Introduction to the various regulations governing the banking industry, including the role of regulatory bodies and the importance of compliance in maintaining stability and protecting consumers.
Overview of Banking Regulations – Study Notes
| Objective | Description |
|---|---|
| Financial Stability | Prevent systemic crises that can spread through the economy. |
| Consumer Protection | Safeguard depositors and borrowers from unfair practices. |
| Market Integrity | Ensure fair competition, transparency, and prevent fraud. |
| Monetary Policy Effectiveness | Enable central banks to control money supply and interest rates. |
| Compliance with International Standards | Align domestic rules with global best‑practice (e.g., Basel accords). |
| Institution | Primary Role |
|---|---|
| Federal Reserve (Fed) | Sets monetary policy, supervises bank holding companies, conducts stress tests. |
| Office of the Comptroller of the Currency (OCC) | Charters and regulates national banks. |
| Federal Deposit Insurance Corporation (FDIC) | Insures deposits up to $250,000, resolves failed banks. |
| Consumer Financial Protection Bureau (CFPB) | Enforces consumer‑fairness rules (e.g., Truth‑in‑Lending). |
| National Credit Union Administration (NCUA) | Regulates and insures credit unions. |
(Other jurisdictions have analogous agencies: ECB/European Central Bank, FCA/UK, APRA/Australia, etc.)
| Framework | Scope | Key Requirements |
|---|---|---|
| Basel III (global) | Capital adequacy, liquidity, leverage | • Minimum Common Equity Tier 1 (CET1) = 4.5% of risk‑weighted assets (RWAs) • Liquidity Coverage Ratio (LCR) ≥ 100% • Net Stable Funding Ratio (NSFR) ≥ 100% |
| Dodd‑Frank Act (U.S.) | Systemic risk, consumer protection | • Creation of the Financial Stability Oversight Council (FSOC) • Volcker Rule – limits proprietary trading • Enhanced reporting (Form 10‑K, FR Y‑14) |
| European Banking Union | EU‑wide supervision & resolution | • Single Supervisory Mechanism (SSM) under ECB • Single Resolution Mechanism (SRM) for failing banks |
| Anti‑Money Laundering (AML) / Counter‑Terrorist Financing (CTF) | Detect & deter illicit flows | • Customer Due Diligence (CDD) • Suspicious Activity Reporting (SAR) • Beneficial‑owner registries |
| Consumer Protection Laws | Fair lending, disclosure | • Truth‑in‑Lending Act (TILA) • Fair Credit Reporting Act (FCRA) • Equal Credit Opportunity Act (ECOA) |
Risk‑Weighted Assets (RWAs)
Capital Adequacy
Liquidity Ratios