I’ve always wanted to know who governs the naming of banks and the like. What criteria does an entity have to meet to earn the right to call themselves “First”, or “National”, or “State” as in
–Colorado National Bank
–First Mortgage Trust
–Florida State Credit Union
–First National Bank of Podunk
Thanks in advance. Loblolly37
IANAbanker, but I’ve heard that if you use the word “National” or “Federal”, then you HAVE to be insured by the FDIC. Everything else is free game.
It used to be that the bank had to indicate how it was chartered. States had different rules than the Federal banking system.
In New York, for instance, “National” indicated a national charter. “State” would indicate a state charter. Nothing in the title (e.g., “North Fork Bank and Trust”) indicated a commercial bank. Savings banks – which are like S&L’s but don’t exist in most other states – had to include “Savings” in the title. (It used to be Savings banks could pay an extra quarter percent interest, but that may have been changed).
A “credit union” is under a different charter than a bank. Credit Unions are owned by their depositors, and usually require that members be within a specific group – for example, public employees (though the rules allow you to join if you’re related to a member of the qualifying group). For instance, my brother-in-law works for the state, which is good enough for the State Employee’s Federal Credit Union.
As for your examples:
–Colorado National Bank – chartered as a National bank
–First Mortgage Trust – not sure, but probably state chartered.
–Florida State Credit Union – Credit union charter
–First National Bank of Podunk – National charter.
No matter what the charter, banks are insured by the FDIC. Credit Unions are insured by the FCUIC, which works the same way.
I’m not sure of all the details, but I don’t believe that is accurate.
In addition to the commercial banks (FDIC) and the credit unions (FCUIC) the Savings and Loans used to be insured by the FSLIC. When that all went to hell, a lot of Savings and Loans institutions were reorganized and the FSLIC was placed under FDIC management under something called SAIF.
However, I am not aware of a law that requires a state chartered bank to seek insurance through the FDIC.
There is no legal requirement for a bank to be a member of the Federal Deposit Insurance Corporation. The FDIC is basically a self funded insurance pool. Members pay a premium based on a percentage of deposits they hold (really much more complicated than that, but it’ll do for now). The premium percentages can change based on reserve requirements at FDIC. If the pool is huge, rates go down. If a few banks fail, the pool gets smaller, rates go up.
That said, I don’t know of any banks in this area, state or nationally chartered, which do not participate. While not legally mandated, not participating would be a marketing nightmare that would be difficult to overcome. Consumers have grown to expect FDIC coverage on their depsits.
Look for the union, er, FDIC label!
That’s my New York state bias; there are no S&Ls in New York. Instead, there are Savings Banks, which are FDIC insured.
Banks used to be charter for the city in which they operated. As a local (for me) example: First National Bank of St. Paul was the first St. Paul bank chartered. Then came the Second National Bank of St. Paul (which became Northwest National Bank, which became Norwest, which became Wells Fargo). But most banks didn’t want to be considered “second” to any other bank and most second (third, fourth…) banks changed their names later. Also the First National Bank of St. Paul was (orginally) unrelated to the First National Bank of Minneapolis, they later came under the same ownership and became Fist Bank, N.A. They later bought the afore mentioned Colorada National Bank but couldn’t use the “First Bank” name because there already was a First National Bank of Colorado, of Denver, of Boulder and all the other major cities so they had to stay Colorado National after the buyout. They are now U.S. Bank.
Isn’t bureaucracy a wonderful thing?