What is a Mutual Savings Bank?

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  • Written By: Mary McMahon
  • Edited By: O. Wallace
  • Last Modified Date: 06 February 2020
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A mutual savings bank is a bank which is operated on a mutual model, with the goal of providing benefits to depositors. The purpose of the mutual savings bank is to create a safe place to deposit money, to offer benefits such as interest on deposits and shares of the bank's profits, and to invest conservatively for the purpose of generating profits. The earliest mutual savings banks were established in the 1800s, primarily as a service to the poor which was intended to create an incentive to save money and to use money wisely. Some of the first mutual savings banks still operate today, and numerous others have been established since.

The bank possesses a charter from the state, provincial, or national government. When someone deposits funds in the mutual savings bank, she or he essentially buys an ownership stake. Some may also offer loans to their depositors, along with services such as checking accounts, debit cards, and so forth. Every quarter or at some other set interval, the bank deducts operating expenses from profits, and returns the excess to depositors.


A mutual savings bank is set up specifically to be operated for the benefit of the depositors. It is typically governed by a board of trustees who make financial decisions on behalf of the bank. They must discharge their duties in accordance with the bank's charter. These trustees are usually members of the local community who have banking or financial experience which qualifies them to be on the board.

Sometimes, a mutual savings bank will go public and will offer stock for sale to the general public. Investing in such stock can be a sound financial choice. Because mutual savings banks are run very conservatively, they tend to be insulated from some of the volatility of the market. Unlike other banks, they weather financial crises much better, and may continue to return a profit when other institutions are failing.

People who are interested in banking with a mutual savings bank can check the phone book or a similar directory to see if there is one in their community. Many banks today have websites which people can use to look up their interest rates and the services they offer; potential depositors can research from the comfort of their homes to decide which bank they would like to work with. There may also be promotional rates available to new customers, such as a fixed interest for six months.



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