The term national bank refers to a private bank that operates on a national scale, typically under the supervision of a centralized authority. While in developing countries the term national bank was synonymous with a country’s central bank, this is no longer the case.
Within today’s financial system, a national bank is a privately-owned bank that operates on a national basis, thereby distinguishing itself from local and regional banks. In many countries, the national bank will also operate under the guidance and supervision of the country’s central banking system.
The operating scale of a national bank plays a critical role in establishing an efficient banking system. This is accomplished by fostering lending and savings competition with regional and local banks. They also maintain a complex communication network that can facilitate transactions with the country’s central bank.