The banking regulatory regime in USA

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The regulatory regime applicable to banks

i Dual banking system

The United States has a dual banking system, whereby banks, or depository institutions, may be chartered by either federal or state authorities. To accept deposits, an institution must apply for and obtain a bank or thrift charter from either a federal or state regulator. The Office of the Comptroller of the Currency (OCC) is the federal bank regulator with the power to charter national banks and, since 2011, thrifts or federal savings associations. The OCC is part of the US Treasury Department. Separately, each state also has a regulatory agency that may charter either banks or thrifts. The Board of Governors of the Federal Reserve System (Federal Reserve) is the primary federal supervisor of state-chartered banks that choose to become members of the Federal Reserve System.

The Federal Deposit Insurance Corporation (FDIC) is the primary federal supervisor of state-chartered banks that are not members of the Federal Reserve System. The FDIC also administers the federal deposit insurance programme that insures certain bank deposits, including supervising any bank failures, and regulates certain bank activities and operations to protect the federal deposit insurance fund.

All nationally chartered banks are required to hold stock in one of the 12 Federal Reserve banks, while state-chartered banks may choose to be members of and hold stock in a regional Federal Reserve bank, upon meeting certain standards. Benefits of Federal Reserve membership include eligibility to vote in the election of their regional Federal Reserve bank's board of directors, which affords member banks the opportunity to participate in monetary policy formulation.

ii Bank holding companies

Any legal entity with a controlling ownership interest in a bank or thrift is regulated as a bank holding company (BHC) or savings and loan holding company (SLHC) by the Federal Reserve.

iii Foreign banks

Foreign bank activities in the United States are supervised by the Federal Reserve, or any other regulator implicated by the type of charter or entity that a foreign bank uses to conduct its banking business in the United States.

iv Relationship with the prudential regulator

Most banks are first regulated by their chartering entities, or their primary regulators. Primary regulators are generally responsible for conducting bank examinations, initiating supervisory and enforcement actions, and approving branch, change of control, merger and other applications. State-chartered institutions are regulated at the federal level by the Federal Reserve in the case of state member banks, or by the FDIC in the case of state non-member banks. The following chart summarises these relationships.

Institution type	Chartering agency	Primary federal regulator	Secondary federal regulator
Federal charter
National bank	OCC	OCC	Federal Reserve, FDIC
Federal savings association	OCC	OCC	FDIC
Federal savings bank	OCC	OCC	FDIC
State charter
State non-member bank	State agency	FDIC	N/A
State member bank	State agency	Federal Reserve	FDIC
State savings bank	State agency	FDIC	N/A
State savings association	State agency	FDIC	N/A
Foreign banks
Foreign bank uninsured state branches and agencies	State agency	Federal Reserve	N/A
Foreign bank uninsured federal branches and agencies	OCC	OCC	Federal Reserve
Foreign bank commercial state chartered lending companies	State agency	Federal Reserve	N/A
Foreign bank representative offices	State agency	Federal Reserve	N/A

Banks and BHCs may also be subject to functional regulation by other regulatory agencies, depending on the types of activities in which they engage. For instance, a BHC's securities underwriting and dealing activities are also regulated by the US Securities and Exchange Commission (SEC), the functional regulator of any SEC-registered broker-dealer.