Learning Objectives:

  • Identify the key bank regulators and their primary functions.

  • Explain the purpose of major banking regulations.

  • Understand the importance of the Bank Secrecy Act (BSA) and anti-money laundering (AML) efforts.

7.1 Bank Regulators
Banks are subject to oversight from multiple regulatory agencies at both the federal and state levels . Key U.S. bank regulators include:

  • Federal Reserve (The Fed): The central bank of the U.S., responsible for monetary policy and regulating bank holding companies.

  • Office of the Comptroller of the Currency (OCC): Charters, regulates, and supervises all national banks.

  • Federal Deposit Insurance Corporation (FDIC): Insures deposits and supervises financial institutions for safety and soundness.

7.2 Key Banking Regulations
The banking industry is governed by a vast body of regulations designed to ensure stability, fairness, and consumer protection . Key regulations include:

  • Bank Secrecy Act (BSA) / Anti-Money Laundering (AML): Requires banks to assist government agencies in detecting and preventing money laundering. This includes record-keeping and reporting of suspicious transactions .

  • Truth in Lending Act (TILA): A consumer protection law that requires lenders to provide clear and standardized information about the cost of credit .

  • Expedited Funds Availability Act (Regulation CC): Sets standards for how long banks can hold deposited checks before making the funds available to customers .

  • Electronic Funds Transfer Act (Regulation E): Establishes the rights and liabilities of consumers as they use electronic fund transfer services .

7.3 Understanding the CAMELS Rating
Regulators use the CAMELS rating system to assess the overall financial health and risk profile of a bank. CAMELS is an acronym for six key components :

  • Capital Adequacy

  • Asset Quality

  • Management

  • Earnings

  • Liquidity

  • Sensitivity to Market Risk

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