A bankers' bank is a financial institution that provides financial services to
community bank
A community bank is a depository institution that is typically locally owned and operated. Community banks tend to focus on the needs of the businesses and families where the bank holds branches and offices. Lending decisions are made by people ...
s in the
United States
The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...
. Bankers' banks offer services only to community banks, not to the general public, and are typically owned by some of their customers. The principal service that they provide is
correspondence, the management of payment balances with other banks. By aggregating the transactions of their client banks, bankers' banks are able to realize
economies of scale
In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of Productivity, output produced per unit of cost (production cost). A decrease in ...
that enable their clients to do business alongside larger banks.
The present system of bankers' banks developed in the 1970s–80s, when independent banks found that their correspondent banks no longer provided a satisfactory level of service and in some cases competed against them. The first institution organized exclusively as a bankers' bank was United Bankers' Bank, formed in
Minnesota
Minnesota ( ) is a U.S. state, state in the Upper Midwestern region of the United States. It is bordered by the Canadian provinces of Manitoba and Ontario to the north and east and by the U.S. states of Wisconsin to the east, Iowa to the so ...
in 1975.
, there are 12 bankers' banks across the US. The largest of these is TIB (The Independent BankersBank), which corresponds on behalf of 1,400 customer banks.
See also
*
Bank
A bank is a financial institution that accepts Deposit account, deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital m ...
*
Corporate credit union
A corporate credit union, also known as a central credit union, provides services to natural person (consumer) credit unions. In the credit union industry, they are sometimes referred to as "the credit union’s credit union". In the United States ...
*
Credit union
A credit union is a member-owned nonprofit organization, nonprofit cooperative financial institution. They may offer financial services equivalent to those of commercial banks, such as share accounts (savings accounts), share draft accounts (che ...
References
{{bank-stub
Community banking
Banks