National Bank
In the United States, a national bank is a commercial bank. Two examples of national banks outside of the United States today include the National Australia Bank (NAB) and the Swiss National Bank. As mentioned above, national banks in the United States are typically commercial banks, the largest of which include Chase Bank, Bank of America, Wells Fargo, Citibank. National banks may facilitate daily transactions with their local Federal Reserve Bank (also called a Fed), such as Fed bank wires. In the U.S., a national bank is a commercial bank chartered by the U.S. Treasury.
What Is a National Bank?
In the United States, a national bank is a commercial bank. The comptroller of the currency of the U.S. Treasury will charter a national bank. This institution will function as a member bank of the Federal Reserve and is an investing member of its district Federal Reserve Bank. National banks may facilitate the auction process of U.S. Treasury bonds. It is essential that they are members of the Federal Deposit Insurance Corporation (FDIC).
Internationally, "national bank" is synonymous with "central bank," or a bank controlled by the national government of a country. Central banks set monetary policies within national economies.
How National Banks Work
National banks in both the U.S. and worldwide have an important role in shaping a country's financial system. Having an efficient banking system, whether through a central bank or the U.S. Federal Reserve, is critical for financial stability especially during times of recession or weathering downturns in the economy.
National banks may facilitate daily transactions with their local Federal Reserve Bank (also called a Fed), such as Fed bank wires. National banks must generate call reports to the Fed each quarter and ensure these reports are made public. As mentioned above, national banks in the United States are typically commercial banks, the largest of which include Chase Bank, Bank of America, Wells Fargo, Citibank. U.S. Bank, PNC Bank, Capital One, and others.
History of the First U.S. National Bank
Alexander Hamilton, the first Secretary of the Treasury, was instrumental in the formation of the first national bank in the United States. Located in Philadelphia, Pennsylvania within Independence National Historical Park, the structure was completed in 1797 and stands today as a National Historic Landmark. It was one of four major financial innovations at the time, including the U.S. government’s assumption of the state war debts, the establishment of a mint, and the imposition of a federal excise tax. Hamilton’s aim with these measures was to establish financial order, national credit, and resolve the issue of fiat currency.
Examples of National Banks Outside the United States
Two examples of national banks outside of the United States today include the National Australia Bank (NAB) and the Swiss National Bank.
NAB counts as one of the "big four" banks in Australia, including the Commonwealth Bank (CBA), Australia and New Zealand Banking Group (ANZ), and Westpac (WBC). National Australia Bank has over 1,500 branches, with major subsidiaries Clydesdale and Yorkshire banks in the United Kingdom.
Meanwhile, the Swiss National Bank is responsible for setting Switzerland's monetary policy and issuing Swiss franc banknotes. In this sense, the Swiss National Bank aims to ensure price stability and a steady supply of cash in Switzerland, allowing liquidity for the money market when needed.
Related terms:
Bank Reserves
Bank reserves are the cash minimums financial institutions must retain to meet central bank requirements. Read how bank reserves impact the economy. read more
Bank : How Does Banking Work?
A bank is a financial institution licensed as a receiver of deposits and can also provide other financial services, such as wealth management. read more
Bank Wire
A bank wire is an electronic message system, which allows major banks to communicate various actions or occurrences regarding client accounts. read more
Central Bank
A central bank conducts a nation's monetary policy and oversees its money supply. read more
Checking Account
A checking account is a deposit account held at a financial institution that allows deposits and withdrawals. Checking accounts are very liquid and can be accessed using checks, automated teller machines, and electronic debits, among other methods. read more
Commercial Bank & Examples
A commercial bank is a financial institution that accepts deposits, offers checking and savings account services, and makes loans. read more
Federal Deposit Insurance Corporation (FDIC)
The Federal Deposit Insurance Corporation (FDIC) is an independent federal agency that provides insurance to U.S. banks and thrifts. read more
Federal Reserve System (FRS)
The Federal Reserve System is the central bank of the United States and provides the nation with a safe, flexible, and stable financial system. read more
Federal Reserve System (FRS)
The Federal Reserve System, commonly known as the Fed, is the central bank of the U.S., which regulates the U.S. monetary and financial system. read more
Fiat Money : How Is Currency Valued?
Fiat money is a government-issued currency that is not backed by a physical commodity, such as gold or silver. read more