Non-Member Banks

DEFINITION of 'Non-Member Banks'

A bank that is not a member of the U.S. Federal Reserve System. As with member banks, non-member banks are subject to reserve requirements, which they have to maintain by placing a percentage of their deposits at a Federal Reserve Bank. Although non-member banks are not required to purchase stock in their district Federal Reserve banks, they have access to Fed services such as its discount window on the same terms as member banks.

BREAKING DOWN 'Non-Member Banks'

Non-member banks can only be state-chartered, since all nationally chartered banks necessarily have to be members of the Federal Reserve System. Because state banking laws are arguably less onerous than federal banking laws, non-member banks may be subject to less regulation than member banks.

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RELATED FAQS
  1. What do banks do to control the bank reserve?

    Understand what the Federal Reserve does in order to expand or contract the economy. Learn what depository institutions can ... Read Answer >>
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    Learn how bank reserve requirements are determined and how bank reserves affect shareholders through improved bank stability ... Read Answer >>
  3. Why do commercial banks borrow from the Federal Reserve?

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  5. Why would the Federal Reserve change the reserve ratio?

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