Who will set policy for public banks? Who decides whether to approve loans? How are decision makers insulated from bribes and pressure from politicians and business interests?


The success of the Bank of North Dakota shows that a public bank can and must be run free of influence from legislators and other high offices.

Elected government lawmakers or policy makers determine the policies that govern the activities of a public bank, or in other words, the bank’s mission or “charter.” Policy makers can do this with the help of an informed advisory committee. Day-to-day decisions about creditworthiness and lending, on the other hand, are made by professional bankers. These decisions are governed by the bank’s charter and subject to transparency and administrative review.

In the case of the Bank of North Dakota, a three-member “State Industrial Commission” oversees the bank’s activities. The commission is made up of the Governor, the Attorney General and the Commissioner of Agriculture. The Bank of North Dakota also has a seven-member “Advisory Board” appointed by the governor, the members of which must be knowledgeable about banking and finance. The Advisory Board reviews the Bank’s activities and makes recommendations about the bank’s management, services, policies and procedures to the Industrial Commission.

Public banks have a mandate to be fiscally conservative, balancing their requirement to lend in the public interest with careful considerations of the risks involved in lending. Public banks are more cautious in their lending than Wall Street banks. The major credit rating agency Standard & Poor’s has consistently awards the Bank of North Dakota an “A” rating, indicating the highest possible levels of confidence in the bank’s standards, practices and creditworthiness. According to North Dakota Attorney General Wayne Stenehjem, “The [2013] S&P review of the bank confirmed that it is well-managed and supports the economic needs of North Dakota. ... The report recognized BND for its conservative management strategy.”


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