Definition
A savings bank is a financial institution predominantly found on the East Coast and in the Midwest of the United States. Its primary service is the provision of time-savings accounts, which are accounts where deposits earn interest over time. These banks are typically owned by their depositors rather than shareholders. The depositors are considered creditors of the bank, and they receive payments (dividends) in the form of interest on their deposits. The functions of savings banks are quite similar to Savings and Loan Associations (S&Ls), focusing on promoting savings and providing loans to their members.
Examples
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Eastern Savings Bank: Based in Maryland, this bank offers various savings accounts, including time-savings accounts where depositors earn interest over time.
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Midwest Savings Bank: Located in Illinois, this bank focuses on providing savings accounts, mortgage loans, and education on financial planning for its depositors.
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Washington Savings Bank: Operating in Massachusetts, it offers traditional savings accounts, plus various loan products, targeting both individual depositors and small businesses.
Frequently Asked Questions (FAQs)
What is the primary service of a savings bank?
The primary service of a savings bank is the provision of time-savings accounts, where depositors can save money and earn interest over time.
Who owns a savings bank?
A savings bank is typically owned by its depositors, who are considered creditors. They receive dividends in the form of interest based on their account balances.
How does a savings bank differ from a traditional commercial bank?
A traditional commercial bank is usually owned by shareholders who invest capital, whereas a savings bank is owned by its depositors. The primary focus of a savings bank is on savings accounts and loans for depositors, rather than the broad range of services offered by commercial banks.
What are the benefits of using a savings bank?
The benefits include earning interest on deposits, having access to various savings products, and receiving personalized services due to the bank’s depositor-owned structure.
Are savings banks safer than other types of banks?
Savings banks are generally considered safe as they are subject to regulatory oversight, and deposits are usually insured by the Federal Deposit Insurance Corporation (FDIC).
Can savings banks offer loans?
Yes, savings banks can offer loans, but they primarily focus on loans that serve the needs of their depositors, such as mortgages, education loans, and personal loans.
Related Terms
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Time-Savings Account: A type of savings account where depositors earn interest over a set period, promoting long-term savings.
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Savings and Loan Association (S&L): A financial institution similar to a savings bank, providing savings accounts and loans, especially mortgages.
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Dividend: The interest paid to depositors in a savings bank, derived from the bank’s earnings.
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Depositor: An individual or entity that places funds in a savings bank, thereby becoming a creditor and often an owner of the bank.
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Federal Deposit Insurance Corporation (FDIC): A U.S. government agency providing insurance for depositors in banks, ensuring the safety of their funds up to a certain limit.
Online References
Suggested Books for Further Studies
- “The Complete Idiot’s Guide to Managing Your Money” by Robert Heady and Christy Heady
- “The Banker’s Handbook on Credit Risk: Implementing Basel II” by Morton Glantz
- “Saving Capitalism: For the Many, Not the Few” by Robert B. Reich
Fundamentals of Savings Bank: Financial Management Basics Quiz
Thank you for enhancing your knowledge about savings banks through our detailed overview and quiz questions. Keep exploring the world of finance to expand your expertise!