The financial services given by banks can take several forms. This may include securities borrowing transactions, repurchase agreements and commercial loans. All these forms are all subjected to regulation at both the state and federal levels. In this article, we are going to give a detailed overview of the supervisory policies and regulations that influence and restrict commercial lending by financial institutions such as banks.
Bank Regulation Framework.
Two factors determine the scope of commercial lending by banking institutions. These include the charter the location of the entity in the financial institution and the lending entity charter. The same lending may be subjected to various limitations and requirements depending on these two factors. To start with, a banking institution is referred to as a lending institution because it includes a bank. A bank is defined as an institution that has a specific state of a federal bank charter. This does not include a charter from a general state corporation. These institutions must have deposited a certain amount of money which is used as insurance by the Federal Deposit Insurance Corporation (FDIC). There are some state and federal agencies that provide charters to depository institutions that have been insured by the FDIC.
The term ‘bank’ in the United States and many other countries is used to refer to all institutions that have been insured by depository authorities. The federal savings and National bank association charters have their insurance issued by the office of Comptroller of the Currency (OCC). The National bank charter is issued by the National Bank Act (NBA) while the federal savings association charter is given by the Home Owners’ Loans Act (HOLA). The state banking agency gives charters to state banks such as business building loans Reading OH. All 50 states in the US, like the US Virgin Islands, Puerto Rico, Guam and the District of Columbia, offer such banking charters. Some states provide a different type of charter such as savings bank, state savings association, and industrial banks.
Moreover, it is critical to note that all state banks are regulated by the US federal government as well as the state governments. Many state bank regulatory authorities will defer most regulation matters to federal regulatory authorities on enforcement and examination issues. A state bank may choose to become a bonafide member of the system of banking offered by the Federal Reserve. In such an event, the Federal Reserve Board popularly referred to as ‘the board’ will serve as its primary federal regulator. If not, the FDIC takes up the oversight and regulation role. The same bank holding firm may regulate banking institutions that have different charters. However, such a circumstance does not alter the powers wielded by any bank when it comes to determination of creditworthiness or commercial lending.
Bank holding companies or savings associations are structured as general corporations that are regulated by the state law and will be subject to any state legislation that applies. Such state laws include the usury lending limits that may apply to the loans they give. Bank holding companies are under state regulation within the state where they operate and the Federal Reserve Board.