how non member banks work
non member banks can only be state chartered since all nationally chartered banks necessarily have to be members of the federal reserve system one reason that state chartered banks may decide to refrain from membership is that regulation can be less onerous some believe under the federal deposit insurance corporation fdic which oversees non member banks rather than the federal reserve banks member banks report to regional federal reserve banks depending on where they are located non member banks are only subject to state laws rather than federal laws so they may opt for less regulated operations in a state like north dakota in addition they are able to keep at least a part of their reserves in interest bearing securities non member banks like members still receive services from the federal reserve system including check clearing electronic funds movements and automated clearing house payments becoming a member is only a matter of submitting an application fulfilling the requirements and going through a waiting period some non member banks deliberate on this decision carefully and engage in the process in measured steps if they believe that being a member is ultimately more beneficial than remaining a non member there are also examples of in extreme cases non member banks deciding to change their status to take advantage of certain benefits of becoming part of the u s federal reserve system examples of non member banksin 2008 some non member banks fled into the arms of the federal reserve system for protection such was the case with investment bank goldman sachs which faced economic uncertainty during the financial crisis in 2008 the investment bank humbly sought and received member status to access the fed s discount window and begin taking government guaranteed deposits from the public in a press release heralding its new status the bank spun it this way we believe that goldman sachs under federal reserve supervision will be regarded as an even more secure institution with an exceptionally clean balance sheet and a greater diversity of funding sources other examples of non member banks include the bank of the west gmac bank and the bank of north dakota 