National Banks

National Banks

The National Bank Act limits the activities of national banks to those deemed “incidental to its organization.” These activities include collecting deposits and making loans; buying, selling and circulating currency; holding real estate; providing fiduciary services; and trading certain securities for clients. The Comptroller of the Currency has discretion to allow other activities that may be considered “incidental” to banking.

Activities authorized by the OCC under this provision include selling credit life insurance; offering banking-related data processing services; issuing credit cards; acting as leasing agents for personal property; warehousing and servicing loans; assisting customers in tax preparation; operating postal substations; acting as payroll issuers; maintaining business records for customers; and providing consulting and auditing services for other banks. National banks can also verify and collect on checks and credit cards for third parties, provide bill payment services, offer economic analysis and forecasts to customers, and develop financial computer software for sale to other banks and customers. National banks in towns of fewer than 5,000 people may sell insurance, and the OCC has recently authorized national bank sales of other uninsured products (e.g., mutual funds and annuities) as well.

The 1933 Banking Acts also known as Glass-Steagall, prohibits national banks from affiliating with commercial firms or engaging in securities activities. Glass-Steagall permits three investment banking activities for national banks: agency activities, restricted purchases for the bank’s own account, and free dealing in certain government securities.