National Bank

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DEFINITION of 'National Bank'

In the United States, a commercial bank chartered by the comptroller of the currency of the U.S. Treasury. A national bank functions as a member bank of the Federal Reserve in the capacity of investing member of its district Federal Reserve Bank. These banks may facilitate the auction process of U.S. Treasury bonds and must be 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.

BREAKING DOWN 'National Bank'

National banks in both structures have an important role in that they help structure a country's financial system. Having an efficient banking system, whether through a central bank or the Federal Reserve, is important to the financial stability of a country's economy.

National banks also facilitate daily transactions with their local Federal Reserve Bank, such as Fed bank wires. They must generate call reports to the Fed each quarter and also make the reports public.

The first national bank in the U.S. was founded under the plans of George Washington.

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