What Is a National Bank?
Let me explain what a national bank is in the United States: it's a commercial bank that the Office of the Comptroller of the Currency (OCC) charters and supervises. You might also hear people call any financial institution that operates nationally a national bank, in contrast to local banks that stick to one city, state, or region.
Key Takeaways
In the U.S., you need to know that a national bank is a commercial bank chartered by the OCC. The four largest banks in the nation hold 60% of the entire banking system's assets. Remember, a national bank's FDIC insurance covers up to $250,000 for an individual's checking accounts, savings accounts, certificates of deposit, and money market deposit accounts.
How National Banks Work
Here's how national banks function in the U.S.: they are commercial banks that handle various financial services, like accepting customer deposits and offering loans. The federal OCC charters these national banks, while state banks get their charters from state banking agencies.
The OCC regulates national banks on their activities and operations. As of 2023, the OCC oversees 1,062 national banks. But keep in mind, the four largest banks account for about 43% of the entire banking system's assets.
National banks have to be members of the Federal Reserve System, and each is an investing member of its district Federal Reserve Bank. They also belong to the Federal Deposit Insurance Corporation (FDIC), which insures eligible customer deposits up to $250,000.
You can expect national banks to handle daily transactions with their local Federal Reserve Bank, such as Fed bank wires. They must generate call reports to the Fed each quarter and make sure these reports are public.
The Four Largest National Banks as of June 2023
- JP Morgan Chase
- Bank of America
- Wells Fargo
- Citigroup
Fast Fact
National banks in the U.S. and around the world are crucial in shaping a country's financial system. You should understand that an efficient banking system, whether through a central bank or the U.S. Federal Reserve, is vital for economic stability, especially during recessions or economic downturns.
History of National Banks
Let me take you through the history: Alexander Hamilton, the first Secretary of the Treasury, played a key role in forming the first national bank in the United States. The building in Philadelphia, Pennsylvania, was completed in 1797 and is a National Historic Landmark today.
The First Bank collected taxes, paid government bills, and printed banknotes, which acted like a national currency. Only First Bank notes could be used to pay federal taxes. Its 20-year charter started in December 1791, but Congress didn't renew it when it expired in 1811.
In 1863, President Lincoln signed the National Currency Act, which established the OCC to manage nationally chartered banks and create a uniform national currency.
Then, in 1913, the Federal Reserve Act created the Federal Reserve System to serve as the national bank of the U.S. and support a new national currency. Before this, about three-fourths of U.S. banks were state-chartered with weak capitalization.
An amendment to the Glass-Steagall Act in 1933 introduced the FDIC to restore public confidence amid bank failures.
National Bank Examples
As I mentioned, national banks in the United States are typically commercial banks. The OCC keeps an up-to-date list of national banks and federal savings associations it charters and regulates.
Examples of Active National Banks Regulated by the OCC
- JPMorgan Chase Bank, National Association
- Hawaii National Bank
- National Bank & Trust
- Neighborhood National Bank
- U.S. Bank National Association
Additional Example
In May 2022, the OCC chartered Agility Bank in Houston, Texas, which is a woman-owned and woman-led bank, categorized as a minority-led institution (MDI) national bank.
Frequently Asked Questions (FAQs)
What Is a National Bank Charter? A national bank charter, granted by the federal government, lets an institution operate as a bank. If you're starting a new financial institution, you apply for a state or national bank charter. This allows the bank to offer services like accepting deposits and providing loans. Since 2009, there have been far fewer new commercial bank charters than in previous decades.
Who Is Responsible for Supervising National Banks? The OCC supervises all national banks. It's an independent bureau of the U.S. Department of the Treasury. The National Credit Union Administration handles federal credit unions.
What Is a National Bank Holiday? A national bank holiday is one observed by the U.S. Federal Reserve System, when financial services typically close nationwide. Examples include Martin Luther King Jr. Day, Juneteenth National Independence Day, Columbus Day, and Christmas Day.
The Bottom Line
National banks are a key part of the federal banking system, designed to build public trust through safety and resilience, while encouraging innovation in products and services for customers and businesses. Federal regulation and FDIC insurance help reassure you about national banks and what they offer.
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