Picking up on the cries of Occupy Wall Street protesters, Councillor Kristyn Wong-Tam ignited an online debate Wednesday by musing that the City of Toronto should get into the banking business. In a sense, it's already there – both municipal employees and TTC employees have members-only credit unions.
While a municipally owned bank in Canada's financial capital may seem like an odd pairing, the concept itself is hardly unheard of.
In Germany, many cities or administrative districts own savings banks, known as sparkassen. While a few are now privately held, many remain in public hands and date back to the mid-19th century, a period that saw a rapid expansion of the German savings bank sector.
– During the 2008 credit meltdown, New York Times columnist Andrew Sorkin wrote that such institutions "enjoy immense trust among ordinary Germans." Some own stakes in larger financial institutions, like West LB. While the sparkassen avoided the risky conduct that destroyed much larger lenders, the German government forced them to contribute to the federal banking bailout in 2010.
– The City of Birmingham, England, operated a bank between 1916 and the 1970s, at which point it became a trustee savings institution later subsumed by Lloyds. But in the past three years, councils in some U.K. counties, including Essex, decided to get back into the banking and mortgage business to help local residents deal with scarce credit and other economic development goals.
– Developing countries like Peru and Namibia have experimented with municipally owned banks as part of a micro-finance strategy. Municipally owned lenders existed in former Soviet Bloc countries like Poland, and continue to operate in China.