In this chapter, the following content will be discussed: Background, regulatory structure, deregulation act of 1980, Garn-St Germain act, regulation of deposit insurance, regulation of capital, regulation of operations, regulation of interstate expansion, how regulators monitor banks, the “too-big-to-fail” issue, global bank regulations. | Chapter 18 Bank Regulation Financial Markets and Institutions, 7e, Jeff Madura Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved. Chapter Outline Background Regulatory structure Deregulation Act of 1980 Garn-St Germain Act Regulation of deposit insurance Regulation of capital Regulation of operations Regulation of interstate expansion How regulators monitor banks The “too-big-to-fail” issue Global bank regulations Background The banking industry has become more competitive due to deregulation Banks have more flexibility on the services they offer, the locations where they operate, and the rates they pay depositors Banks have recognized the potential benefits from economies of scale and scope Bank regulation is needed to protect customers who supply funds to the banking system Regulators are shifting more of the burden of risk assessment to the individual banks themselves Regulatory Structure The . has a dual banking system consisting of federal and state regulation Three federal and fifty state agencies supervise the banking system A federal or state charter is required to open a commercial bank National versus state banks Federal charters are issued by the Comptroller of the Currency State banks may decide to become members of the Fed 35 percent of all banks are members of the Fed, comprising 70 percent of deposits Regulatory Structure (cont’d) Regulatory overlap National banks are regulated by the Comptroller of the Currency, the Fed, and the FDIC State banks are regulated by the state agency, the Fed, and the FDIC Perhaps a single regulatory agency should be assigned the role of regulating all commercial banks and savings institutions Regulatory Structure (cont’d) Regulation of bank ownership Commercial banks can be either independently owned or owned by a bank holding company Most banks are owned by BHCs BHCs have more potential for product diversification because of amendments to the Bank Holding Company . | Chapter 18 Bank Regulation Financial Markets and Institutions, 7e, Jeff Madura Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved. Chapter Outline Background Regulatory structure Deregulation Act of 1980 Garn-St Germain Act Regulation of deposit insurance Regulation of capital Regulation of operations Regulation of interstate expansion How regulators monitor banks The “too-big-to-fail” issue Global bank regulations Background The banking industry has become more competitive due to deregulation Banks have more flexibility on the services they offer, the locations where they operate, and the rates they pay depositors Banks have recognized the potential benefits from economies of scale and scope Bank regulation is needed to protect customers who supply funds to the banking system Regulators are shifting more of the burden of risk assessment to the individual banks themselves Regulatory Structure The . has a dual banking system consisting of .
