Member Bank

A member bank describes a bank that is recognized as being part of the Federal Reserve System. In order to be considered a member bank, a bank must be willing to meet and maintain certain requirements outlined by the Federal Reserve System. It must purchase stock in the Federal Reserve which must be allocated in a certain manner. It must maintain a certain percentage of its deposits in its vaults and another percentage at the Federal Reserve branch in its district. Such deposits help ensure member banks have the necessary resources (currency) on hand, every day, to handle the financial transactions that might arise.