Banking and Finance - An Overview
Banking and finance is a broad subject covered by federal and state law. There are a number of federal agencies that regulate banking transactions, the business structure of financial institutions and bank operations. State law, with the addition of some federal law, governs the management and operation of checking accounts. Banks can be chartered under federal or state law. For assistance regarding banking and finance matters, contact our firm to schedule a consultation with an attorney.
Types of Banks
Banking institutions can be organized either under state or federal law. In addition, under federal banking laws, banking institutions can be “banks” or “savings associations.”
The most common banking institution is the commercial bank. Commercial banks generally offer a full range of services, including checking accounts for businesses and individuals, savings accounts, investment accounts and loans. A commercial bank can be chartered under state or federal law.
Savings banks are a type of savings association that are generally limited to noncommercial deposit and lending activities. There are two forms of savings banks in the US: the mutual savings bank and the stock savings bank.
A savings and loan association (S & L) can be chartered under state or federal law. Traditionally, the activities of savings and loan associations were consumer-oriented and limited to receiving savings deposits and making consumer and mortgage loans. Savings and loan associations were granted broader powers in 1980.
A credit union has members that have a preexisting common bond, such as being employed by the same entity or living in a certain geographic area. Credit unions generally provide modest financial services, such as non-commercial deposits and consumer lending, to their members.
Regulation of Banks
There are three federal agencies that regulate commercial banks:
- Office of the Comptroller of the Currency: charters, regulates and supervises all national banks
- Board of Governors of the Federal Reserve System: regulates and supervises commercial banks to ensure their soundness and the stability of the nation's financial system; "the Fed" is the US's central bank
- Federal Deposit Insurance Corporation (FDIC): maintains the stability of the US financial system by insuring deposits, examining and supervising banks and managing receiverships
Both the Office of Thrift Supervision and the FDIC regulate savings associations. The Office of Thrift Supervision is the primary federal regulatory authority for federally and state-chartered savings associations, their subsidiaries and their registered savings and loan holding companies. The National Credit Union Administration (NCUA) charters and supervises federal credit unions and insures savings in federal and most state-chartered credit unions through the National Credit Union Share Insurance Fund (NCUSIF).
Electronic Banking
Electronic banking, also called electronic fund transfer (EFT) uses computers and electronic technology instead of paper checks and transactions. For many banking customers, electronic banking is an important feature, allowing convenient, 24-hour access to cash and account information. Electronic banking involves a number of services, including:
- Automated teller machine (ATM) transactions
- Direct deposit of paychecks and other payments into your account
- Direct withdrawal of payments so that recurring bills can be paid automatically
- Internet banking and conducting banking business from your personal computer
- By-phone payment systems that allow you to pay bills or transfer funds over the phone
Two federal statutes have a direct impact on day-to-day electronic banking: the Electronic Fund Transfer Act and the Check Clearing for the 21st Century Act.
Conclusion
Bank transactions touch on many different issues, from financing to electronic checks. It is important for business owners to be aware of the regulations and laws that govern banking transactions, particularly interest ceilings, eligibility for loans and small business lending. It may be necessary to consult with an attorney when considering options that involve complicated bank transactions. If you have questions about banking and finance, contact our firm to schedule a consultation with an attorney.
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