DEFINITION of 'Bankers' Bank'

A bankers' bank is specific type of bank, which a group of larger, more established banks create. Bankers' banks exist for the purpose of servicing the charter banks that founded them. While their banking services are not generally open to the public in any fashion, these institutions are designed to support community banks.

BREAKING DOWN 'Bankers' Bank'

Bankers' banks can help community banks to effectively compete with larger banking entities. The first bank of this kind was created in 1975 in Minnesota. There are currently 22 of these entities nationwide that serve over 6,000 community banks in 48 states.

Bankers' Bank and Credit Unions

In several ways a bankers’ bank is similar to a credit union. Both exist well within the financial services industry but offer different structures and community benefits than more traditional commercial banks.

In a credit union members pool their money by purchasing shares in the cooperative. These buy-ins allow the credit union to provide loans, demand deposit accounts, and other financial products and services to its members.

Credit unions and banks do offer similar services, such as accepting deposits, lending money and providing members with a range of other useful financial products (credit and debit cards, Certificates of Deposit, etc.). At the same time key differences exist in how both entities make money. The biggest difference is that banks function to generate profits for their shareholders, while credit unions operate as not-for-profit organizations designed to serve their members. Credit unions will generally use any income generated to fund projects and services that will benefit the community and interests of its members (de-facto owners).

Credit unions range from small, volunteer-only operations to large entities with thousands of participants. Corporations and other entities can also form their own credit unions for their employees and affiliates.


Example of a Bankers' Bank

One example is the aptly named Bankers’ Bank, with its headquarters in Madison, Wisconsin. This institution is state chartered and previously held the name of Bankers Bank Of Wisconsin prior to changing to simply Bankers' Bank in September 1993. Bankers’ Bank now offers a large variety of products, including secondary mortgages, safekeeping and portfolio accounting, lending alternatives, federal funds, cash letter processing, municipal bond underwriting, investment trading, and more.

The mission of Bankers’ Bank is “to enhance the value of community based financial institutions by delivering the highest quality products and services at competitive pricing, while providing a return to shareholders.”

Since Bankers' Bank is not a retail bank, it not compete with clients for market or charters.

  1. Banker's Acceptance - BA

    A banker's acceptance (BA) is a short-term debt instrument issued ...
  2. Relationship Banking

    Relationship banking is a strategy used by banks to strengthen ...
  3. Consumer Bankers Association - ...

    A U.S. trade organization representing financial institutions ...
  4. Investment Banking

    Investment banking is a specific division of banking related ...
  5. Bank

    A bank is a financial institution licensed as a receiver of deposits. ...
  6. Universal Banking

    Universal banking is a banking system in which banks provide ...
Related Articles
  1. Personal Finance

    What do investment bankers really do?

    Investment bankers are essentially corporate financial advisors who help companies manage the process of raising financing for their activities. Check out more on their roles in banking industry.
  2. Personal Finance

    Career Advice: Investment Banking Vs. Private Banking

    Examine the two potential career options of investment banking and private banking, with an eye toward choosing the most suitable career.
  3. Personal Finance

    Retail Banking vs. Corporate Banking

    Retail banking is the visible face of banking to the general public. Corporate banking refers to the aspect of banking that deals with corporate customers. Check out more on the differences between ...
  4. Personal Finance

    Banker or Broker: Which Career Is Right for You?

    Bankers and stock brokers may share similar traits, but there are many differences.
  5. Personal Finance

    Banker's Acceptance 101

    A banker's acceptance, or a negotiable time draft a bank guarantees to pay at a predetermined date, is a common way of financing international trade activity.
  6. Personal Finance

    The evolution of banking

    Banks are a part of ancient history. Find out how this system of money management developed into what we know today.
  7. Personal Finance

    4 Reasons Private Banking Is The Right Career For You

    Learn how a strong income potential, good hours, strong client relationships, and low stress might make private banking the ideal career for you.
  8. Personal Finance

    Choose To Beat The Bank

    From internet banking to credit unions, it's in your power to cut fees and maximize service.
  9. Personal Finance

    6 Benefits of Using a Credit Union

    Credit unions are community-focused and offer better interest rates than traditional banks.
  1. What are some roles of an investment bank?

    Explore the world of investment banking and discover the various functions investment bankers serve, such as handling IPOs ... Read Answer >>
  2. How does the deposit multiplier affect a bank's profitability?

    Find out how a deposit multiplier affects bank profitability, how it increases the supply of money in the economy and why ... Read Answer >>
  3. What economic indicators are important to consider when investing in the banking ...

    Find out which economic indicators are most useful for investors in the banking sector, especially those influenced by central ... Read Answer >>
Trading Center