The article discusses the history of corporate banking law and the banking regulation in the United States. As early as the 18th century America has developed into the largest economy in the world with some of the biggest financial markets in the world. Normally, the path has been influenced by a variety of factors and the continuously changing regulation. By definition, corporate banking law is a broad term for the legal framework that governs the operation of banks and other financial institutions.
With the expansion of the American economy in the 20th century, legislators became concerned about the influence of banks over the economy of the country. Therefore, their impact on the society, the consumers and the public as a whole was notable. Banking regulation came as a mechanism that ensured that the banks’ conduct was fair and transparent.
Banks must comply with both federal and state regulations
Multiple federal agencies oversee banking regulations. For instance, banks and other financial institutions can fall under the regulations of the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve System or the Office of the Controller of Currency (OCC). Many of the federal bank regulations can be found in the 12th chapter of the U.S. Code. Some other major laws in the United States that regulate banking are the Banking Act of 1933, the Right to Privacy Act, Dodd-Frank Act of 2010, USA Patriot Act, Bank Secrecy Act, and Community Reinvestment Act of 1977.
Even if on state level corporate banking law varies widely between jurisdictions, there are some general principles that each jurisdiction takes into consideration. Being a complex type of regulation, corporate banking law usually requires two components: licensing and supervision. First, the licensing sets a certain standard of requirements for starting a new bank. Licensing provides the license holders the right to own and operate a bank.
The licensing process is specific to the regulatory environment of the country and/or the state where the bank is located. Second, the supervision is an extension of licensing. For instance, banks are usually supervised by a government regulatory body – usually the central bank or another independent governmental agency. Supervision ensures that the functioning of the bank complies with the regulatory guidelines and monitors for possible deviations from regulatory standards.
Corporate banking laws exist in order to achieve many objectives. Some of these objectives include:
- Provide transparency for consumers;
- Reduce risk for banking customers;
- Avoid misuse of banks for purposes like money laundering;
- Allow consumers to bank with confidentiality;
- Prioritize bank lending according to economic and social priorities;
- Provide fair banking and equal opportunities for banking;
- Create fair debt collection practices;
- Make credit card agreements fair to consumers;
- Prevent banks from making unfair loans to insiders like officers and principal shareholders;
- Allow customers to reasonably raise disputes.
Given the vast number of regulations with which banks must comply, it is suitable to seek legal counsel before making important decisions. Contact us or schedule a consultation with your international business attorney in Miami, Florida USA, to assist you with your corporate banking law issues.
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