What Is Public Bank?

What Is Public Bank? A public bank is a bank that is owned and operated by the government or a public entity. It is different from private banks, which are owned and operated by private individuals or entities. The Bank of North Dakota is the sole public bank in the United States.

How Public Banks Work 

Public banks, despite having different ownership compared to commercial banks, still play a crucial role in facilitating the circulation of money in the economy. Instead of depositing funds into a commercial bank and incurring fees and interest, the government manages its own bank. This enables the government to potentially provide loans for community investment at lower interest rates.


Public banks are mainly suggested for handling deposits and providing banking services to local governments and agencies.

In addition, these banks may be able to offer:

  • Infrastructure lending
  • Wholesale lending
  • Small business lending
  • Liquidity and security for other community banks

Most state laws and suggestions currently mandate that the public bank restrict its provision of public services.

A public bank can provide similar retail deposit and lending options as regular banks, such as savings and checking accounts, loans, and certificates of deposit (CDs). Nevertheless, worries about government competition with private enterprises may restrict even these services.


A government or government entity owns a public bank. This means that elected officials or representatives have a say in the bank’s decisions and help manage it. Public banks prioritize the public’s interests and may be required to address the financial needs of the community, city, or state they operate in. Instead of solely aiming for short-term profits, public banks concentrate on fulfilling the long-term requirements of the community.


It can be challenging to create a public bank as it necessitates a regulatory structure and initial funds to begin. Public banks may pose competition to local commercial banks, which might not benefit the communities they cater to.

Potential Impact

Public banks can be established with the purpose of fulfilling specific public policy objectives. Unlike traditional banks, which prioritize maximizing profits for shareholders, public banks are designed to address these goals.


Public banks provide banking services while also serving specific public policy goals. They can be a valuable resource for underserved communities and the government entity they serve. However, establishing a public bank can be challenging and there are potential risks to their stability. Due to the increasing interest in policy-focused banking solutions, many city and state governments are now exploring the option of public banks for their communities.