How to Become a Member

State chartered banks that elect Federal Reserve membership are referred to as "state member banks." Each state member bank must subscribe to capital stock in the Federal Reserve Bank of its district in an amount equal to six percent of its combined capital and surplus (but excluding retained earnings). However, only three percent must be paid-in, and the remaining three percent is on call. The paid-in portion currently earns an annual dividend of six percent.

Federal Reserve discount window and other services are available to all financial institutions on an equivalent basis. However, there are certain other unique considerations to being a member of the Federal Reserve System, including:

the reduction of federal supervisors from two to one in those situations involving a bank holding company organization;
the ability to engage in activities to the same extent as national banks, unless restricted by applicable state laws and regulations;
the absence of any fees charged in connection with Federal Reserve examinations and application filings; and
the privilege of voting for directors of the Federal Reserve Bank and eligibility for service as a director.

Any of the following institutions may file an application for membership:

a newly organizing state bank (de novo);
an existing state nonmember bank;
an existing national bank that seeks to convert to a state charter and continue as a member bank; or
a thrift or other depository institution converting to a state bank charter and desiring to become a member bank.

The Federal Reserve considers the following factors when reviewing an application for membership:

the financial history and condition of the applying bank and the general character of its management;
the adequacy of the bank’s capital structure, taking into account the character and condition of its assets, its existing and prospective deposit liabilities and other corporate responsibilities and its future earnings prospects. (Note: A de novo bank must provide projections demonstrating that the initial capitalization is adequate to maintain a leverage ratio of at least 9 percent throughout the first three years of operations.)
the convenience and needs of the community to be served by the bank; and
whether its corporate powers are consistent with the purposes of the Federal Reserve Act, that is, whether the institution is primarily engaged in the business of banking.

Before submitting a membership application, we encourage applicants to contact Reserve Bank staff so that we may determine whether a pre-membership examination of the applying institution is necessary. The examination may be waived depending on the recency of the latest examination by the current supervisor, the rating assigned, and the size of the institution. If the applying institution is a de novo bank, it should obtain preliminary charter approval from the state banking department before filing a final application with the Reserve Bank.

Our Reserve Bank staff is available to provide guidance and assistance prior to submission of an application. We would also be pleased to arrange meetings with bank officers, directors, organizers, or advisers, to discuss Federal Reserve membership.

In the event that you have any questions regarding the membership process, please call:

William L. Gaunt, Assistant Vice President (215) 574-6167

Judy Lynn, Applications Analyst (215) 574-6171

Lisa R. Williams, Supervising Examiner (215) 574-6046

Sheila V. Slater, Examiner (215) 574-6477

How to Become a Member

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