If you’re curious about how banks are regulated and your money is protected, it’s important to understand that multiple agencies help keep America’s financial institutions safe and compliant with the law. Some of the key regulatory agencies you may hear about are the Office of the Comptroller of the Currency (OCC), the Federal Reserve (the Fed), and the Federal Deposit Insurance Corporation (FDIC), although there are others involved as well.
This topic has been in the spotlight recently. You may have read the headlines and wondered who those agencies were and how they knew when to spring into action to help ensure that customers’ finances didn’t suffer.
Here, you can learn more about how bank regulation works, including:
• What is the history of bank regulation?
• What exactly do bank regulators do?
• Who regulates banks?
What Do Bank Regulators Do?
Now that you have read about a few of the critical moments in U.S. banking regulation history, you may be interested to get a little more insight into what bank regulation accomplished during the ups and downs of America’s economy.
Here are some of the key points to know about what bank regulators do and how they can provide a sense of financial security:
• Review the financial health of banks and step in as they deem necessary
• Regulate foreign banks that are in business in the United States
• Examine banks to make sure their practices are safe, sound, and fair
• Intervene if banks are failing and ensure that depositors are protected up to the limits of insurance (and sometimes beyond, as mentioned above).
Recommended: Guide to Opening a Bank Account as a Non-US Citizen
Who Regulates Banks?
The next aspect to delve into is who has the responsibility of regulating banks and can intervene when they deem necessary. Here are the three key players when it comes to oversight of commercial banks:
Office of the Comptroller of the Currency
The Office of the Comptroller of the Currency (OCC) is an independent bureau within the U.S. Department of the Treasury. Its role is to charter, regulate, and supervise America’s national banks and federal savings associations.
In addition, the OCC oversees federal branches and agencies of foreign banks doing business on U.S. soil.
The OCC describes its mission as:
• Ensuring that these institutions conduct business in a safe and sound manner
• Determining that there is equitable access to financial services and customers are treated fairly
• Making certain that the banks it oversees are complying with all applicable laws and regulations.
The Federal Reserve
The Federal Reserve, or the Fed, is responsible for regulating a different set of entities: some state chartered banks, certain nonbank financial institutions, bank and financial holding companies, and foreign banking organizations.
The Federal Reserve is America’s central bank, and has a broad jurisdiction as it works to promote the health of the U.S. economy and the stability of the financial system. Among its key functions are:
• Conducting on-site and off-site examinations of banks to make sure they are operating in accordance with applicable laws.
• Making sure that banks have enough capital available to withstand economic fluctuations. This can involve reviewing balance sheets, projections, and other financial materials.
• Possibly reviewing “resolution plans,” which detail how a financial organization would resolve a situation in which it was in financial trouble or failed.
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The Federal Deposit Insurance Corporation
As mentioned above, the FDIC plays a role in insuring its member banks so that, in the rare event of a bank failure, depositors are covered for $250,000 per account holder, per ownership category, per insured institution.
However, the FDIC does more than this. It also supervises state-chartered banks that are members of the Federal Reserve. It this capacity, it oversees more than 3,500 banks, and does the following:
• Checks for safe and sound operations
• Examines institutions to be sure they are complying with consumer protection regulations and laws.
A Brief History of Bank Regulation
America’s banking history has taken some twists and turns, as regulation has gone in and out of favor. Here are some key points in U.S. banking to consider:
• In 1791, the First Bank of the United States was created, but its charter was not renewed in 1811. The reason? While the bank provided some stability to the new nation’s economy, people worried that it put too much financial control in the hands of the federal government.
• State banks began to flourish and funded the War of 1812, but, with a large amount of credit being extended, the federal government stepped in again, chartering the Second Bank of the United States in 1816.
• There were again worries that the federal government had too much power over the nation’s purse strings. In 1836, the Second Bank was dissolved.
• An era of free banking emerged, without federal oversight or, in many cases, the need to have an official charter to do business. The federal government tried to rein this in with the National Banking Act of 1863; the OCC was formed to charter banks and ensure that they backed their notes with U.S. government securities.
• The next few decades were a bit of a bumpy ride, with bank panics, such as the Panic of 1907, occurring. The Federal Reserve was created in 1913 to help bring order to the economy.
• With the debilitating Great Depression, which began in 1929, new regulations were needed. The FDIC was formed in 1933 to help shore up the faltering economy.
• More recently, after a period of deregulation, the government responded to the financial crisis of 2007 and the subsequent Great Recession. It passed the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, designed to improve accountability and financial transparency in America’s financial system.
• In 2021, President Biden signed an executive order that charged federal regulators with improving their oversight of bank mergers, as part of a larger effort to increase competition in the country’s economy.
• An example of financial regulation in action occurred in mid-March 2023, when the federal government stepped in as two banks faltered. The government even took the step of guaranteeing deposits over the typical FDIC insurance maximum of $250,000 per depositor, per ownership category, per insured institution.
Recommended: How Much Money Do Banks Insure?
Who Regulates Credit Unions?
Not everyone, however, keeps their accounts at a bank. There are other financial institutions, such as credit unions.
If you have an account (or multiple accounts) at a credit union, the institution that holds your money will be regulated at either the state or federal level. The National Credit Union Administration (NCUA) has oversight of federal credit unions. State-chartered credit unions are regulated by their state.
Also, credit union accounts can be insured by NCUA vs. FDIC. It’s NCUA that provides $250,000 coverage per depositor, per ownership category, per insured institution.
Who Regulates Savings and Loan Associations?
As of 2023, there are 624 savings and loan associations (sometimes called “thrifts”) operating in the U.S. While these financial institutions used to be federally regulated by the Office of Thrift Supervision (OTS), that bureau ceased to operate in 2010.
Now, savings and loans are regulated by the Fed and the OCC. These organizations are tasked with ensuring the thrifts are following the applicable laws and operating safely and soundly.
How Do I Know Who Regulates My Bank?
If you are curious about how your own bank is regulated, you can try the following, which will narrow down the field somewhat. The OCC, which regulates national banks and savings associations, has a “Who Regulates My Bank?” website.
If you don’t get the answer you are seeking there, you can call the OCC Customer Assistance Group at 800-613-6743 for further assistance.
The Takeaway
Banking regulation helps keep our financial institutions safe and sound and compliant with the appropriate laws. It also helps protect our economic stability and consumers’ deposits.
Several agencies are involved in banking regulation, such as the Fed, FDIC, OCC, and NCUA. While they rarely need to take action such as overseeing a bank closure, it can be wise to know who they are and how they function. This can help you feel more secure, knowing that they are there, backing you up; transparency in financial matters is important.
If you’re looking for a home for your funds, SoFi can be the reliable, transparent banking partner you seek. When you open an online bank account with SoFi, you pay no account fees and earn a competitive annual percentage yield (APY), which can help your money grow faster. Plus, you have tools at your disposal to help increase your savings, such as Vaults and Roundups. And, with our Checking and Savings, you’ll spend and save in one convenient place and be able to track your money with our easy-to-navigate app.
FAQ
How do I know which agency regulates my bank?
The agency that regulates your bank will likely depend on the kind of bank that holds your money: The Office of the Comptroller of the Currency (OCC) oversees national banks and federal savings associations; the Federal Reserve (the Fed) regulates some state-chartered banks, certain nonbank financial institutions, bank and financial holding companies, and foreign banking organizations; and the Federal Deposit Insurance Corporation (FDIC) supervises state-chartered banks that are members of the Federal Reserve.
Does the FDIC regulate banks?
The FDIC regulates state-chartered banks that are members of the Federal Reserve. In addition, an array of banks are insured by the FDIC. This means that clients’ accounts are insured for $250,000 per depositor, per ownership category, per insured institution.
What level of government regulates banks?
Banks are typically regulated by the federal government, with the Office of the Comptroller of the Currency (OCC), the Federal Reserve (the Fed), and the Federal Deposit Insurance Corporation (FDIC) overseeing many banks. State-chartered banks may also be regulated by their state’s agency.
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