Public Bank (State-Owned Bank)


The term public bank refers to a financial institution that is owned by a government agency and operated in the public interest.  A public bank may be created by any government agency that is willing to comply with local banking requirements.


Also referred to as state-owned banks, public banking includes those financial institutions owned by a jurisdiction's citizens and operated by their representative government agencies.  The geographic reach of a public bank can range from local branch offices to international operations.  There are no additional requirements of a public bank; they need only meet the same requirements as the banks operating in the same geographic regions offering the same services.

While a privately owned bank has an obligation to shareholders to maximize profits, a public bank's primary objective is to provide services to the community it serves.  Generally, the profits of a public bank are redirected to a general fund, which can be used to reduce local taxes.

A colony of Quakers located in Pennsylvania was the first to introduce the concept of public banking to the United States.  North Dakota is currently the only state to operate a network of public banks.  The Bank of North Dakota was originally founded in 1919 to provide farmers and ranchers with affordable credit.

Related Terms

merchant bank, commercial bank, private bank, cooperative bank