Presented by

1.Tahniyat Sultana Prova 16-017 2.Tanvir Ahmed 16-009

3.Morium Akhter 16-0024.Sanjida Islam Khan 16-0185.Md.Farhadul Islam 16-066

Bank Structure And Regulation In The USA

Central bank & supervisory functions have evolved to create US banking & financial structure.

Uniqueness: 1. far more inclined to seek statutory

remedies2. Protection of small depositors3. Potential collusion among banks and

between banksStriking feature:Large number of banks

Community bank-having assets less than $1 billion

Regional or super banks-having assets in excess $1 billion

Credit union- owned by members (employees, police & fire associations)

Insurance firms and finance companies- consisting sales finance firms, personal credit firms.

Federal Reserve Act,1913 The act allowed the FSB to provide an “elastic”

currency Adjusted it requirements in 1934 Encourage “oligopolistic” banking Federal Reserve System - one of several regulators Must obtain a state charter granted by superintendent

of Banks Cost of FRS – bank examination

Evaluates banks from the CAMEL score system:

1. C : capital adequacy

2. A : asset quality

3. M : management quality

4. E : earnings performance

5. L : liquidity Bank scoring 1-2 are satisfactory Bank scoring between 3-5 need additional supervision Bank scoring 4/5 are closly monitored

Member bank of FRS must meet a 1 tier capita asset or leverage ratio of at least 5%

Leverage ration:

= Tier 1 capital (equity capital+long term funds) Total asset

State supervisors:1. The state of New York Banking Department

2. The different regional banks.etc

The Glass Steagall Act,separated commercial and investment banking in 1933

Commercial bank:

Severly curtailed to underwriting and dealing in municipal govt. debt.

Investment bank:engage in securities and underwriting but prohibited from taking

deposit.

Prevented the possibility of collusion between bank and customer.

Until the 1960s, Bank holding companies were controlling about 15% of total bank deposits.

By the 1990s, 92%of banks were owned by BHCs. Only pure owned banking subsidiaries were

required to conform to banking regulations.

Until the 1960s, Bank holding companies were controlling about 15% of total bank deposits.

By the 1990s, 92%of banks were owned by BHCs. Only pure owned banking subsidiaries were

required to conform to banking regulations.

Defined a BHC as any firm holding at least 25% of the voting stock of a bank subsidiary

Required BHCs to be registered with the Federal Reserve.

By granting BHCs legal status, it encouraged their growth.

BHCs could circumvent the interstate branching laws via ‘multi-bank’ holding companies.

Defined a BHC as any firm holding at least 25% of the voting stock of a bank subsidiary

Required BHCs to be registered with the Federal Reserve.

By granting BHCs legal status, it encouraged their growth.

BHCs could circumvent the interstate branching laws via ‘multi-bank’ holding companies.

Tried to limit BHCs to offering banking product and engaging in non-banking financial activities.

In 1987, the Federal allowed BHCs to create section 20 subsidiaries .

o Under the GBL Act, US bank holding companies can convert into Financial Holding Companies.

o Supervision of the FHCs is functional ; Insurance firms-department of Trade &

Industry Investment bank-Securities & Exchange

Commission Banking Subsidiaries-Federal reserve Bank.

FHCs fall into the restricted universal category, and the restrictions are-

As , subsidiaries , they must be separately capitalized.

The cross-share ownership of non-financial firms is largely prohibited.

In the USA, BHC/FHCs may not own more than 5% of a commercial concern.

A bank can sell but may not underwrite insurance

Since 1933 legislation means the regulation of branching was largely a matter for individual states and as result each state had different degrees of restriction.

BHCs might establish bank subsidiaries in each states which has to be separately capitalized.

In the US a customer with an account at the subsidiary of a BHC in one state can not bank at another subsidiary of the same BHC

Riegle neal interstate banking & branching efficiency Act-

The Act allowed all US banks to acquire bank in other states from September 1995.

Any out of state bank taken over by another bank can be converted into branch

The Fed has a final say over interstate bank acquisition-

To prevent excessive concentration BHC & FHC may not hold more than 30% of total deposits in any given state and 10% nationally.

Branching across states comes just when bank in other countries are cutting back on bank branches.

It is an important of US system since the Federal Deposit Insurance Corporation was set up.

The FDIC was created to protect small depositors from ever experiencing the losses.

99% of US bank representeting 99.8% of deposits. A system of 100% deposit insurance is the only

way to stop banks being threatened from run by depositors.

in 1991, FDIC improvement Act was passed by congress to reform the rule of FDIC.

The Act requires the FDIC to take prompt corrective action should a bank fail to meet the criteria for being well capitalized.

The International Banking Act(1978):

Eliminated difference between domestic & foreign bank

Banks are bound by McFadden Bank Holding Company Glass Steagall acts

Foreign Bank branches and agencies were to be regulated by Fed

Foreign subsidiaries could apply for a federal charter ,which give them access to

Discount window, Cheque collection & clearing

Reserve requirements imposed on all federal & state licensed foreign bank branches & agencies

A parent with more than $1 billion in international assets

To establish uniform federal standards for entry & expansion of foreign banks in USA

Ensure that foreign bank operation are regulated, supervised & examined in the same way as US banks

Gave the Fed the right to close any foreign bank which violates US laws Or if bank’s home country regulation is deemed inadequate

Us banking activities are regulated by the Federal Reserve

Us banks require to seek permission to open foreign branches

Edge act corporations in financial activities like Leasing Trust business Insurance Data processing Securities & dealing in money market funds

Tiring to regulate bank interest rate Rapidly change technology and financial Innovation. Domestic banks provided the foreign country applies

the principle of equal treatment. More Important, the RN branching(1994)and GLB

financial Modernization act. Few barriers to prevent the development of a nation

wide banking system

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