Question

Answer the question in 400 words.

What is the dual banking System? is it relevant today?

Answer 1

A dual banking system followed in the United States in which both state as well as national banks are chartered and supervised at different levels. National/Federal agencies and State agencies are responsible for chartering and supervising national and state banks respectively. It was born during Civil war Period.

Examples of Federal Bank- Bank of America, Chase, Goldman Sachs.

Examples of State bank- SunTrust, Fifth Third bank, Bank of the west etc.

A bank can opt to become a member of the Federal Reserve(eg. SunTrust) if it meets certain requirements (and, generally, larger banks choose this option) to gain certain advantages such as greater access to capital and stock. Today, when credit lending limits have been regulated by central banks and differences in regulations from state to state, It is somewhat required for the banking system. Central Banks keep in mind the economies of scale and design policies best in nation's interest. State banks however, are flexible to the unique needs of customers of their state.

So, It is relevant today to maintain a balance between the state and National Interest as well as better credit lending and regulatory framework.