Commercial Banks vs. National Banks: Key Differences Explained

In the past, national banks had to issue government printed bills.

A commercial bank is any financial institution that holds deposits for and lends money to individuals and businesses. In the United States, a national bank is a commercial bank that is a member of the Federal Reserve System. As such, a national bank is an investing member of its district Federal Reserve Bank.

Commercial Banks

Any bank we go to when we need to open an account, withdraw cash or ask for a loan is a commercial, or retail, bank. The term commercial is used to distinguish these banks from other types, such as investment and merchant banks.

National Banks

In the United States, when a bank is given national status, it means that it is chartered by the Office of the Comptroller of the Currency as a member of the Federal Reserve System. A national bank may facilitate the auction process of U.S. Treasury bonds and acts as an investing member of its district Federal Reserve Bank. A bank may be called "national" even if it operates locally.

National as Central Banks

In many other countries, the term "national" refers to central bank, which is a government-controlled bank in charge of the country's monetary policy. In the U.S., the central bank is called the Federal Reserve.