Difference between a state-chartered bank and a federally chartered bank in the USA?

In the United States, banks can be chartered by either the federal government or by individual states. Here are some key differences between state-chartered banks and federally chartered banks:

  1. Regulators: State-chartered banks are regulated by the state in which they are chartered, while federally chartered banks are regulated by the Office of the Comptroller of the Currency (OCC), which is a federal agency.
  2. Insurance: State-chartered banks can choose to be insured by either the Federal Deposit Insurance Corporation (FDIC) or a state-run insurance program, while federally chartered banks are required to be insured by the FDIC.
  3. Membership: State-chartered banks are typically members of the state’s banking association, while federally chartered banks are members of the American Bankers Association.
  4. Powers: Both state-chartered and federally chartered banks have similar powers to engage in lending, taking deposits, and other banking activities. However, federally chartered banks have the added advantage of being able to operate in multiple states without needing to obtain a separate charter in each state.
  5. Examination frequency: State-chartered banks are typically examined by their state regulator more frequently than federally chartered banks, which are examined by the OCC on a regular schedule.

It’s worth noting that these differences are mostly related to regulation and oversight, and both state-chartered and federally-chartered banks must adhere to similar standards for safety and soundness. Ultimately, the choice between a state-chartered or federally chartered bank may depend on factors such as the bank’s location, business goals, and regulatory environment.

This page was last updated on March 31, 2023.

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