Savings bank
Savings bank is technically a non-profit organization, which unlike traditional commercial banks, focuses on "[...]channeling people´s savings into investment ventures and also performing social tasks in their respective territories"[1]. Their own financial gain is never the most important element of their plan, with some cases leaving their financial profit out of the equation, discarding the income as objective of highest tier. Their main target are consumers with mid - and long-term goals in mind, while traditional commercial banks tend to focus on short-term capital, usually in the form of dividends[2].
Savings banks aren't usually a publicly traded companies and don't consist of shareholders[3]. Their investment policies are much more strict and are usually limited to more secure options like real estate. Savings banks often support local companies, rural area development or non-profit organizations.
In many places around the world savings banks are bound by law to actively research and make use of broad range of activities. Those can be for example promoting savings among popular classes, what should help the financial system by limiting social exclusion. Savings banks are often expected to offer services of even charitable or in most cases social character. Sometimes they help with regional development in the areas where private sector don't have means to properly supply[4].
Differences between savings banks and commercial banks
Commercial banks and savings banks are clearly different from each other. Main differences are shown in the table below[5].
| Savings Banks | Commercial Banks |
|---|---|
| Financial profit is not the main objective of savings banks, sometimes even being left out completely. | Own financial profit and is almost always the most important goal of the commercial bank. They focus on multiplying own wealth, which directly increases how much shareholders earn. |
| They usually focus on individuals or smaller companies and enterprises, ensuring high quality for their customers. | Commercial banks don't limit themselves too much, offering their services to almost everyone, from an individual to big companies. Customer support quality is usually low, due to much bigger "traffic". |
| Mid - and long-term goals are what saving banks usually focus on. Those provide decently low-risk investments. | Commercial banks look after short-term targets, usually in form of dividends, always giving highest priority to the value of capital ownership. |
| Very often savings banks stay local, without expandin much further. | Commercial banks grow into huge corporations, conducting worldwide operations. |
| Bonuses earned by management and leadership are usually very transparent and in reasonable amounts, often winning consumers trust when publishing them. | Commercial banks management team bonuses are often based on quarterly or annual income, achieving very large sums of money. Banks usually keep the exact values under secret. |
Organizational structure of savings banks around the world
Organizational structure of the savings bank is what clearly differentiates it from the commercial banks[6]. As it was mentioned above, they aren't usually run by corporate individuals. Below is the short list of examples:
- Nordic region: In Denmark, Norway and Sweden, savings banks also don't have typical owners or stockholders. In those countries they are set as independent foundations.
- Germany: Savings banks function as public organizations, which, in commercial sense, don't have owners. It is usually public authorities that are being held responsible for their operation.
- Italy: Savings banks are functioning as joint stock companies.
- Spain: While still being focused on the client and placing main goal as long-term lending operations, savings banks in Spain have had changed their legal status, to utilize access to capital markets.
Due to shareholders or stockholders not being present in the leadership of the company, Savings bank governing bodies often operate in a team consisting of[7]:
- General assembly
- Board of directors
- Control committee
Footnotes
| Savings bank — recommended articles |
| Investment fund — Anglo-Saxon model of corporate governance — Stock insurance company — Sponsorship marketing — Corporate agent — Non-profit organization — Chartered wealth manager — Large organizations — Charitable foundation |
References
- Cardenas A. (2013), The Spanish Savings Bank Crisis: History, Causes and Responses, "IN3 Working Paper Series", September 2013 release
- Manghetti G. (2011), Henry Duncan and the Savings Bank Movement in the UK, "World Savings and Retail Banking Institute", March 2011 release
- Moss M. (2011), Do Savings Banks differ from traditional Commercial Banks?, "World Savings and Retail Banking Institute", March 2011 release
- Spulbar C., M. Nitoi, L. Anghel (2015), Efficiency in cooperative banks and savings banks: A stochastic frontier approach, "Romanian Journal of Economic Forecasting", Vol. 18, Issue 1
- Thomes P. (2013), The Impact of crises on savings bank institutions in Germany, "World Savings and Retail Banking Institute", 2013 release
Author: Jakub Urban
