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Chartered Bank Definition
A chartered bank basically refers to any financial institution vested with the power to accept and protect monetary deposits from person and other organizations, and also permitted to lend these money out as loan. The general conduct of chartered banks vary by country, however, in each legislation, this organization should have been approved by the government to authorize financial transactions at all levels. Chartered banks mostly works hand in hand with commercial banks.
A Little More on What is a Chartered Bank
Chartered bank serve the general public by providing crucial customer financial service in modern economy. Here, private investors or individuals can easily open a savings account with these banks and fund their accounts, with the chance of receiving interests based on the deposit account being operated. Just like commercial banks, a large chunk of the amount received by chartered banks are lent out to private investors or corporations to enable them carry out their businesses, while keeping just enough money for tending to their customers in the case of withdrawals.
Each bank has a charter which guides its actions and ensures that its operational conducts are in line with the relevant banking rules. An example of such rule may include but is not limited to how the bank will maintain a specific minimum cash expectation. Charters in the United States can be issued by two levels of government; the state and federal government. The state charter is guided and solely controlled by state agencies, while the federal charter is maintained by federal regulations.
There are different organizations and entities that overlook the U.S. chartered banks, and each have different physical location from which they run their operations. The deputy comptroller is located in Washington, D.C., alongside other big bank supervisors based in the same state. The type of charter (state or federally-owned) used by a bank seems to have different benefits. For instance, a state issued charter is less expensive in all aspects than a federally-owned charter, and surprisingly, both charters have the same level of power.
The first chartered bank was established on 1863, and it was signed by President Abraham Lincoln and Salmon P Chase (the then Treasury Secretary) into law in that same year.
Online Chartered Banks
Some banks are out of the reach of state and federal charters, and they are usually said to be controlled by overseas charters. Most online banks fit into this category. In a situation like this, potential customers should check if the bank wishes to provide them with Federal Deposit Insurance Corporation (FDIC) protection. This protection plan was established in 1933 to ease bank failures and build customer’s confidence in banks in the United States. As of 2016, each member institution had an insured deposit of up to $250,000.
Most of the big names in the U.S. Banking Sector are top examples of online banks. Banks like Charles Schwab, Discover Bank, Bank of Internet USA, Ally Bank, EverBank, etc. Most of the banks offer unbeatable interests on savings and top notch quality service to their customers. These conducts are due to their ability to reduce operational costs using online privileges.