What Agencies Oversee U.S. Financial Institutions?
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What Agencies Oversee U.S. Financial Institutions?

In the United States, various agencies, such as the Federal Reserve Board (FRB), the Federal Deposit Insurance Corp. (FDIC), and the Securities and Exchange Commission (SEC), are responsible for regulating and overseeing financial institutions and markets. While their effectiveness is occasionally scrutinized, their primary purpose is to ensure sensible market regulation and safeguard the interests of investors and consumers.

Basics

In the United States, federal agencies like the FRB and FDIC oversee financial institutions, while state agencies play a role in regulating insurance products. The stock market is subject to oversight from the U.S. Securities and Exchange Commission and self-regulatory organizations.

Who Regulates Banks?

Bank regulation in the United States varies depending on the charter, with some banks regulated at both federal and state levels. The key federal regulators are the OCC, the Federal Reserve System, and the FDIC. Now, let's delve into each agency's specific responsibilities.

Office of the Comptroller of the Currency

Established under the National Currency Act in 1863, the Office of the Comptroller of the Currency (OCC) is one of the oldest federal regulatory agencies. Operating under the Treasury Department, its purview includes the regulation of national banks, federal savings associations, and the operating subsidiaries of both national banks and federal savings associations.

Federal Reserve System

The Federal Reserve System, commonly known as the Fed, is the central bank of the United States and a prominent regulatory agency. Its responsibilities encompass regulating the financial system and managing monetary policy. Open market operations are its primary tool for monetary policy, influencing interest rates across the economy by controlling the buying and selling of U.S. Treasury and federal agency securities to determine the federal funds rate. Additionally, the Fed oversees various entities, including bank holding companies, state member banks, savings and loan holding companies, and foreign banks operating in the U.S. Some regional banks also fall under its supervision, along with other entities regulated by the FDIC and state regulators. Although nationally chartered banks must be Fed members, they are primarily supervised by the OCC. Notably, the Fed's authority extends to regulating many of the nation's largest banks due to its oversight of bank holding companies.

Federal Deposit Insurance Corp.

Established under the Emergency Banking Act of 1933 in response to the Great Depression's bank failures, the Federal Deposit Insurance Corp. is a U.S. government corporation. Its primary function is to provide deposit insurance, assuring depositor accounts up to specific limits at member banks. Additionally, the FDIC oversees state-chartered and regional banks that are not affiliated with the Federal Reserve.

Who Regulates Credit Unions?

Credit unions in the U.S. undergo regulation, either federally or at the state level, based on their charter. National credit unions are chartered and overseen by the National Credit Union Administration (NCUA), an autonomous federal agency founded in 1970. Similar to the FDIC for banks, the NCUA provides deposit insurance for federal credit unions. State-chartered credit unions, on the other hand, are regulated by their respective states, with some potentially obtaining NCUA insurance as well.

Who Regulates Savings and Loan Associations?

Regulation of savings and loan associations, or S&Ls, previously fell under the Office of Thrift Supervision (OTS). However, with the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, the OTS was disbanded, and its regulatory duties were distributed among the OCC (federal savings associations), the Fed (savings and loan holding companies), and the FDIC (state-chartered savings associations).

Who Regulates Savings and Loan Associations?

Savings and loan associations, commonly known as S&Ls or thrifts, were previously overseen by the Office of Thrift Supervision. However, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 led to the dissolution of the OTS. Subsequently, its regulatory duties were redistributed among the OCC for federal savings associations, the Fed for savings and loan holding companies, and the FDIC for state-chartered savings associations.

Who Regulates Mortgage Lenders?

Regulating mortgage lenders involves oversight from various federal agencies mentioned earlier, as these lenders are mainly banks, credit unions, and savings and loans. The Consumer Financial Protection Bureau holds supervisory authority over nonbank mortgage originators and servicers, in addition to banks, thrifts, and credit unions with assets exceeding $10 billion and their affiliates, ensuring compliance with federal consumer financial laws. Furthermore, states handle the licensing of mortgage loan officers and mortgage brokers.

Who Regulates the Stock Market?

The regulation of the stock market in the U.S. falls under the purview of the Securities and Exchange Commission, formed in 1934 through the Securities Exchange Act. This regulatory body oversees securities exchanges, securities firms, and self-regulatory organizations like the Financial Industry Regulatory Authority (FINRA). The SEC's mission centers on safeguarding investors, maintaining equitable, orderly, and efficient markets, and facilitating capital formation.

Additionally, the SEC supervises the Securities Investor Protection Corp. SIPC, a non-profit corporation that provides insurance for securities and cash held in customer accounts of member brokerage firms in case of their failure (but not for other losses). Most securities offered in the U.S. must be registered with the SEC, though there are certain exceptions like limited private offerings and securities issued by municipal, state, or federal governments.

Generally, broker-dealer firms engaged in securities trading must be registered with the SEC and hold membership in FINRA. Individual brokers, also known as registered representatives, need to be registered with FINRA and licensed by their state securities regulator.

Who Regulates the Insurance Industry?

The insurance industry in the U.S. falls under state-level regulation, leading to varying regulations across states. Insurers must obtain licenses from the respective state's insurance department to conduct business there. Similarly, insurance salespeople are also required to be licensed.

State insurance departments set rules, including capital and surplus requirements, to ensure insurers can fulfill policyholders' claims. They may review and approve or reject proposed rate increases. To safeguard policyholders from insurer insolvencies, states establish guaranty associations that cover claims up to certain limits.

In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act created the Federal Insurance Office (FIO) within the U.S. Treasury Department. Although the FIO lacks regulatory authority, it acts in an advisory role to monitor the industry's accessibility to affordable non-health insurance products, especially for traditionally underserved communities and consumers.

Who regulates cryptocurrencies like bitcoin?

Regulation of cryptocurrencies, including bitcoin, is primarily lacking at the federal level, despite some proposed national regulations. States, along with Puerto Rico, have taken steps with existing or pending legislation concerning cryptocurrencies and blockchain-based tokens. As the regulatory landscape swiftly evolves, you can find updated state-specific information here.

Who regulates real estate transactions?

Real estate transactions fall under the purview of both federal and state laws, with state-level licensing required for real estate agents and brokers.

Who regulates pension plans?

Pension plans fall under the regulation of the Employee Benefits Security Administration (EBSA), a U.S. Department of Labor agency. EBSA oversees and enforces the Employee Retirement Income Security Act (ERISA), which covers most private-sector pension plans, including both defined-benefit and defined-contribution plans like 401(k)s. Additionally, the Pension Benefit Guaranty Corp. (PBGC), another federal agency, provides insurance for private defined-benefit plans, offering coverage up to certain limits.

Conclusion

In the United States, federal agencies play a significant role in overseeing financial institutions, financial markets, and financial products, while federal laws govern most aspects. However, the insurance industry stands as a notable exception, as it is primarily regulated by individual states.

Federal Deposit Insurance Corporation (FDIC)
Securities and Exchange Commission (SEC)
Federal Reserve Board (FRB)
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