DEFINITION of 'Bankers' Bank'

A bankers' bank is specific type of bank that 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 many 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. Investment Banking

    Investment banking is a specific division of banking related ...
  2. Loan Participation Note (LPN)

    A loan participation note is a fixed-income security that permits ...
  3. Retail Banking

    Typical mass-market banking in which individual customers use ...
  4. Mortgage Bankers Association's ...

    The Mortgage Bankers Association’s National Delinquency Survey ...
  5. Chartered Bank

    A chartered bank is a financial institution, whose primary roles ...
  6. Bankers Professional Liability ...

    Financial protection for financial professionals against customers’ ...
Related Articles
  1. Personal Finance

    What personal bankers do – and how much they make

    Discover the job duties and typical salary of a personal banker, and identify the education and skill set needed to be successful in the field.
  2. Personal Finance

    Private banker: Job description and average salary

    Discover what a career in private banking entails, including a job description, education and training, necessary skills and licensing, and salary.
  3. Personal Finance

    Investment Banker: Job Description & Average Salary

    Identify what investment bankers do in a typical work day, learn what skills are needed to be successful and understand how investment bankers get paid.
  4. Personal Finance

    Is a Career in Investment Banking Worth It?

    Discover why many finance professionals are wondering whether an investment banking career is worth it. Consider the challenges of this profession.
  5. Personal Finance

    Private banker: Career path and qualifications

    Discover what kind of work private bankers do, and learn more about how you can develop the experience and qualifications required to work in the field.
  6. Personal Finance

    Investment Banker: Career Path & Qualifications

    Learn more about the work of investment bankers, and discover how most professionals got started in the field and progressed into their roles.
  7. Personal Finance

    Banker's Acceptance 101

    Banker's acceptances are time drafts that a business can order from the bank if it wants additional security against counterparty risk. Learn the basics of bankers acceptances.
  8. Financial Advisor

    A day in the life of an investment banker

    Take a look at a day in the life of an investment banker, one of the most sought-after and stressful jobs in the financial sector.
  9. Personal Finance

    The Evolution of Banking Over Time

    Discover how the evolution of banking has changed the business model. Find out how this system of money management developed into what we know today.
  1. What are the 9 major financial institutions?

    There are nine major types of financial institutions. Understand the major types of financial institutions that exist and ... Read Answer >>
  2. What is the difference between an investment and a retail bank?

    Learn the primary differences between retail banks and investment banks by examining the business activities, type of clients ... Read Answer >>
  3. How do investment banks help the economy?

    Learn more about the functions of investment banks in a modern economy and how investment banks have been treated differently ... Read Answer >>
Trading Center