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Encyclopedia > Bank regulation

Bank regulations are a form of government regulation which subject banks to certain requirements, restrictions and guidelines, aiming to uphold the soundness and integrity of the financial system. Image File history File links Gnome-globe. ... Image File history File links This is a lossless scalable vector image. ... For other uses, see Bank (disambiguation). ... The Global Financial System refers to those financial institutions and regulations that act on the international level, as opposed to those that act on a national or regional level. ...


General Principles of Bank Regulation

Banking regulations can vary widely across nations and jurisdictions. Most countries' bank regulations however address certain similar policy goals and requirements. This section of the article describes general principles of bank regulation throughout the world. The following sections address specific banking requirements in the United States and other countries.

Reserve requirement

Main article: Reserve requirement

The reserve requirement sets the minimum reserves each bank must hold to customer deposits and notes. This type of regulation has perhaps lost the role it once had in places like the United States. In 2004 deposits in United States banks were roughly $8 trillion while central bank "reserves of depository institutions" were less than $50 billion. This is because reserve requirements apply to just transaction deposits today. The reserve requirement (or required reserve ratio) is a government regulation, that sets the minimum reserves each bank must hold to customer deposits and notes. ... Bank reserves are banks holdings of deposits in accounts with their central bank (for instance the European Central Bank or the Federal Reserve, in the later case called federal funds), plus currency that is physically held in banks vaults (vault cash). ... For other uses, see Bank (disambiguation). ... This article does not cite any references or sources. ... Bank deposits are the large part of the money supply. They come in different types depending on withdrawal restrictions. ... In the United States transactions deposit is a term used by the Federal Reserve for checkable deposits and other accounts that can be used directly as cash without withdrawal limits or restrictions. ...

Reserve requirements serve monetary policy goals by limiting the growth and supply of money. The higher a bank's reserve requirement is, the more money it must hold in reserve and thus cannot lend (which would thereby create new money). Reserve requirements also serve a safety and soundness role by acting as a cushion in case of a severe recession that leads to a "bank run." See the description of "Regulation D" above for more specific information on regulatory reserve requriements for US banks. Theatrical promotional poster depicting a bank run A bank run is a type of financial crisis. ...

Capital requirement

Main article: Capital requirement

The capital requirement sets a framework on how banks and depository institutions must handle their capital in relation to their assets. Internationally, the Bank for International Settlements' Basel Committee on Banking Supervision influences each country's capital requirements. In 1988, the Committee decided to introduce a capital measurement system commonly referred to as the Basel Capital Accords. The latest capital adequacy framework is commonly known as Basel II. Most developed countries do not adjust the capital adequacy ratios to their yearly inflation rates, therefore eroding their lending capacity, year after year. This has promoted the growth of Junk Bonds, hedge funds and private equity as prime lenders, without the customary lending standards. Banks have redirected their dying business to services, high yield consumer credit, derivatives, closing credit deparments and losing credit inteligence, now restricted to two firms, S&P and Moody´s. Loans are not evaluated in terms of the % Cs of credit, but only on underlying Assets and the credit rating. The capital requirement is a bank regulation, which sets a framework on how banks and depository institutions must handle their capital. ... A depository institution is a financial institution, such as a savings bank, that is legally allowed to accept monetary deposits from consumers. ... Capital has a number of related meanings in economics, finance and accounting. ... In business and accounting an asset is anything owned which can produce future economic benefit, whether in possession or by right to take possession, by a person or a group acting together, e. ... BIS Headquarters in Basel The Bank for International Settlements (or BIS) is an international organization of central banks which exists to foster cooperation among central banks and other agencies in pursuit of monetary and financial stability. It carries out its work through subcommittees, the secretariats it hosts, and through its... Basel Committee on Banking Supervision is an institution created by the central bank Governors of the Group of Ten nations (see G-10). ... Year 1988 (MCMLXXXVIII) was a leap year starting on Friday (link displays 1988 Gregorian calendar). ... The Basel Capital Accords are a series of discussion papers issued by the Basel Committee on Banking Supervision. ... The final version aims at: Ensuring that capital allocation is more risk sensitive; Separating operational risk from credit risk, and quantifying both; Attempting to align economic and regulatory capital more closely to reduce the scope for regulatory arbitrage. ...

In the United States, "depository institutions" are subject to risk-based capital guidelines issued by the Board of Governors of the Federal Reserve System (FRB). A financial institution acts as an agent that provides financial services for its clients. ... The Federal Reserve System is headquartered in the Eccles Building on Constitution Avenue in Washington, DC. The Federal Reserve System (also the Federal Reserve; informally The Fed) is the central bank of the United States. ...

Activity and Affiliation Restrictions

More coming later.

Payments Systems Requirements

More coming later.

United States

Bank regulation in the United States is highly fragmented compared to other G10 countries where most countries have only one bank regulator. In the U.S., banking is regulated at both the federal and state level. Depending on a banking organization's charter-type and organizational structure, it may be subject to numerous federal and state banking regulators. Unlike Japan and the United Kingdom, where regulatory authority over the banking, securities and insurance industries is combined into one single financial services agency, the U.S. maintains separate securities, commodities, and insurance regulatory agencies (which are separate from the bank regulatory agencies) at the federal and state level as well. [[1]][[2]] G10 countries. ...

The U.S also has one of the most highly regulated banking environments in the world; however, many of the regulations are not safety and soundness related, but are instead focused on privacy, disclosure, fraud prevention, anti-money laundering, anti-terrorism, anti-usury lending, and promoting lending to lower-income segments. Even individual cities enact their own financial regulation laws (for example, for usury lending). Look up usury in Wiktionary, the free dictionary. ... Look up usury in Wiktionary, the free dictionary. ...

Federal Regulatory Agencies

A bank's primary federal regulator could be the Federal Deposit Insurance Corporation, the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision. And within the Federal Reserve Board, there are 12 districts centered around 12 regional Federal Reserve Banks, each of which carries out the Federal Reserve Board's bank regulatory responsibilities in its respective district. Credit Unions in the United States are subject to certain similar bank-like regulations and are supervised by the National Credit Union Administration. The FDIC logo The Federal Deposit Insurance Corporation (FDIC) is a United States government corporation created by the Glass-Steagall Act of 1933. ... The Federal Reserve System is headquartered in the Eccles Building on Constitution Avenue in Washington, DC. The Federal Reserve System (also the Federal Reserve; informally The Fed) is the central bank of the United States. ... The Office of the Comptroller of the Currency (or OCC) was established by the National Currency Act of 1863 and serves to charter, regulate, and supervise all national banks and the federal branches and agencies of foreign banks in the United States. ... The Office of Thrift Supervision (OTS), an agency in the U.S. Treasury Department, is the primary regulator of federal savings associations (sometimes referred to as federal thrifts). ... The Federal Reserve System is headquartered in the Eccles Building on Constitution Avenue in Washington, DC. The Federal Reserve System (also the Federal Reserve; informally The Fed) is the central bank of the United States. ... The National Credit Union Administration (NCUA) is the United States federal agency that charters and supervises federal credit unions and insures savings in federal and most state-chartered credit unions across the country through the National Credit Union Share Insurance Fund (NCUSIF), a federal fund backed by the full faith...

State Regulatory Agencies

State-chartered banks are also subject to the regulation and supervision of the state regulatory agency of the state in which they were chartered. State regulation of state-chartered banks applies in addition to federal regulation. For example, a California state bank that is not a member of the Federal Reserve System would be regulated by both the California Department of Financial Institutions and the FDIC. Likewise, a Nevada state bank that is a member of the Federal Reserve System would be jointly regulated by the Nevada Division of Financial Institutions and the Federal Reserve.

Federal Laws and Regulations

This portion of the article focuses on federal banking laws and regulations. State banking laws also apply to state-chartered banks and certain nonbank affiliates of federally-chartered banks.

Bank Secrecy Act

Main article: Bank Secrecy Act

The Bank Secrecy Act (or BSA) requires financial institutions to assist government agencies to detect and prevent money laundering. Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments, file reports of cash transactions exceeding $10,000 (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities. The Bank Secrecy Act (or BSA, or otherwise known as the Currency and Foreign Transactions Reporting Act) requires U.S.A. financial institutions to assist U.S. government agencies to detect and prevent money laundering. ... Bank secrecy (or bank privacy) is a legal principle under which banks are allowed to protect personal information about their customers, through the use of numbered bank accounts or otherwise. ... An agency is a department of a local or national government responsible for the oversight and administration of a specific function, such as a customs agency or a space agency. ... Money laundering is the practice of engaging in financial transactions in order to conceal the identity, source and destination of the money in question. ... A negotiable instrument is a specialized type of contract which obligates a party to pay a certain sum of money on specified terms. ... Money laundering is the practice of engaging in financial transactions in order to conceal the identity, source and destination of the money in question. ... This article contrasts tax evasion, tax avoidance, tax resistance and tax mitigation. ...

Fair Credit Reporting Act (FCRA)

More coming later. The Fair Credit Reporting Act (FCRA) is an American federal law (codified at 15 U.S.C. Â§ 1681 et seq. ...

Lending Limits

Lending limit regulations restrict the total amount of loans and credits that a bank may extend to a single borrower. This restriction is usually stated as a percentage of the bank's capital or assets. For example, a national bank generally must limit its total oustanding loans and credits to any single borrower to no more than 15% of the bank's total capital and surplus. [3] Some state banking regulations also contain similar lending limits applicable to state-chartered banks. [4] Both federal and state laws generally allow for a higher lending limit, up to 25% of capital and surplus for national banks, when the portion of the credit that exceed the initial lending limit is fully secured.

Pass Through Insurance (PTI)

More coming later.

Right to Financial Privacy Act

More coming later.

Sarbanes-Oxley Act of 2002

Main article: Sarbanes Oxley

More coming later. The Sarbanes-Oxley Act of 2002 (107 H.R. 3763), signed into law on 30 July 2002, is considered the most significant change to federal securities laws in the United States since the New Deal. ...


Main article: USA PATRIOT Act

More coming later. The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56), known as the USA PATRIOT Act or simply the Patriot Act, is an Act of Congress which U.S. President George W. Bush signed into law on October...

Federal Reserve regulations

Regulation A - Extensions of Credit by Federal Reserve Banks

This regulation establishes rules regarding extensions of credit made by a Federal Reserve Bank to banks and other institutions (i.e., "discount window lending"). The Federal Reserve Board made significant amendments to Regulation A in 2003 including amendments to price certain discount window lending at above-market rates and to restrict borrowing to banks in generally sound condition. In amending the regulation, the Federal Reserve Board noted that many banks had expressed their unwillingness to use discount window borrowing because their use of such a funding source was interpreted as sign of the bank's financial weakness or distress. The Federal Reserve Board indicated its hope that the 2003 amendments would make discount window lending a more attractive funding option to banks. [5][6][7]

Regulation B - Equal Credit Opporunity
Main article: Equal Credit Opportunity Act

More coming later. The Equal Credit Opportunity Act (ECOA) is a United States law that states that creditors must evaluate candidates based on credit worthiness only, not on factors that have nothing to do with their ability to repay the debt. ...

Regulation C - Home Mortgage Disclosure Act (HMDA)

The HMDA requires financial institutions to maintain and annually disclose data about home purchases, home purchase pre-approvals, home improvement, and refinance applications involving 1 to 4 unit and multifamily dwellings. It also requires branches and loan centers to display an HMDA poster. The Home Mortgage Disclosure Act (or HMDA) was passed in 1975. ...

Regulation D - Reserve Requirements for Depository Institutions
  • Establishes reserve requirement guidelines.
  • Regulates certain early withdrawals from certificate of deposit accounts.
  • Defines what qualifies as DDA/NOW accounts. See Reg. Q to see eligibility rules for interest-bearing checking accounts.
  • Defines limitations on certain withdrawals on savings and money market accounts.
    • Unlimited transfers or withdrawals if made in person, by ATM, by mail, or by messenger.
    • In all other instances, there is a limit of six (6) transfers or withdrawals. No more than three (3) of these transactions may be made payable to a third party (by check, draft, point-of-sale, etc.).
    • Some banks will charge a fee with each excess transaction
    • Bank must close accounts where this transaction limit is constantly exceeded

A certificate of deposit or CD is a time deposit, a financial product commonly offered to consumers by banks, thrift institutions, and credit unions. ...

Regulation E - Electronic Funds Transfer Act

There are very few or no other articles that link to this one. ...

Regulation F - Limitations on Interbank Liabilities

More coming later.

Regulation O - Loans to Insiders

Regulation O establishes varying quantitative and qualitative limits and reporting requirements on extensions of credit made by a bank to its "insiders" or the insiders of the bank's affiliates. The term "insiders" includes executive officers, directors, principal shareholders and the related interests of such parties. [8][9]

Regulation P - Privacy of Consumer Financial Information

More coming later

Regulation Q - Prohibition Against Payment of Interest on Certain Deposit Account Types

Regulation Q prohibits banks from paying interest on demand deposit accounts. A "demand deposit" account includes many, but not all checking accounts. Banks, however, may pay interest on "negotiable on withdrawal"-type checking accounts ("NOW accounts") offered to consumers and certain entities (but not commercial enterprises other than sole-proprietors). [10]

Regulation W - Transactions Between Member Banks and Their Affiliates

Regulation W establishes quantitative and qualitative requirements for loans, purchases of assets, and other transactions between banks and their affiliates. The term "affiliate" is broadly defined and includes parent companies, companies that share a parent company with the bank, companies that are under other types of common control with the bank (e.g. by a trust), companies with interlocking directors (a majority of directors, trustees, etc. are the same as a majority of the bank's), subsidiaries, and certain other types of companies.

Regulation AA - Unfair or Deceptive Acts or Practices

More coming later.

Regulation BB - Community Reinvestment Act (CRA)
  • Insured depository institutions are required to reinvest in the communities they serve. There should be an emphasis on low to moderate income (LMI) neighborhoods.
  • Insured depository institutions must display a CRA notice
  • Each branch must have a current CRA public file. It must be shown upon request.

The Community Reinvestment Act (or CRA, Pub. ...

Regulation CC - Expedited Funds Availability Act
  • Defines when standard holds and exception holds can be placed on check deposits, and defines the maximum length of time the money can be held.
    • Deposits made in person and meeting certain requirements must be made available by the next business day.
    • $100 from each deposit on hold is immediately available
    • Standard holds
      • The first $4,900: 2 business days
      • The remaining amount over $5,000: 7 business days
    • Exception Holds
      • The first $4,900: 5 business days
      • The remaining amount over $5,000: 11 business days
    • Special Check Deposits, including guaranteed items such as cashiers checks
      • The first $5,000 must be made available immediately
  • A bank's hold policy can be less stringent than the guidelines outlined in Reg. CC, but it cannot exceed the guidelines.

The Expedited Funds Availability Act (EFA or EFAA) was enacted in 1987 by the United States Congress for the purpose of standardizing hold periods on deposits made to commercial banks and to regulate institutions use of deposit holds. ... Bank deposits are the large part of the money supply. They come in different types depending on withdrawal restrictions. ... A cashiers check (also known as a bank check, official check, tellers check, bank draft or treasurers check) is a check guaranteed by a bank. ...

Regulation DD - Truth in Savings Act
Main article: Truth in Savings Act

The purpose of this part is to enable consumers to make informed decisions about accounts at depository institutions. This part requires depository institutions to provide disclosures so that consumers can make meaningful comparisons among depository institutions. This regulation is not applicable to credit unions. The Truth in Savings Act (also known by the acronym TISA) is a United States federal law that was passed on December 19, 1991. ... A credit union is a cooperative financial institution that is owned and controlled by its members. ...

  • Part 230 -- Truth in Savings (pdf)

Preemption of State Banking Laws

By statute and judicial interpretation of statutes and the United States Constitution, federal banking statutes and the regulations and other guidance issued by federal banking regulatory agencies often preempt state laws that would regulate certain activities of nationally chartered banking institutions and their subsidiaries. Specific exceptions to the general rule of federal preemption exist, e.g. some contract law, escheat law, and insurance law.

OTS Preemption of State Law

Fiduciary Activities of Savings and Loans, or Thrifts

One example of OTS Preemption begins with Section 550.136(a) of the OTS Regulations, providing that “. . . OTS occupies the field of the regulation of the fiduciary activities of Federal savings associations . . .. Accordingly, Federal savings associations may exercise fiduciary powers as authorized under Federal law, including this part, without regard to State laws that purport to regulate or otherwise affect their fiduciary activities, except to the extent provided in 12 U.S.C. § 1464(n) . . . or in paragraph (c) of this section.” 12 U.S.C. § 1464(n), authorizes fiduciary activities for federal savings associations, and specifies certain state law requirements that are applicable to federal savings associations. Section 550.136(c) lists six types of state laws that in certain specified circumstances are not preempted with respect to Federal savings associations

See also

Anti-money laundering is a term mainly used in the finance and legal industries to describe the legal controls that require financial institutions and other regulated entities to prevent or report money laundering activities. ... Financial supervision is government supervision of financial institutions by regulators. ... ISO 4217 is the international standard describing three letter codes (also known as the currency code) to define the names of currencies established by the International Organization for Standardization (ISO). ... ISO 6166 defines the structure of an International Securities Identifying Number (ISIN). ... ISO 9362 (also known as BIC code or SWIFT code) is a standard format of Bank Identifier Codes approved by the International Organization for Standardization. ... ISO 10962 is the CFI (Classification of Financial Instruments) code maintained by the International Organization for Standardization (ISO). ... This article needs to be cleaned up to conform to a higher standard of quality. ... It has been suggested that monetary theory be merged into this article or section. ... This article is about short-term financing. ...

External links

Reserve requirements

  • Reserve Requirements - Fedpoints - Federal Reserve Bank of New York

Capital requirements

Agenda from ISO

  • ISO/TR 17944

ISO has many meanings: Iso is the stem of the Latin transliteration of the Greek word ίσος (ísos, meaning equal). The iso- prefix in English derives from this and means equality or similarity. ...

Various Countries


  • Israeli Banking Law

  Results from FactBites:
Bank regulation - Wikipedia, the free encyclopedia (802 words)
Bank regulations are a form of government regulation which subjects banks to certain requirements, restrictions and guidelines, aiming to uphold the soundness and integrity of the financial system.
Regulates certain early withdrawals from certificate of deposit accounts.
In 2004 deposits in United States banks were roughly $8 trillion while central bank "reserves of depository institutions" were less than $50 billion.
Bank - Wikipedia, the free encyclopedia (2208 words)
The Bank of Taiwan in Taipei, Republic of China was formerly the central bank of Taiwan Province and issued the New Taiwan dollar.
Banking licenses are granted by bank regulatory authorities and provide rights to conduct the most fundamental banking services such as accepting deposits and making loans.
Bank reserves are typically kept in the form of a deposit with a central bank.
  More results at FactBites »



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