Non-member banks are banks that are not members of the United States Federal Reserve System. As with member banks, non-member banks are subject to reserve requirements which they must maintain by placing a percentage of their deposits in a federal reserve bank. Although non-member banks are not required to purchase shares from the banks in their federal district reserve, they still have access to Fed services such as its discount window on the same terms as member banks.
Breakdown of non-member banks
Non-member banks cannot be state chartered as all national chartered banks must necessarily be members of the Federal Reserve system. One reason why state-chartered banks may choose not to join is that regulation may be cheaper, some say, under the Federal Deposit Insurance Corporation (FDIC), which oversees non-member banks than banks. Federal Reserve Banks. Non-member banks, like members, receive services from the Federal Reserve system, including check clearing, electronic funds movement, and automated clearing house payments.
Becoming a member is only a question of applying, meeting the requirements and going through a waiting period. Some non-member banks deliberate carefully on this decision and embark on the process in measured steps if they believe that being a member is a net benefit than remaining non-member. In extreme cases, as we saw in 2008, non-member banks will flee into the arms of the Federal Reserve system to protect themselves. This was the case of the proud Goldman Sachs, who was brought to his knees at the height of the financial crisis in 2008. The investment bank humbly asked for and obtained the status of member to access the discount window. from the Fed and start receiving government guaranteed deposits from the public. . In a statement announcing its new status, the bank did so: “We believe that Goldman Sachs, under the supervision of the Federal Reserve, will be considered an even safer institution with an exceptionally clean balance sheet and a greater diversity of funding sources. . “