Nonmember Bank

Nonmember bank

Depository institution that is not a member of the Federal Reserve System. Specifically, a state-chartered commercial bank that has elected not to join the System.

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Nonmember Bank

In the United States, a state-chartered bank that has opted not to join the Federal Reserve System. Such banks are required to place a certain number of their accounts at a Federal Reserve Bank so as to meet reserve requirements. However, nonmember banks allowed access to the Federal Reserve's discount window are not required to purchase stock in the Federal Reserve. In general, nonmember banks are less regulated than member banks. For example, they are allowed to keep at least a portion of their reserves in interest-bearing securities. They are subject only to the laws of the states in which they are chartered.