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

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Presented by

1.Tahniyat Sultana Prova 16-017

2.Tanvir Ahmed 16-009

3.Morium Akhter 16-002

4.Sanjida Islam Khan 16-018

5.Md.Farhadul Islam 16-066


Bank Structure And Regulation In The USA

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


  • far more inclined to seek statutory remedies
  • Protection of small depositors
  • 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.
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.

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

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

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.

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



being with Us