Mutual savings bank

A mutual savings bank is a financial institution chartered by a central or regional government, without capital stock, that is owned by its members who subscribe to a common fund. From this fund claims, loans, etc., are paid. Profits after deductions are shared between the members. The institution is intended to provide a safe place for individual members to save and to invest those savings in mortgages, loans, stocks, bonds and other securities and to share in any profits or losses that result. The members own the business.



The institution most frequently identified as the first modern savings bank was the “Savings and Friendly Society” organized by the Reverend Henry Duncan in 1810, in Ruthwell, Scotland. Rev. Duncan established the small bank in order to encourage his working class congregation to develop thrift. European voluntary organizations and “friendly societies” provided the inspiration for their state incorporated American counterparts.

These first savings banks were envisioned as philanthropic endeavors, designed to uplift the poor and working classes. The banks were started by philanthropists, who took on the positions of savings bank trustees, managers, and directors as opportunities to teach the working class the virtues of thrift, and self-reliance by allowing them the security to save their money. The first incorporated US mutual savings bank was the Provident Institution for Savings, in Boston. Its 1816 charter was the first government legislation in the world to safeguard savings banks.

Mutual savings banks are common in New England. New Bedford Institution For Savings was founded in 1825, and converted from mutual to stock status in 1987.

Since the 1970s, when the industry was deregulated, thousands of mutual savings banks have been converted into stock ownership companies, raising more than $40 billion. In 2010, only about 600 remained.[1] These conversions have often resulted in large financial rewards for top bank executives.[2]

Use and design

Mutual savings banks were designed to stimulate savings by individuals; the exclusive function of these banks is to protect deposits, make limited, secure investments, and provide depositors with interest. Unlike commercial banks, savings banks have no stockholders; the entirety of profits beyond the upkeep of the bank belongs to the depositors of the mutual savings bank. Mutual savings banks prioritize security, and as a result, have historically been characteristically conservative in their investments. This conservatism is what allowed mutual savings banks to remain stable throughout the turbulent period of the Great Depression, despite the failing of commercial banks and savings and loan associations.


See also

External links

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Look at other dictionaries:

  • mutual savings bank — n. a state chartered savings bank owned by its depositors and managed by a board of trustees. Abbreviated {MSB}. [WordNet 1.5] …   The Collaborative International Dictionary of English

  • mutual savings bank — ☆ mutual savings bank n. a savings bank that has no capital, its depositors sharing all the net profits …   English World dictionary

  • mutual savings bank — A state chartered savings bank which is owned by its depositors and managed by a fiduciary board of trustees . Bloomberg Financial Dictionary * * * mutual savings bank mutual savings bank ➔ bank1 * * * mutual savings bank UK US noun [C] BANKING,… …   Financial and business terms

  • mutual savings bank — noun a state chartered savings bank owned by its depositors and managed by a board of trustees • Syn: ↑MSB • Hypernyms: ↑savings bank * * * noun : a bank organized without stock which receives savings deposits and whose earnings accrue entirely… …   Useful english dictionary

  • mutual savings bank — a noncapitalized savings bank that distributes its net earnings to depositors. * * * …   Universalium

  • mutual savings bank — noun a non capitalised savings bank distributing its profits to depositors …   Australian English dictionary

  • mutual savings bank — /ˌmju:tʃuəl seɪvɪŋz bæŋk/ noun a savings bank which is owned by the customers who have deposits with it …   Dictionary of banking and finance

  • mutual savings bank — Fin in the United States, a state chartered savings bank run in the interests of its members. It is governed by a local board of trustees, not the legal owners. Some of these banks have recently begun offering accounts and services that are… …   The ultimate business dictionary

  • mutual savings bank — A bank organized by depositors, whose interest is shown by certificates of deposit, for the purpose of furnishing a safe depositary for money of members. It need not be incorporated or under supervision unless state law so requires. A C… …   Black's law dictionary

  • Mutual Savings Bank - MSB — A type of thrift institution, originally designed to serve low income individuals, that historically invested in long term, fixed rate assets such as mortgages. Initiated in 1816, the first mutual savings banks (MSBs) were the Philadelphia Saving …   Investment dictionary

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