Examples of bank regulation in the following topics:
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- Appraise the difference between a state bank and a national bank.
- Identify the two methods the FDIC uses to handle a bank failure.
- Identify methods a bank holding company uses to circumvent government regulations.
- How does a nonbank bank and automated teller machines circumvent bank regulations?
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- Furthermore, the Federal Reserve System exempts the subsidiary from some U.S. banking regulations and has the authority to approve the Edge ActCorporation.
- Agency office is similar to a nonbank bank, and it circumvents the numerous U.S. banking regulations because the legal definition of a bank is an institution that accepts deposits and grants loans.
- Consequently, the foreign bank branch must follow the U.S. banking regulations.
- Hence, the U.S. bank employs staffs and experts who know the laws, rules, and regulations.
- If a foreign bank opened a new branch, the managers and staff would spend time learning and complying with allnumerous rules and regulations.
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- If a bank receives a charter from the federal government, then three government agencies can regulate that bank, which are:
- Treasury Department, regulates national banks.
- Moreover, the Fed regulates banks.
- A state-chartered bank could have fewer regulations.
- A state government agency regulates its state banks, and many states require their banks to join the Fed and/or FDIC.
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- Regulations can spur innovation.
- First method to circumvent banking regulations, bank leaders and owners developed bank holding companies.
- Second innovation, nonbank bank, allows banks to circumvent federal and state regulations.
- Legally, the bank is no longer a bank and becomes exempted from the extensive U.S. bank regulations.
- Last innovation, automated teller machine (ATM), allowed banks to circumvent regulations.
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- Moreover, banks can circumvent government regulations as they cross borders, and they invented new financial instruments.
- Unfortunately, international banks pose many problems for government regulators.
- Consequently, a government in one country has problems regulating its bank's activities in other countries.
- The U.S. government and Federal Reserve System have trouble regulating and monitoring all the bank's activities.
- An offshore market has little regulations, low tax rates, and strict banker-customer confidentiality laws.
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- Banks can structure their business to circumvent regulations or lower taxes.
- An offshore market is banks are located in countries with lax regulations, low taxes, and strict consumer confidentiality.
- A U.S. bank can open a branch bank or forms a holding company with another bank in another country.
- A U.S. bank can become an Edge Act corporation or international banking facility.
- Countries have different deposit insurance, and regulations, and banks became skilled at circumventing regulation when entering the international markets.
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- Bank deposits are liquid.
- The Comptroller of the Currency, FDIC, and the Fed regulate the national banks.
- A state bank could be regulated by one or more regulatory agencies, depending upon the state where the bank is located.
- A contagion is one bank run leads to other bank runs, even for financially healthy banks.
- Regulations help a central bank exert more control over monetary policy.
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- One of the Federal Reserve's duties is to regulate financial institutions, such as bank-holding companies and state member banks.
- The Federal Reserve supervises certain entities and has the statutory authority to take formal enforcement actions against them, including state member banks, bank holding companies, nonbank subsidiaries of bank holding companies, branches and agencies of foreign banking organizations operating in the United States and their parent banks, and officers, directors, employees, and certain other categories of individuals associated with the above banks, companies, and organizations.
- Generally, the Federal Reserve takes formal enforcement actions against the above entities for violations of laws, rules, or regulations, unsafe or unsound practices, breaches of fiduciary duty, and violations of final orders.
- If the Federal Reserve determines that a state member bank or bank holding company has problems that affect the institution's safety and soundness or is not in compliance with laws and regulations, it may take a supervisory action to ensure that the institution undertakes corrective measures.
- If the Federal Reserve determines that a state member bank or bank holding company has problems that affect the institution's safety and soundness or is not in compliance with laws and regulations, it may take a supervisory action to ensure that the institution undertakes corrective measures.
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- The Second Bank of the United States was chartered in 1816, five years after the First Bank of the United States lost its own charter.
- The Second Bank of the United States, like the First Bank before it, was created as part of the American System of economics.
- This involved the use of sovereign powers for the regulation of credit to encourage the development of the economy and to deter speculation.
- The Second Bank provided a means for the government to regulate financial affairs.
- Nicholas Biddle, desperate to save his bank, called in all of his loans and closed the bank to new loans.
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- A bank failure is a bank develops financial problems and fails.
- A government imposes regulations to encourage banks to hold a large amount of reserves, marketable securities, and equity capital, reducing a chance of bank failure.
- Bank borrows the funds from the central bank or from another commercial bank.
- How does a bank prevent a bank failure?
- Your bank could ask other banks for a loan, but other banks may decline if they believe your bank will fail.