Talk:Banking regulation and supervision

In need of extensive revision
A lot of the comments here are accurate and this page is in need of serious revision to remove off-topic items, poorly sourced or unsourced items, a US-centric view and a focus on the recent banking crisis. I will try and draft a revision in the next couple of weeks but it would be good to hear what others watching this page think.Editengine (talk) 02:09, 16 January 2018 (UTC)

Self-Regulated Industry
The accuracy of this article comes into question, as banking is classified as a "self-regulated" industry in the United States.

This aspect of banking needs to be discussed in Wikipedia to maintain an objective viewpoint. — Preceding unsigned comment added by 98.101.162.28 (talk) 22:36, 9 March 2014 (UTC)

Not a worldwide view
We need an article on this subject, so it would be a shame to move it to Bank regulation in the United States which would match the current content. --Mereda 17:18, 27 May 2006 (UTC)

Yeah, this article does not represent a world-wide view, but the structure of the article does allow for other countries to be added. The structure also shows that the current content pertains only to US banks. --blackstripe

It's ok for now as a placeholder, but yes, this needs to eventually move to Bank regulation in the United States. The broader article really needs to start with Basel II (especially pillar 2) and build out based on the components (without a full explanation of each component -- this is not the article to explain trading risk measurement) of regulation described therein that accord. Unfortunately that Basel II article is pretty weak at the moment, so we would have to start with external website material. Deet 02:05, 29 August 2006 (UTC)

Made some small clarifications and expansions on the regulatory bodies. Added Regulation A and some description to Reg's O and Q. Hamban 23:13 PDT, May 11, 2007

Reorganized the introduction and broke out the section on regulatory agencies. Clarified that the article deals with federal, not state, law (although we could add some state laws later). Added a couple more of the FRB regulations. Hamban 20:45 PDT, May 12, 2007


 * Hamban, I don't believe the FDIC is ever a primary regulator (yes it has rules, "regulations" if you will, but it is ultimately a service provider to the banks not a primary regulator), and you have lost the fact that states can be primary regulators. I understand it was correct before you edited: a bank's primary regulator could be the Federal Reserve Board, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, or any one of 50 state regulatory bodies, depending on the charter of the bank   Also, I would not mix in credit unions into this article. They are typically handled separately for all regulatory purposes in all countries and deserve a separate article (I would say it's ok to mention for completeness, but in a somewhat dismissive way as it applies to this article). Deet 01:57, 3 June 2007 (UTC)


 * Deet, per the FDIC's website, "The FDIC is the primary federal regulator of banks that are chartered by the states that do not join the Federal Reserve System." This would cover state banks that are not FRB members (i.e., "state nonmember banks").  [] In my edits, I was refering to "federal" banking regulators, but I will attempt to expand and clarify that state-chartere banks (FRB members and non-members) are both also subject to the supervision of state banking authorities.  The FRB and the FDIC conduct join examinations of state-chartered banks (or sometimes they trade-off, with the federal agencies doing examinations one year, and the states handling the other years). Hamban 12:18 PDT, June 16, 2007


 * Deet, I'll try and distinguish the credit unions a bit. I'll admit that my familiarity with CUs is based mostly on the US structure.  CUs in the US are not banks for purposes of the FDI Act, Federal Reserve Act and Bank Holding Company Act, but are banks for purposes of Reg CC (and Reg E too I think).   In addition, the NCUA is part of the US Federal Financial Institutions Examination Council (FFIEC) and coordinates its regulatory and supervisory actions with the federal banking agencies.  []  I think that part of the underlying problem here is that the article is almost entirely US focused.  I'll try and restructure a bit.Hamban 12:19 PDT, June 16, 2007

Made edits per my discussion with Deet above, please let me know if this gets to your concern. Also fleshed out the lending limits section. Hamban 11:30 PDT, June 17, 2007

I like the addition of the material on federal preemption of state banking law. I'm thinking though that it fits better as part of the sub-section on US banking law rather than forming a separate section. Do other countries have similar issues? Hamban 9:15 PDT, Sept 4, 2007 —Preceding unsigned comment added by Hamban (talk • contribs) 04:19, 7 September 2007 (UTC)

Asset-liability maturity match requirement?
There could be a requirement that the there must be no asset-liability maturity mismatch as this would prevent bank runs, or at least a disclosure requirement for the banks to display the extent of the mismatch so the market will be able to do correct valuation of the risks of the bank. In the table How the example bank manages its liquidity positions are sorted into maturity buckets which gives approximately this information (the bucket "Beyond 5 years" is not very exact), but as a complement and more precise and compact measurement would be the duration gap. By requiring the duration gap to be zero the bank would be immunized. Najro (talk) 16:47, 10 October 2008 (UTC)

ISO numbers what do they mean? ?
There are several ISO links - it woudl be good to put a short description as a list of numbers is meaningless and it takes time to go to the page, and then see what they actually mean. —Preceding unsigned comment added by 212.246.66.223 (talk) 08:13, 13 May 2009 (UTC)

There are some serious problems with this article
Some serious bias in this article. For example, claiming Basel II has forced European banking systems to be run by a private banking cartel. I assume they are talking about VAR models or the capital requirements. Even if this is true (it isn't), it is a contraversial enough claim that it shouldn't be on what is supposedly a factual article. — Preceding unsigned comment added by 163.1.208.255 (talk) 12:17, 3 May 2015 (UTC)

Dr. Wall's comment on this article
Dr. Wall has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:

"Comment 1 “Bank regulation is a form of government regulation which subjects banks to certain requirements, restrictions and guidelines, designed to create market transparency between banking institutions and the individuals and corporations with whom they conduct business, among other things.”

This first part of the this is correct but the discussion of what bank regulation is designed to do could be more helpful. I would say broadly speaking that bank regulation falls into two categories: prudential regulation which is designed to reduce the risk of bank failure and its cost when a bank does fail and conduct regulation which is designed to “improve” bank’s conduct. The details of this are then fleshed out in the section on the “Objectives of Bank Regulation” section.

I would also add a sentence distinguishing banking regulation (written rules) from banking supervision which is the monitoring, inspecting and examining of banking organizations. See chapter 5 of Federal Reserve System Purposes and Functions which is available at https://www.federalreserve.gov/pf/pdf/pf_5.pdf

Comment 2 “Given the interconnectedness of the banking industry and the reliance that the national (and global) economy hold on banks, it is important for regulatory agencies to maintain control over the standardized practices of these institutions. Supporters of such regulation often base their arguments on the "too big to fail" notion. This holds that many financial institutions (particularly investment banks with a commercial arm) hold too much control over the economy to fail without enormous consequences. This is the premise for government bailouts, in which government financial assistance is provided to banks or other financial institutions who appear to be on the brink of collapse. The belief is that without this aid, the crippled banks would not only become bankrupt, but would create rippling effects throughout the economy leading to systemic failure.”

I would not emphasize interconnectedness and macroprudential concerns in the second paragraph of the introduction of “Bank Regulation.” A better second paragraph paragraph would note that bank regulation has existed for millennia and for good reason. The first banking regulations predate concerns about global interconnectedness with the Wikipedia article on the history of banking saying that “A very early writing on clay tablet called the Code of Hammurabi, refers to the regulation of a banking activity of sorts within the civilization (Armstrong) of an era which dates to ca. 1700 BCE, banking was well enough developed to justify laws governing banking operations.” Haber and Calomiris in their book “Fragile by Design” argue that banks have long be interdependent with the government. The banks needed government to enforce the terms of their loan contracts. In return, the government had certain expectations for its banks (those expectations varying across time and location).

A third paragraph might (or might not) be then added saying that the recent financial crisis has demonstrated the importance of banks remaining viable and hence sparked renewed interest in stronger bank regulation.

Comment 3 The section “The reserve requirement sets the minimum reserves each bank must hold to demand deposits and banknotes. This type of regulation has lost the role it once had, as the emphasis has moved toward capital adequacy, and in many countries there is no minimum reserve ratio. The purpose of minimum reserve ratios is liquidity rather than safety.”

This discussion of the role of reserve requirements is confusing. The second sentence says it has lost the role it once had without specifying what that role is. The third sentence says its purpose is liquidity rather than safety, but remaining liquid is a critical requirement for a bank to continue in operation.

An article by Joshua Feinman titled “Reserve Requirements: History, Current Practice and Potential Reform” in the Federal Reserve Bulletin of July 1993 provides a nice discussion of the role of reserve requirements in the U.S. prior to the crisis. Feinman notes that reserve requirements were once thought to ensure banks would have adequate liquidity to manage a run. However, they are no longer thought to serve that purpose. Instead they are used for monetary control purposes.

After the financial crisis of 2007-09, some of the largest central banks, including the Federal Reserve, European Central Bank, Bank of Japan and Bank of England have greatly expanded the amount of reserves outstanding (something widely referred to as QE or quantitative easing). As a result, reserve requirements are not currently an important tool for monetary control. However, the Federal Reserve is currently committed to shrinking the amount of reserves outstanding and if it does then reserve requirements could once again be a useful tool of monetary policy. See the Federal Open Market Committee’s “Policy Normalization Principles and Plans” at http://www.federalreserve.gov/newsevents/press/monetary/20140917c.htm.

Comment 4 “Banks may be required to obtain and maintain a current credit rating from an approved credit rating agency, and to disclose it to investors and prospective investors. Also, banks may be required to maintain a minimum credit rating.”

This assertion needs to be supported or this paragraph should be dropped. I am not aware of any jurisdiction that requires their banks to be rated. Moreover, Section 939A of the Dodd-Frank Act ordered the U.S. financial regulatory agencies to stop using credit ratings in their regulations and substitute in some other measure.

Comment 5 The section “Instruments and requirements of bank regulation” should have a discussion of the liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) which are part of Basel III. The Basel Committee on Banking Supervision’s (BCBS’s) agreement on the LCR is available at http://www.bis.org/publ/bcbs238.pdf. The BCBS’s agreement on the NSFR is available at http://www.bis.org/bcbs/publ/d295.pdf.

Comment 6 “ In the US in response to the Great depression of the 1930s, President Franklin D. Roosevelt’s under the New Deal enacted the Securities Act of 1933 and the Glass–Steagall Act (GSA), setting up a pervasive regulatory scheme for the public offering of securities and generally prohibiting commercial banks from underwriting and dealing in those securities. GSA prohibited affiliations between banks (which means bank-chartered depository institutions, that is, financial institutions that hold federally insured consumer deposits) and securities firms (which are commonly referred to as “investment banks” even though they are not technically banks and do not hold federally insured consumer deposits);”

This discussion is very dated. The Federal Reserve started reinterpreting the Glass-Steagall Act to allow commercial banks greater authority to engage in securities activities starting in 1987 (See Cohen, “Section 20 Affiliates of Bank Holding Companies” at http://scholarship.law.unc.edu/cgi/viewcontent.cgi?article=1011&context=ncbi). Important parts (but not all) of the Glass-Steagall Act was repealed by the Gramm-Leach-Bliley Act in 1999 (Wikipedia has an entry for the Gramm-Leach-Bliley Act). Since the crisis, there has been increased concern about the mixing of commercial and investment banking. The response in the U.S. has been the so called Volcker Rule (Wikipedia has an entry on the Volcker Rule). In the UK, the government established the Independent Commission on Banking (this has an entry in Wikipedia at https://en.wikipedia.org/wiki/Independent_Commission_on_Banking) which recommended that investment banking be “ring fenced” from its retail banking operations. This recommendation has been adopted into law. The European Union is also considering some form of ring fencing (see the Wikipedia entry on the UK Independent Commission on Banking).

Comment 7 The Section on the "Instruments and requirements of bank regulation" has no discussion of credit allocation or conduct regulation. Important examples of credit allocation regulation in the U.S. is the Community Reinvestment Act. Important examples of conduct regulation include the Bank Secrecy Act (to reduce money laundering) and the Equal Credit Opportunity Act (to prohibit certain types of discrimination)."

We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.

We believe Dr. Wall has expertise on the topic of this article, since he has published relevant scholarly research:


 * Reference : David G. Mayes & Maria J. Nieto & Larry Wall, 2008. "Multiple safety net regulators and agency problems in the EU: Is Prompt Corrective Action partly the solution?," Banco de Espaa Working Papers 0819, Banco de Espaa.

ExpertIdeasBot (talk) 18:54, 30 August 2016 (UTC)