What distinguishes a national bank from a state bank?

National banks are distinct because they operate under charters granted by the federal government, specifically the Office of the Comptroller of the Currency (OCC). This federal charter allows national banks to engage in a variety of banking activities and provides them with certain privileges, such as the ability to issue national bank notes. As federally chartered institutions, they are also subject to federal regulatory oversight and standards, including capital requirements and safety and soundness regulations.

In contrast, state banks are chartered by the individual states in which they operate. They are regulated by state banking authorities and can choose to be members of the Federal Reserve system, which subjects them to additional regulations. However, they do not fall under the jurisdiction of the OCC like national banks do. Understanding this difference highlights the regulatory environment and operational frameworks that govern these two types of banking institutions.