A bankers' bank is a banking institution that is organized solely to do business with other financial institutions. It is owned exclusively by financial institutions which has or are eligible for insurance of deposits by a federal agency or a financial institution holding company or a savings institution holding company owning any such aforementioned entity. A bankers' bank does NOT do business with the general public, except for officers and directors of financial institutions (insiders).

HOW IT WORKS
A bankers' bank is formed primarily to serve the needs of the financial institutions that own it. That is the difference between the traditional correspondent relationship and the bankers' bank relationship. In a traditional correspondent relationship, a respondent institution is offered a menu of services by one or more correspondents, and then chooses what services it wants from among several correspondent banks. This type of system often results in multiple correspondent relationships, excessive charges in balances, and is time-consuming and expensive to the community financial institution.

A bankers' bank is owned and directed by its customer institutions who are shareholders. Each subscribing financial institution controls one vote per share toward the selection of the board of directors. Elections are held annually and positions on the board rotate.

ADVANTAGES OF THE BANKERS' BANK RELATIONSHIP
The relationship between a bankers' bank and its respondents offers several advantages to community financial institutions over the traditional correspondent relationships.

1. Community financial institutions are dealing with a bank whose only purpose is to serve that bank.
   
2. A bankers' bank offers the same services offered by a traditional correspondent bank but does not compete with its customer financial institutions for any direct retail or commercial customers.
   
3. Bankers' bank customers are not providing income to potential competitors.
   
4. Shareholder institutions of a bankers' bank actually earn income from their correspondent relationship with the bankers' bank through reduced costs by utilization of the bankers' bank services.
   
5. The bankers' bank provides a full array of correspondent services in addition to introducing services previously unavailable to community financial institutions.
   
6. Bankers' banks are closer to their respondent banks because many of them are shareholders and they elect the Board of Directors who govern the bankers' bank.