HOW IT WORKS
- The California Public Banking Act (AB 857) allows charter cities like Los Angeles to store their funds in a public bank instead of a private bank. This includes money that city departments, like the treasurer's office, receive in the form of taxes, fees, fines, and funding from state and federal programs.
- The Los Angeles Public Bank is well-positioned to provide affordable loans for community projects like affordable housing, climate-resilient infrastructure, and small business support due to its lower overhead costs. Any profits earned by the bank can be reinvested back into the municipality's general fund. This arrangement allows the public bank to offer loans at lower interest rates compared to traditional financial institutions.
- The Los Angeles Public Bank will function as a "mini-Fed" for the region, providing support to local banks and underwriting loans. It will act as a "banker's bank," working in partnership with community banks and credit unions to offer loans. This arrangement can increase the lending capacity and stability of local banks.
- The Los Angeles Public Bank will be able to fund local projects at a lower cost by partnering with small banks, credit unions, and Community Development Financial Institutions (CDFIs). As a self-funding and self-sustaining institution, it will not put state funds or tax dollars at risk. This feature makes public banks a particularly attractive option for municipalities and charter cities looking for an alternative to traditional financial institutions.
- The Los Angeles Public Bank will be managed by experienced professionals and overseen by an independent board of directors to ensure that it is not influenced by special interests. This structure is designed to protect the bank from political interference and allow it to serve the needs of the community. To obtain approval for its charter from state and federal regulatory agencies, the bank will need to provide a governance plan demonstrating its independence from political influence.
- To ensure that community concerns are taken into account, the Los Angeles Public Bank will establish citizen advisories to monitor its investments. These advisors will have a role in shaping the bank's decision-making and ensuring that it is responsive to the needs of the community.
BUSINESS AS USUAL IS NOT WORKING
The City of Los Angeles currently spends more than $340 million each year on banking interest and fees and $1.4 billion in debt service paid to large international banks annually. It also holds more than $2 billion in investments tied to petrochemical companies and multinational banks, which generate private profits at a public cost. By issuing and purchasing its own debt through municipal bonds, the City could save up to 50 percent on debt-related expenses and meet its fiduciary duty to invest locally. These municipal bonds are often considered safer than even triple-A-rated commercial debt, according to Moody’s.
Affordable housing projects in Los Angeles often require as many as 12 separate funding sources from different public agencies. This complex, fragmented financing structure drives up costs and delays construction. The City needs a reliable public financial infrastructure to centralize and streamline funding so that affordable housing projects can be completed more quickly and efficiently.
Small and micro-businesses, particularly those owned by people of color, continue to face barriers to credit and are often ignored by traditional banks. Federal and state regulations do not do enough to ensure that banks meet the needs of low-income communities. This lack of support contributed to Black-owned businesses being twice as likely to close during the pandemic.
The City of Los Angeles also lacks a direct banking relationship with the federal government, leaving it entirely dependent on the commercial banking network for financing. This dependence is costly and makes the City’s finances more vulnerable during times of crisis. The Bank of Los Angeles will give the City a stable public financial infrastructure it can depend on, saving money and strengthening its ability to fund community priorities.
WHAT'S NEXT
The California Public Banking Act, signed into law by Governor Gavin Newsom in 2019, allows cities and regions to create public banks. Public bank regulations were finalized by the DFPI in 2022. To establish a public bank, local governments must complete a viability study and develop a business plan for the proposed bank. This plan must then be reviewed and approved by the state’s regulatory agency before a public bank charter can be issued.
The Los Angeles City Council awarded the winning bid for its public bank Request for Proposal (RFP) in 2023. The RFP, first released in June 2022, sought consultants to conduct a full feasibility study and develop a business plan for the proposed Los Angeles Public Bank. This work builds on the Council’s unanimous vote in October 2021 authorizing the city to move forward with study and planning.
As of July 2025, the coalition working to establish the bank is focused on securing full funding for the feasibility study. Six councilmembers have stepped up by contributing from their own discretionary funds to help cover the remaining costs and keep the project moving forward.
Under the authorizing legislation, the consultants chosen by the City will work closely with community members to define the priorities and principles that will guide the bank. The completed business plan will form the basis of Los Angeles’ application for a state bank charter, a critical step in making the public bank a reality.