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The Federal Deposit Insurance Corporation (FDIC) is a United States government corporation supplying deposit insurance to depositors in American commercial banks and savings banks. The FDIC was created by the Banking Act of 1933, enacted during the Great Depression to restore trust in the American banking system. More than one-third of banks failed in the years before the FDIC's creation, and bank runs were common. The insurance limit was initially US$2,500 per ownership category, and this has been increased several times over the years. Since the enactment of the Dodd–Frank Wall Street Reform and Consumer Protection Act in 2010, the FDIC insures deposits in member banks up to $250,000 per ownership category. FDIC insurance is backed by the full faith and credit of the government of the United States, and according to the FDIC, "since its start in 1933 no depositor has ever lost a penny of FDIC-insured funds".
In most legal jurisdictions, a financial institution is required to obtain a banking license before it is legally permitted to carry on a banking business. Besides other requirements, such a business is not permitted to contain in its name words such as bank, insurance, national, etc, unless it holds an appropriate license. Depending on banking regulations, jurisdictions may offer different types of banking licenses, such as:
In the United States, the ACH Network is the national automated clearing house (ACH) for electronic funds transfers established in the 1960s and 1970s. It processes financial transactions for consumers, businesses, and federal, state, and local governments. ACH processes large volumes of credit and debit transactions in batches. ACH credit transfers include direct deposit for payroll, Social Security, and other benefit payments, tax refunds, and vendor payments. ACH direct debit transfers include consumer payments on insurance premiums, mortgage loans, and other kinds of bills.
A transaction account, also called a checking account, chequing account, current account, demand deposit account, or share account at credit unions, is a deposit account or bank account held at a bank or other financial institution. It is available to the account owner "on demand" and is available for frequent and immediate access by the account owner or to others as the account owner may direct. Access may be in a variety of ways, such as cash withdrawals, use of debit cards, cheques and electronic transfer. In economic terms, the funds held in a transaction account are regarded as liquid funds. In accounting terms, they are considered as cash.
A savings and loan association (S&L), or thrift institution, is a financial institution that specializes in accepting savings deposits and making mortgage and other loans. While the terms "S&L" and "thrift" are mainly used in the United States, similar institutions in the United Kingdom, Ireland and some Commonwealth countries include building societies and trustee savings banks. They are often mutually held, meaning that the depositors and borrowers are members with voting rights, and have the ability to direct the financial and managerial goals of the organization like the members of a credit union or the policyholders of a mutual insurance company. While it is possible for an S&L to be a joint-stock company, and even publicly traded, in such instances it is no longer truly a mutual association, and depositors and borrowers no longer have membership rights and managerial control. By law, thrifts can have no more than 20 percent of their lending in commercial loans—their focus on mortgage and consumer loans makes them particularly vulnerable to housing downturns such as the deep one the U.S. experienced in 2007.
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A substitute check is a negotiable instrument that is a digital reproduction of an original paper check. As a negotiable payment instrument in the United States, a substitute check maintains the status of a "legal check" in lieu of the original paper check, as authorized by the Check Clearing for the 21st Century Act. Instead of presenting the original paper checks, financial institutions and payment-processing centers transmit data from substitute checks electronically through the settlement process, through the United States Federal Reserve System, or by clearing the deposits on the basis of private agreements between member financial institutions. Financial institutions that process substitute checks in accordance with such private agreements are typically members of a clearinghouse that operates under the Uniform Commercial Code (UCC).
Title 12 of the United States Code outlines the role of Banks and Banking in the United States Code.
The National Credit Union Share Insurance Fund provides deposit insurance to protect the accounts of credit union members at federally insured institutions in the United States. Created in 1970, the Share Insurance Fund is administered by the National Credit Union Administration, an independent federal financial regulator. The Share Insurance Fund is funded completely by participating credit unions, and not one penny of insured savings has ever been lost by a member of a federally insured credit union. The Share Insurance Fund is backed by the full faith and credit of the United States government.
Bank regulation in the United States is highly fragmented compared with other G10 countries, where most countries have only one bank regulator. In the U.S., banking is regulated at both the federal and state level. Depending on the type of charter a banking organization has and on its organizational structure, it may be subject to numerous federal and state banking regulations. Apart from the bank regulatory agencies the U.S. maintains separate securities, commodities, and insurance regulatory agencies at the federal and state level, unlike Japan and the United Kingdom. Bank examiners are generally employed to supervise banks and to ensure compliance with regulations.
A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets.
The New York State Banking Department was created by the New York Legislature on April 15, 1851, with a chief officer to be known as the Superintendent. The New York State Banking Department was the oldest bank regulatory agency in the United States.
The Temporary Liquidity Guarantee Program (TLGP) was a program administered by the Federal Deposit Insurance Corporation (FDIC) from 2008 to 2012 in the aftermath of the 2007–2008 financial crisis. The program sought to promote confidence in the US banking system by guaranteeing interbank loans and no-interest transaction accounts, such as checking accounts. It was announced through an Interim Rule on October 14, 2008.
Reserve Requirements for Depository Institutions is a Federal Reserve regulation governing the reserves that banks and credit unions keep to satisfy depositor withdrawals. Although the regulation still requires banks to report the aggregate balances of their deposit accounts to the Federal Reserve, most of its provisions are inactive as a result of policy changes during the COVID-19 pandemic.
The Dodd–Frank Wall Street Reform and Consumer Protection Act was created as a response to the financial crisis in 2007. Passed in 2010, the act contains a great number of provisions, taking over 848 pages. It targets the sectors of the financial system that were believed to be responsible for the financial crisis, including banks, mortgage lenders, and credit rating agencies. Ostensibly aimed at reducing the instability that led to the crash, the act has the power to force these institutions to reduce their risk and increase their reserve capital.
References
- ↑ Amendments to Appendix A of Regulation CC. (Federal Reserve website) "... the amendments are effective February 27, 2010. At that time, there will only be a single check-processing region for purposes of Regulation CC and there will no longer be any checks that are nonlocal."
- ↑ Federal Reserve Banks' Check Restructuring Resource Center Archived 2010-07-13 at the Wayback Machine . Top-level page pointing to more detailed pages.
- ↑ "H.R. 1679 - Actions". United States Congress. 10 June 2014. Retrieved 10 June 2014.
- 1 2 "H.R. 1679 - Summary". United States Congress. 10 June 2014. Retrieved 10 June 2014.
