13 December 1816
In the 19th century, not unlike today, there was much concern about poverty in industrial towns. Many felt the problem was a lack of thrift by the poor, which could be solved by getting those on low incomes to save more money.
Existing banks and the bond market were aimed at the well-off. So in 1810, a Scottish minister established the first savings bank in Dumfriesshire, which accepted even the smallest deposits, and the idea took off.
Some such banks were run on the trustee model, with directors solely responsible for ensuring savers’ money was invested soundly. But a radical variation came about – the mutual model, where depositors also became the bank’s owners.
While the trustee ‘banks’ just pooled deposits and put them into commercial bank accounts or gilts, mutuals lent money too. The model quickly crossed the Atlantic, and the Provident Institution for Savings (PIS) was the first to be granted a business charter in 1816.
Founded by Boston philanthropists, it allowed people of all incomes to save safely. First investing in government bonds, it soon began lending to selected Boston businesses. Similar banks spread across the US.
But while cautious lending helped them survive various crises, including the Great Depression, the lure of commercialisation proved too strong. By the 1970s deregulation saw many mutuals taken over by commercial rivals or floated (PIS itself went public in 1986).
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