class 4 Flashcards
Dodd-frank Wall Street reform and consumer protection act
response to the 2008 financial crisis which mandated new supervision and controls over large and systematically significant financial institutions and to create consumer protection mechanisms at the federal level.
supervises systemic risks, protect consumers
Dodd-frank act § 175
encourages intentional policy coordination by authorizing the president to coordinate similar policies as those in the US relating to limiting scope, nature, size, scale, concentration, and interconnectedness of financial companies
CFTC
is required to consult to consult and coordinate with non-US regulators in establishing consistent intentional standards with respect to the regulation of contracts of sale of a commodity for future delivery and options on such contracts
12 U.S.C. § 1813
A1: bank means any national bank, and state bank, and any federal branch and insured branch. federal branch- US branch of a non-US bank and is approved by the Fed
national bank act
banks created under this act are “National Banks”
Federal bank holding act
bank holding company is an entity that owns or controls a bank and not a bank itself (parent).
Banks for purposes of this statute accept deposits and engage in commercial banking
the Fed
is 1 of 4 federal regulators of depository institutions.
comptroller of the currency and the federal deposit insurance corporation (FDIC)
for basically all issues- have to be aware of these regulators in addition to general business law
12 USC § 83
lending limits- cannot exceed 15% of the total amount of unimpaired surplus.
limit on how much interest can be charged- differs between federal and state statute
15 USC § 17
banks are subject to bank law. a non-banking securities company is subject to the SEC. this is imperfect and has several real life difference
banking adjacent activity
statute determines what incidental banking activities are and what the national bank is allowed to engage in. which can create incentives for banks to charter in that state
EU mandatory regulations
apply to all EU banks- only applies if the bank is established and functioning in multiple EU states.
if the bank moves into the territory of an EU member state- they have to meet the requirements unless an outside the EU bank comes and only establishes themselves in one EU state.
BASEL
US and almost all of the EU are participants in the capital adequacy requirements
Why capital asset ratios
built in alarm in the balance sheet to alert the regulator to an issue.
deposits
debt- liability to the bank because it is money they owe to people
loans
considered assets on a balance sheet
BIS capital adequacy guidelines
incorporated into the US as a regulation
capital requirements are for maintaining balance- if a loan goes bad then you can balance it with your capital.
The required amount of capital (8%) is not enough to take care of a disaster but there is enough room to ebb and flow and be an alarm for a problem.
BIS capital requirements is response to
a narrow problem- making sure that banks can handle their minimum requirements and does not protect against human error or any other reason that could cause a bank to fail.
entry by US. banks into host markets
entry into a market other than the one in which you received your charter
correspondent banking
done by wire; positions correspond to each other.
very limited relationship and no physical presence in the foreign market.
not an agent- just performing banking services at your request for your existing customers- not tapping a new market
representative office
data collection- have a physical presence but just to check out the market and start establishing connections and can later apply for licensing. has to be approved by the regulator- or whatever is required by the host country
agency
can make loans and engage in other banking activities- does not take deposits and requires formal approval on the US side.
gets bank direct involvement in one sector of the market (lending)
gives information about one part of the market but not necessarily the banking market taken as a whole.
branch
can offer the full banking services.
physical location where all banking services can be preformed but which it is not a separate corporate entity
International lending supervision act (ILSA)
provided that the failure of a bank to maintain prescribed capital adequacy levels may be deemed unsafe or unsound practice requiring the bank to submit and comply with a capital plan to reform capital levels.
requires each agency to cause banking institutions to achieve and maintain adequate capital by establishing minimum levels of capital for banking institutions.
tier 1 capital
equitable capital and disclosed reserves from post-tax earnings
must account for at least 50% of banks capital base.
amount of goodwill is deduced from tier 1
