There are three federal banking regulators in US which include; Federal Reserve System, Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of Currency all having separate although overlying authority over commercial banks. Additionally, there exist various groups of depository institutions having similar functions to those of banks although they have unique category of regulatory institutions, laws and regulations (Shanmuganathan, Merlin and Bryan 389). Banking regulations can be classified into varying groups to reduce ambiguity and to link the regulation to the motives behind their introduction. According to Shanmuganathan, Merlin and Bryan (392), the regulations could either fall under economic regulations, information regulations and health-safety-environment (HSE) regulations. Economic regulations comprise restrictions and requirements introduced by the government to control profits, prices and conditions for entry and exit into the industry. In the banking industry, economic regulations include those limits on interest rates paid on deposits and those charged on credit. They also include limits on fees charge for financial services, requirements for establishment of new branch or entry into the banking industry, limitations on areas and activities where banks can engage in (Shanmuganathan, Merlin and Bryan 394). In the banking industry, information regulations require banks to offer standardized information on deposits and loan rates to customers. Moreover, information regulations require that banks to ensure safe custody of customer’s information. Health-safety-environment (HSE) regulations in the banking industry are implemented to prevent banks from becoming insolvent. Safety and soundness regulations are based on various tools such as minimum capital requirements, restrictions on banking activities and supervising the bank’s management to ensure the banks operations are run competently and honestly. All the regulations in-turn protects the consumers’ interests (Shanmuganathan, Merlin and Bryan 395). Banking regulations in US have a long history and have undergone various changes to conform to emerging economic concerns. This paper will explore the evolution of banking regulations in US from around 1900 to the present. The emphasis of the paper will be on the way economic factors have influenced changes in these regulations. In addition, the paper will discuss how the regulations have affected the economy and banking. Major Banking Regulations in the US Previously, most banks in US were state based and issued varying notes. Consequently, the federal government had limited control of banks until the National Banking Act was passed in 1864 establishing a national banking system and allowed for chartering of national banks (Williams, Julie and Gillspie 1279). This act set the stage for the development of a common and stable national currency which was to be backed by the US Government bonds issued within the national banks system. Although this law could be linked to the demand for a national currency, its main motive was to create a reliable market where the government bonds could be sold in new network of national banks to acquire resources to finance Civil War (Williams, Julie
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