What’s a Public Bank?

Public banks are lending and depository institutions owned by a local agency, such as a city or county, that serve a non-profit public purpose and are governed by a mandate responsive to local needs. These banks leverage their deposit base and lending power to benefit residents with affordable housing, small business loans, modernization of public infrastructure, and other community needs. They differ from traditional financial institutions in that they prioritize serving the needs of the communities they are accountable to, rather than maximizing profits for private shareholders.

California public banks will provide municipal governments with cost-effective depository services and cash management while also supplying funding that supplements government spending. This frees up money for crucial services and reduces the billions of dollars in interest payments that local governments currently pay to private banks, many of which continue to profit during crises like the COVID-19 pandemic. By accepting deposits and handling banking services for local governments and agencies, California public banks also enable these institutions to move their money away from private megabanks that finance activities such as fossil fuel projects, which many cities and counties have voted to divest from. The result is more customized service at a lower cost while keeping our money local and aligning with our values.

Benefits of Public Banks

Public banks offer a range of benefits to local communities, including:

  • Investing public money locally: Public banks help stimulate the local economy and create jobs by investing in local projects and initiatives, keeping public funds circulating within the community rather than these monies being funneled to external investors.

  • Returning profit and interest to local communities: Unlike private banks, which maximize profits for shareholders, public banks can return profits and interest to the community through various means, such as lower fees for banking services, lower interest rates on loans, or funding for community projects.

  • Reducing banking costs: Public banks can offer lower fees and interest rates on banking services to participating agencies, such as municipalities or school districts, which can help to free up more revenue for other priorities

  • Investing in community priorities and values: Public banks can align their investment decisions with the values and priorities of the local community rather than being driven solely by financial considerations. This allows them to support projects and initiatives that reflect the community’s needs and values.

  • Promoting democracy and transparency: Public banks are accountable to the public and operate more transparently, allowing for greater community oversight and participation in decision-making. This helps ensure that public funds are used responsibly and transparently.

  • Using a bank’s leverage to benefit the public: Through their ability to leverage money, public banks can amplify the impact of public funds and achieve greater returns for the community, allowing them to make a bigger difference in infrastructure development, economic development, and community revitalization.

  • Cutting infrastructure construction costs significantly: Public banks can help reduce overall construction costs by providing low-interest loans for infrastructure projects, making improvements more affordable for local governments and agencies.

  • Strengthening local banks and credit unions: Public banks can support and strengthen local banks and credit unions by partnering with these institutions to back their loans and letters of credit, helping them access the capital they need to grow and serve their communities.

  • Creating a multi-generational source of capital: By investing in long-term projects and initiatives, public banks can create a source of capital that benefits residents and local businesses for generations to come and helps create a more sustainable and resilient local economy.

A public bank has the ability to lend up to ten times the amount of capital it holds, allowing it to start making loans as soon as it opens its doors. The charter, directors, and management of California public banks will be chosen with a focus on a triple-bottom-line philosophy, which prioritizes preserving the capital of government depositors, meeting the needs of residents, and protecting the environment.