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WELCOME TO OUR PRESENTATION. Presented by 1.Tahniyat Sultana Prova 16-017 2.Tanvir Ahmed16-009 3.Morium Akhter 16-002 4.Sanjida Islam Khan16-018 5.Md.Farhadul Islam16-066. TOPIC :. B ank Structure And Regulation In The USA. Background.

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WELCOME TO OUR PRESENTATION

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Welcome to our presentation

WELCOME

TO

OUR

PRESENTATION


Welcome to our presentation

Presented by

1.Tahniyat Sultana Prova16-017

2.Tanvir Ahmed16-009

3.Morium Akhter16-002

4.Sanjida Islam Khan16-018

5.Md.Farhadul Islam16-066


Topic

TOPIC :

Bank Structure And Regulation In The USA


Background

Background

  • Central bank & supervisory functions have evolved to create US banking & financial structure.

    Uniqueness:

  • far more inclined to seek statutory remedies

  • Protection of small depositors

  • Potential collusion among banks and between banks

    Striking feature:

    Large number of banks


Welcome to our presentation

  • 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.


Central bank

Central Bank:

  • 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


Bank scoring

Bank Scoring

  • Evaluates banks from the CAMEL score system:

  • C : capital adequacy

  • A : asset quality

  • M : management quality

  • E : earnings performance

  • L : liquidity

  • Bank scoring 1-2 are satisfactory

  • Bank scoring between 3-5 need additional supervision

  • Bank scoring 4/5 are closly monitored


Some obligation

Some obligation

  • 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:

  • The state of New York Banking Department

  • The different regional banks.etc


Commercial and investment banking

Commercial and investment banking

  • The Glass Steagall Act,separated commercial and investment banking in 1933

    Commercial bank:

    Severly curtailed to underwriting anddealing 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.


Bank holding companies

Bank Holding Companies

  • 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.


The bank holding company act 1956

The Bank Holding Company Act,1956

  • 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.


Federal reserve activities on bhcs

Federal reserve activities on BHCs

  • 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 .


Financial holding companies

Financial Holding Companies

  • Under the GBL Act, US bank holding companies can convert into Financial Holding Companies.

  • Supervision of the FHCs is functional ;

    • Insurance firms-department of Trade & Industry

    • Investment bank-Securities & Exchange Commission

    • Banking Subsidiaries-Federal reserve Bank.


Welcome to our presentation

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


Branch banking regulation

Branch Banking Regulation

  • 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


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Riegle neal interstate banking & branching efficiency Act-

  • The Act allowed all US banks to acquire bank in other states from September 1995.

  • Any out of state bank taken over by another bank can be converted into branch


Welcome to our presentation

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.


Deposit insurance

Deposit Insurance

  • 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.


Welcome to our presentation

  • 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.


Regulation of foreign banks

Regulation of Foreign Banks

  • 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


Regulation of foreign banks1

Regulation of foreign Banks

  • 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


  • The foreign bank enforcement supervision act 1991

    The Foreign bank Enforcement Supervision Act(1991)

    • 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


    Today s regulation of foreign banks in us

    Today’s Regulation of foreign banks in Us

    • 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


    National banking structure in us

    National banking Structure in Us

    • 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


    Welcome to our presentation

    Thanks

    for

    being with Us


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