Presented by 1.Tahniyat Sultana Prova Tanvir Ahmed Morium Akhter Sanjida Islam Khan Md.Farhadul Islam16-066

 B ank 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 remedies 2. Protection of small depositors 3. Potential collusion among banks and between banks Striking 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  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

Thanks for being with Us