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In the United States, a state bank is a bank which is chartered with the state, not the federal government. For most bank customers, there is little functional difference between a state bank and a federal bank. Both are subject to regulations which protect consumers, both are supervised by government officials, and both can offer a range of banking services. Many state banks operate functionally like federal banks and sometimes it is difficult to tell the difference just by comparing services offered.
One key difference between a state bank and a federal bank is that state banks are often not involved in the creation of monetary policy, and they do not have to belong to the Federal Reserve. Banks can also opt to receive some Fed services, but not to be full Federal Reserve members. Most state banks are, however, supervised by the Federal Deposit Insurance Corporation (FDIC) which protects funds on deposit.
State banks file their charters with state regulatory agencies, and their activities are supervised by the state. They can perform a variety of commercial banking opportunities, including making loans, and some also offer other financial services like insurance. State banks sometimes have more latitude in the kinds of services they offer, and this may be viewed as an advantage for customers who would like the opportunity to meet their financial needs in one location instead of several.
A state chartered bank is authorized to offer a wide array of services, and can be subject to auditing and other interventions from government regulators if there are concerns that the bank is not functioning properly. In addition, a state bank may be encouraged to offer more community-based services, serving as a bank which benefits the community it is located in by offering loans and other useful banking services.
When opening an account at a state bank, customers can ask to inspect the bank's records of charter, and may ask to see proof of coverage by the FDIC. It is advisable to confirm that a bank is fully chartered and in good standing, and that deposits are insured, before opening an account, taking out a loan, or engaging in other business activities, not just with a state bank, but with any bank. If consumers suspect that a bank is not operating legally or is falsifying information, this should be reported to government regulators as quickly as possible, and it can be helpful to provide supporting information and documentation.
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