Bank regulation in the United States

The United States was the second country (after Czechoslovakia)[9] to officially enact deposit insurance to protect depositors from losses by insolvent banks. In 1933 the Glass–Steagall Act established the Federal Deposit Insurance Corporation (FDIC) to insure deposits at commercial banks.

In 1970 Congress established a separate fund for credit unions, the National Credit Union Share Insurance Fund. The NCUSIF insures all federally chartered credit unions and many state-chartered credit unions (98% as of 2009).[10] Some others are insured by the private guaranty corporation American Share Insurance (156 as of 2009).[10] In 1978 foreign banks operating in the United States were required to hold the same level of reserves under the specifications of the International Banking Act.[11][12]

In 1934, Congress created the Federal Savings and Loan Insurance Corporation to insure savings and loan deposits. In the 1980s, during the savings and loan crisis, the FSLIC became insolvent and was abolished; its responsibility was transferred to the FDIC.

Some financial institutions offer insurance in excess of FDIC or NCUA limits. For example, the Depositors Insurance Fund insures excess deposits at Massachusetts-chartered savings banks. American Share Insurance provides excess share insurance at participating credit unions.

In the USA, the Federal Deposit Insurance Corporation (FDIC) provides deposit insurance to US banks, with coverage of up to $250,000 per depositor per bank. The FDIC is funded by premiums paid by US banks based on size and risk assessment metrics which are calculated each quarter. Risk assessment rates consider financial data and “CAMELS ratings” pertaining to capital adequacy, asset quality, management, earnings, liquidity, and sensitivity. [13]

The Truth in Savings Act (TISA), implemented by Regulation DD, established uniformity in disclosing terms and conditions regarding interest and fees when giving out information and when opening a new savings account. On passing the law in 1991, Congress noted it would help promote economic stability, competition between depository institutions, and allow the consumer to make informed decisions.

The Expedited Funds Availability Act (EFAA) of 1987, implemented by Regulation CC, defines when standard holds and exception holds can be placed on checks deposited to checking accounts, and the maximum length of time the money can be held. A bank's hold policy can be less stringent than the guidelines provided, but it cannot exceed the guidelines.

The Electronic Fund Transfer Act of 1978, implemented by Regulation E, established the rights and liabilities of consumers as well as the responsibilities of all participants in electronic funds transfer activities.

• Establishes reserve requirement guidelines
• Regulates certain early withdrawals from certificate of deposit accounts
• Defines what qualifies as DDA/NOW accounts. See Regulation Q for 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 transfers or withdrawals. No more than three 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

Until 2011, Regulation Q prohibited banks from paying interest on demand deposit accounts. A "demand deposit" account includes many, but not all checking accounts, and does not include Negotiable Order of Withdrawal accounts (NOW accounts).[14]

The Home Mortgage Disclosure Act (HMDA) of 1975, implemented by Regulation C, requires financial institutions to maintain and annually disclose data about home purchases, home purchase pre-approvals, home improvement, and refinance applications involving one- to four-unit and multifamily dwellings. It also requires branches and loan centers to display a HMDA poster.

The Equal Credit Opportunity Act (ECOA) of 1974, implemented by Regulation B, requires creditors which regularly extend credit to customers—including banks, retailers, finance companies, and bank-card companies—to evaluate candidates on creditworthiness alone, rather than other factors such as race, color, religion, national origin, or sex. Discrimination based on marital status, receipt of public assistance, and age is generally prohibited (with exceptions), as is discrimination based on a consumer's good-faith exercise of his or her credit-protection rights.

The Truth in Lending Act (TILA) of 1968, implemented by Regulation Z, promotes the informed use of consumer credit by standardizing the disclosure of interest rates and other costs associated with borrowing. TILA also gives consumers the right to cancel certain credit transactions involving a lien on the consumer's principal dwelling, regulates certain credit-card practices, and provides a means of resolving credit-billing disputes.

The Fair Credit Reporting Act (FCRA) of 1970 regulates the collection, sharing, and use of customer-credit information. The act allows consumers to obtain a copy of their credit report from credit bureaus that hold information on them, provides for consumers to dispute negative information held and sets time limits, after which negative information is suppressed. It requires that consumers be informed when negative information is added to their credit records, and when adverse action is taken based on a credit report.

Provisions addressing credit-card practices aim to enhance protections for consumers who use credit cards and improve credit-card disclosure under the Truth in Lending Act:

• Banks would be prohibited from increasing the rate on a pre-existing credit card balance (except under limited circumstances) and must allow the consumer to pay off that balance over a reasonable period of time
• Banks would be prohibited from applying payments in excess of the minimum in a manner that maximizes interest charges
• Banks would be required to give consumers the full benefit of discounted promotional rates on credit cards by applying payments in excess of the minimum to any higher-rate balances first, and by providing a grace period for purchases where the consumer is otherwise eligible
• Banks would be prohibited from imposing interest charges using the "two-cycle" method, which computes interest on balances on days in billing cycles preceding the most recent billing cycle
• Banks would be required to provide consumers a reasonable amount of time to make payments[15]

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 outstanding loans and credits to any single borrower to no more than 15% of the bank's total capital and surplus.[16] Some state banking regulations also contain similar lending limits applicable to state-chartered banks.[17] 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 exceeds the initial lending limit is fully secured.

Loans to Insiders (Regulation O) establishes various 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.[18][19]