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Non-Member Banks

Candlefocus Editor

Non-member banks are non-federally regulated state-chartered banks that are not members of the United States Federal Reserve System. The decision to be a non-member bank is voluntary, allowing state-chartered banks to avoid the additional regulation associated with being a member of the Fed. This decision also allows them to avoid certain fees and assessments non-members are exempt from, such as the Federal Reserve Board of Governors' charges associated with regulating reserve requirements.

Non-member banks, also known as privately-chartered banks, are monitored by the Federal Deposit Insurance Corporation (FDIC) to ensure compliance with relevant state banking laws when interstate banking activities are undertaken. To be insured by the FDIC, non-member banks must meet certain criteria, including the requirement to have a “good safety record” and to be “well capitalized” in terms of assets.

In addition to Bank of the West and GMC Bank, other examples of non-member banks include USAA Bank, M&T Bank, and Regions Bank. Non-member banks offer services similar to those of members of the Federal Reserve System, such as checking and savings accounts, loans, mortgages, and credit cards. They may also be able to offer foreign currencies and services associated with opening business accounts.

Non-member banks offer the potential for lower fees and more personalized customer service due to a focus on local and regional markets. They can also provide customers with fee- and interest-free banking options. On the other hand, there are some potential drawbacks associated with non-member banks, including lower deposit limits and lack of access to federal programs. Therefore, it is important to compare the terms and fees provided by various banks before deciding on a provider.

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