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Borrowing Money from a Mutual Savings Bank

Updated: Sep 20, 2023


Borrowing Money from a Mutual Savings Bank


Question:

Do Mutual Banks Need a Heter Iska?


Answer:

Borrowing money from a mutual bank, often referred to as a Mutual Savings Bank, may pose a Ribbis concern, similar to but not exactly the same as credit unions. Therefore, we advise that you consult your local Orthodox Rabbi before taking a loan or opening an account.



Understanding the Structure and Operations of a Mutual Bank

A mutual savings bank, often called a Mutual Institution, is a type of thrift institution technically owned by its depositors. However, control usually doesn't rest with depositors, differing from credit unions that operate on a one-member, one-vote structure.


In mutual savings banks, control is held by a board of trustees, typically self-governed and longstanding, with no direct accountability to depositors. Depositors can only influence the institution's decisions indirectly by withdrawing their deposits.


In this structure, depositors are represented by a group known as "Corporators", who serve the bank's community or communities. These Corporators are effectively the bank's "members" and are involved in substantial governance tasks like amending bylaws and electing Directors/Trustees.


Please note, the structure and operations of mutual banks can vary significantly based on the specific legal and regulatory context, so it is always important to understand the specific details of any given mutual bank.

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