The definition of the National Bank meaning varies by country. In the United States, all private banks that operate in a specific area are called national banks. Know that a bank doesn’t have to operate nationally in order to be recognized as the national bank. In many countries, the word national bank is used interchangeably with the central bank. Many financial institutions have the word “National Bank” in their names, for example - National Bank of Canada. Just because the bank has this term in its name doesn’t mean it operates nationally or is the central bank of the country. In fact, the National Bank of Canada is a private bank that operates in Montreal. Central banks are in charge of developing the monetary rules and policies for the Economy.
This financial institution plays a pivotal role in planning the country’s Financial System. It is important for the countries to have a national bank that brings stability to the monetary system during the Recession period. Whether it is the bank hired by the Federal Reserve or a central bank, all economies need a dedicated financial institution that takes responsibility for establishing certain financial standards for the country.
A national bank is also responsible for facilitating the regular monetary transactions between different banks. In the United States, all the commercial banks owned by private corporations are classified as national banks. Some of the most popular national banks in the US are PNC Bank, Bank of America, Capital One, Citibank, Chase Bank, Wells Fargo, and so on.
The history of the first national bank in the US dates back to 1797 when the first secretary of the US Treasury decided to build a bank in the country. Constructed in Pennsylvania, the project got completed in 1797. In fact, the US first national bank was declared a historic landmark. The construction of the national bank was one of the four major financial innovations of the late 70s. The other three includes mint, the introduction of the federal tax, and state war debts.
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Alexander Hamilton happens to be the very first secretary of the United States Treasury. He was the one who took the initiative of establishing the national bank and implementing federal excise tax. The main objective of the secretary of the US Treasury was to stabilize the financial condition of the country and find a solution for the fiat currency issues.
As mentioned, national banks are not necessarily the commercial banks of the state. It can also imply the central bank that controls all the banks in the economy. Swiss National Bank and the National Australia Bank are the perfect examples of the national banks located outside America. The former is considered to be one of the four main banks of Australia. It has approx 1500 branches, located in different parts of the nation. The Swiss National Bank, on the other hand, is in charge of establishing the monetary policies for the country. It also issues Swiss Franc Banknotes.