WGU C214 - Government Regulations

National Banking Act of 1863

One of the first cases of government regulation within the U.S. banking industry as a result of “wildcat banking”

Federal Reserve Act of 1913

Designed to curb a series of bank runs and recessions

McFadden Act of 1927

Designed to provide greater accessibility for bank customers; for example, it prohibited banks from establishing branches across state lines to deter customers from redeeming banknotes

Glass-Steagall Banking Act of 1933

As a result of the Great Depression, this Act was designed to decrease the number of banks that were failing

Glass-Steagall Banking Act of 1933 (1)

Significant because it limited banks in a fairly dramatic way; for example, banks were not allowed to underwrite risky securities, pay interest on checking accounts, or hold corporate debt or equity

Glass-Steagall Banking Act of 1933 (2)

Essentially set up a wall between commercial/consumer banking and investment banking

Bank Holding Company Act of 1956

Designed to further protect the banking industry from competition

Depository Institutions Deregulation and Monetary Control Act of 1980

In the late 1970s, inflation and a sluggish economy where the catalyst for this

Garn-St. Germain Act of 1982 (1)

The next phase of deregulation was a response to the savings and loan (S&L) crisis of the early 1980s

Garn-St. Germain Act of 1982 (2)

Loosened restrictions on what financial institutions could do in the United States with regard to products they could offer; for example, it allowed banks to offer adjustable rate mortgages, money market deposit accounts, and investment in government bonds, and permitted healthy institutions to acquire failing institutions

Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) (1)

The next major regulation was a result of a major deteroriation in the banking industry and reversed the deregulation trend a bit

Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) (2)

Dealt mostly with capital requirements; established risk-based insurance premiums for banks known as a CAMELS score (capital adequacy, asset quality, management quality, earnings, liquidity, sensitivity to market risk)

Reigle-Neal Interstate Branching and Banking Efficiency Act of 1994 (1)

After the 1989 Act, a wave of deregulation of institutions began again with this act

Reigle-Neal Interstate Branching and Banking Efficiency Act of 1994 (2)

Allowed banks to transact business across state lines

Gramm-Leach-Bliley Financial Services Modernization Act of 1999

Along with Reigle-Neal, this Act continued to deregulate the banking industry

Dodd Frank Act (1)

Created in 2010, in response to the financial crisis of 2008; was an aggressive step for re-regulation of the banking industry

Dodd Frank Act (2)

Creation of the Financial Stability Oversight Council to monitory systematic risk in the industry

Dodd Frank Act (3)

Increased monitoring of the insurance industry

Dodd Frank Act (4)

Expanded governmental authority to force liquidation of financial instituations

Dodd Frank Act (5)

Volcker rule - where banks are restricted in their participation with hedge funds

Securities Act of 1933 (1)

Established in response to the Wall Street crash of 1929 and the ensuing Great Depression

Securities Act of 1933 (2)

Companies must register with the SEC and agree to its regulations in order to sell its shares on public exchanges (NYSE and NASDAQ)

Securities Act of 1933 (3)

Safe harbor rules allow smaller companies to issue non-registered stock to investors (Rule 144A when selling to only accredited investors and Regulation S when selling outside of the United States only)

Securities Exchange Act of 1934

Established the Securities Exchange Commission (SEC)

Sarbanes Oxley Act of 2002 (1)

Created in response to the Enron and WorldCom corporate scandals of 2000

Sarbanes Oxley Act of 2002 (2)

Designed to ensure that public company boards of directors actually represented the shareholders in good faith

Sarbanes Oxley Act of 2002 (3)

Effective internal control is mandated by the act; separate public accountants audit the internal control environment of public companies

Sarbanes Oxley Act of 2002 (4)

Management (CEO and CFO) must certify effectiveness of internal control; if the certification is in error, management will be levied fines and sent to prison