, it shares a border with England to the south and is bounded by the North Sea to the east, the Atlantic Ocean to the north and west, and the North Channel and Irish Sea to the...
. Rev. Duncan established the small bank in order to encourage his working class congregation to develop thrift. European voluntary organizations and “friendly societies” provided the inspiration for their state incorporated American counterparts.
These first savings banks were envisioned as philanthropic endeavors, designed to uplift the poor and working classes. The banks were started by philanthropists, who took on the positions of savings bank trustees, managers, and directors as opportunities to teach the working class the virtues of thrift, and self-reliance by allowing them the security to save their money. The first incorporated US mutual savings bank was the Provident Institution for Savings, in Boston. Its 1816 charter was the first government legislation in the world to safeguard savings banks.
Mutual savings banks were designed to stimulate savings by individuals; the exclusive function of these banks is to protect deposits, make limited, secure investments, and provide depositors with interest. Unlike
commercial bankA commercial bank is a type of financial intermediary and a type of bank. Commercial banking is also known as business banking. It is a bank that provides checking accounts, savings accounts, and money market accounts and that accepts time deposits. After the Great Depression, the U.S...
s, savings banks have no stockholders; the entirety of profits beyond the upkeep of the bank belongs to the depositors of the mutual savings bank. Mutual savings banks prioritize security, and as a result, have historically been characteristically conservative in their investments. This conservatism is what allowed mutual savings banks to remain stable throughout the turbulent period of the Great Depression, despite the failing of commercial banks and savings and loan associations.
In the United States
In
AmericaThe United States of America is a federal constitutional republic comprising fifty states and a federal district...
, most mutual savings banks are located in the
NortheastThe Northeastern United States is a region of the United States. According to the definition used by the United States Census Bureau, the Northeast region consists of nine states: the New England states of Maine, New Hampshire, Vermont, Massachusetts, Rhode Island and Connecticut; and the...
, and are owned by their depositors and borrowers. A mutual savings bank does not issue capital stock. Profits are distributed to the owner/customers in proportion to the business they do with the institution.
See also
- Building Society
A building society is a financial institution, owned by its members, that offers banking and other financial services, especially mortgage lending....
- Cooperative banking
Cooperative banking is retail and commercial banking organized on a cooperative basis.Cooperative banking institutions take deposits and lend money in most parts of the world....
- Credit union
A credit union is a cooperative financial institution that is owned and controlled by its members, and operated for the purpose of promoting thrift, providing credit at reasonable rates, and providing other financial services to its members. Many credit unions exist to further community...
- Mutual organization
A mutual, mutual organization, or mutual society is an organization based on the principle of mutuality. Unlike a true cooperative, members usually do not contribute to the capital of the company by direct investment, but derive their right to profits and votes through their customer relationship...
External links
- http://www.fdic.gov/bank/historical/history/index.html
- http://www.ots.treas.gov/glossary/gloss-m.html
- http://www.census.gov/hhes/www/rfs/glossary.html