《金融市场与机构 Jeff Madura》ch18.pptVIP

18 Bank Regulation Chapter Objectives Describe the key regulations imposed on commercial banks Explain development of bank regulation over time Evaluate the areas of bank regulation Describe the main provisions of the Financial Services Modernization Act of 1999 Background Banking industry has experienced tremendous change in recent years Post-Depression legislation focused on safety and soundness of commercial banks Deregulation of financial services industry Intense competition/consolidation Expansion--economies of scale Why Banks Are Regulated? Deposits are 70% of money supply Center of payments mechanism Primary transmitter of monetary policy Major liquidity provider to economy Make loans Deposits are liquid assets of customers Liabilities are major, low risk assets of consumers Regulatory Structure The regulatory structure of the banking system in the U.S. is unique Dual banking system: Federal and State Charter State charter = state bank Regulated by state banking agency Federal charter = national bank Regulated by Comptroller of the Currency Regulatory Structure Banks that are members of the Federal Reserve are also regulated by the Fed Banks that are insured by the Federal Deposit Insurance Corporation are also regulated by the FDIC Regulatory overlap: FDIC Federal Reserve System State banking authorities Now Securities and Exchange Commission--stock Regulatory Structure Regulation of bank ownership Bank independently owned Bank owned by a holding company Popularity stems from amendments to the Bank Holding Company Act in 1970 Allowed BHC’s more flexibility to participate in activities like leasing, mortgage banking, and data processing, and later, Insurance, securities underwriting, etc. Deregulation Act of 1980 Initiated to reduce bank regulations and increase Fed monetary policy effectiveness Also known as DIDMCA Phase out of deposit rate ceilings Interest rate ceilings were previously enforced by Regulation Q. Phased out by 1986 The act allowed bank