RegulationMain article: Banking regulation See also: Basel II
Currently commercial banks are regulated in most jurisdictions by government entities and require a special bank license to operate.
Usually the definition of the business of banking for the purposes of regulation is extended to include acceptance of deposits, even if they are not repayable to the customer's order—although money lending, by itself, is generally not included in the definition.
Unlike most other regulated industries, the regulator is typically also a participant in the market, being either a publicly or privately governed central bank. Central banks also typically have a monopoly on the business of issuing banknotes. However, in some countries this is not the case. In the UK, for example, the Financial Services Authority licenses banks, and some commercial banks (such as the Bank of Scotland) issue their own banknotes in addition to those issued by the Bank of England, the UK government's central bank.
The law implies rights and obligations into this relationship as follows:
- The bank account balance is the financial position between the bank and the customer: when the account is in credit, the bank owes the balance to the customer; when the account is overdrawn, the customer owes the balance to the bank.
- The bank agrees to pay the customer's checks up to the amount standing to the credit of the customer's account, plus any agreed overdraft limit.
- The bank may not pay from the customer's account without a mandate from the customer, e.g. a check drawn by the customer.
- The bank agrees to promptly collect the checks deposited to the customer's account as the customer's agent, and to credit the proceeds to the customer's account.
- The bank has a right to combine the customer's accounts, since each account is just an aspect of the same credit relationship.
- The bank has a lien on checks deposited to the customer's account, to the extent that the customer is indebted to the bank.
- The bank must not disclose details of transactions through the customer's account—unless the customer consents, there is a public duty to disclose, the bank's interests require it, or the law demands it.
- The bank must not close a customer's account without reasonable notice, since checks are outstanding in the ordinary course of business for several days.
These implied contractual terms may be modified by express agreement between the customer and the bank. The statutes and regulations in force within a particular jurisdiction may also modify the above terms and/or create new rights, obligations or limitations relevant to the bank-customer relationship.
Some types of financial institution, such as building societies and credit unions, may be partly or wholly exempt from bank license requirements, and therefore regulated under separate rules.
The requirements for the issue of a bank license vary between jurisdictions but typically include:
- Minimum capital
- Minimum capital ratio
- 'Fit and Proper' requirements for the bank's controllers, owners, directors, or senior officers
- Approval of the bank's business plan as being sufficiently prudent and plausible.
Read more about this topic: Bank
Other articles related to "regulation, regulations":
... complex Biological process • negative regulation of type 2 immune response • negative regulation of cell proliferation • negative regulation of interleukin-13 production • negative ...
... cinema's first decade resulted in the increasing regulation of the film exhibition industry, including the requirement that projectors be housed in fireproof booths, segregated from the auditorium ... Trade union-based regulation of the profession was also widespread in some jurisdictions, in which the licensing of projectionists was incorporated into collective bargaining ... The original reason for this regulation was the necessity for safety precautions for the use of nitrate prints, and hence the requirement that projectionists should be formally trained ...
... Cellular component • extracellular space Biological process • positive regulation of natural killer cell cytokine production • immune response • signal transduction • positive ...
... the cost to the economy of government regulation in the United States is approximately $1.75 trillion per year, which exceeds all corporate pretax profits put together ... simplifying, and making more cost effective regulations ... and Budget's Office of Information and Regulatory Affairs, and the United Kingdom's Better Regulation Commission ...
... transactions (externalities.) Most governments therefore have some form of control or regulation to manage these possible conflicts ... This regulation ensures that a safe and appropriate service is delivered, while not discouraging the effective functioning and development of businesses ... and prescription drugs are controlled by regulation in most countries, as are the food business, provision of personal or residential care, public ...
Famous quotes containing the word regulation:
“Lots of white people think black people are stupid. They are stupid themselves for thinking so, but regulation will not make them smarter.”
—Stephen Carter (b. 1954)
“Nothing can be more real, or concern us more, than our own sentiments of pleasure and uneasiness; and if these be favourable to virtue and unfavourable to vice, no more can be requisite to the regulation of our conduct and behavior.”
—David Hume (17111776)
“Nothing changes my twenty-six years in the military. I continue to love it and everything it stands for and everything I was able to accomplish in it. To put up a wall against the military because of one regulation would be doing the same thing that the regulation does in terms of negating people.”
—Margarethe Cammermeyer (b. 1942)