Dual Banking System

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DEFINITION of 'Dual Banking System'

The system of banking that exists in the United States in which state banks and national banks are chartered and supervised at different levels. Under the dual banking system, national banks are chartered and regulated under federal law and standards, and supervised by a federal agency. State banks are chartered and regulated under state laws and standards, which includes supervision by a state supervisor.

BREAKING DOWN 'Dual Banking System'

The dual banking system allows for the co-existance of two different regulatory structures for state and national banks. This translates into differences in how credit is regulated, the legal lending limits and variations of regulations from state to state.

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