Definition of Government-Owned Bank


A government-owned bank is a financial institution controlled by the government as opposed to a private entity. These banks are regulated and supervised by the Office of the Comptroller of the Currency.

Impact of Government-Owned Banks

The Office of the Comptroller of the Currency supervises roughly 1,600 national banks and 50 foreign bank branches in the United States.

Government Bailouts

The term government-owned bank took on extra significance when federal regulators took over several failing banks. In November 2008, Citigroup announced it would issue $20 billion of preferred stock and warrants to the U.S. Treasury Department for the government's Troubled Asset Relief Program, known as TARP.


Under TARP, the federal government purchased preferred stock in banks. Bank shares purchased by the Treasury have a dividend rate of 5 percent per year.


TARP critics said the program was unsuccessful. While TARP gave financial institutions more money to lend, banks complained that they were unable to fully use the funds for lending because loan demand from the private sector was lower than usual due to the recession.

Proponents of Government-Owned Banks

Proponents of government-owned banks point to the Bank of North Dakota as a model. The bank is not a member of the Federal Deposit Insurance Corporation, and its main source of deposits is the state of North Dakota.

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