Have you ever wondered why your bank's official name has the letters "NA" after it (e.g., "Citibank, NA")? Read on.

NA (generally written with no 'dots',and always allcaps, despite this node's title), is a banking term used since the mid-1800's to designate a bank as a National Association in the United States. This designation is necessary because the United States has a dual banking system, in which both the federal government and individual states may issue charters to new banks. The distinction between state and national banks used to make a bigger difference in regulations than it does today, because the national and state authorities and laws used to regulate financial institutions in much different ways.

Most of the differences between state-chartered and nationally-chartered banks have disappeared now, and banking practices have become increasingly uniform since the Great Depression. So why do the two types of charters (and the "NA" desingation, as a result), persist? Because a few important differences still remain for state-issued bank charters:

  • The regulations involved in state charters are less expensive for a bank to adhere to. Immensely so; in one example I found, that of a bank in Kentucky, the yearly expense to a bank for regulation and oversight would have been five times as much if they had gone with a national charter.

  • The business relationships between financial institution executives and regulators are easier to establish at the state level, partly because of simple geography. National banks are overseen by agencies headquartered in Washington, DC -- a faraway land from the viewpoints of many. Meanwhile, state banks are primarily (but not exclusively) overseen by agencies headquartered in the chartering state. This is not to suggest that there is ever any favoritism or racketeering involved in bank regulation [cough], but it can't hurt to have a good professional relationship with the people who could send you away for honest mistakes.

  • Several states do not require their banks to maintain insurance with the Federal Deposit Insurance Corporation (the "FDIC"). That's an important thing to remember when opening an account.

  • It is generally simpler for a national bank to open branches in other states. However, state-chartered banks can open branches in other states too -- there's just a bit more beauracracy involved.

The above differences notwithstanding, every legally-operating state-chartered bank in the United States is overseen and regulated in many ways by the Federal government, even if such bank is not a member of the FDIC. It will not surprise me if the future brings even more uniformity to banking laws across the country, perhaps at the expense of state autonomy.