banking: an overview
Banks and bank accounts are regulated by both state and federal statutes. Bank accounts may be established by national and state chartered banks and savings associations. All are regulated by the law under which they were established.
Until the early 1980s the federal government regulated and controlled interest rates on bank accounts. Federal law set a ceiling on interest rates for savings accounts and generally prohibited interest payments on checking and other demand deposit accounts. Federal law also prohibited banks from offering money market accounts. Subsequently, the federal government lifted these restrictions on banks. The Depository Institutions Deregulation Act of 1980 (DIDRA) eliminated the interest rate controls on savings accounts. Additionally, DIDRA (by authorizing of NOW and Super NOW checking accounts) and the Garn-St Germain Depository Institutions Act of 1982 lifted restrictions on checking and money market accounts nationwide.
State law, supplemented by some federal law, governs the operation of checking accounts. Article 4 of the Uniform Commercial Code (UCC), which has been adopted at least in part in every state, "defines rights between parties with respect to bank deposits and collections." The Article governs the actions of the first bank to accept the check (depository bank) and other banks that handle the check but are not responsible for its final payment (collecting banks); the actions of the bank that is responsible for the payment of the check (payor bank); the relationship between a payor bank and its customers; and documentary drafts (checks or other types of drafts that will only be honored if certain documents are first presented to the payor of the draft).
Federal Reserve regulations also play a role in banking regulation, in particular with regards to rules governing checks. The majority of checks pass through the federal reserve system; when they do, Federal Reserve Regulation J comes into effect. Further, Regulation CC governs extensively the availability of funds in a depositor's account and the process required for dealing with checks dishonored due to non-payment. Additionally, the Expedited Funds Availability Act, elaborated by Subpart B of Federal Reserve Regulation CC, limits the time that a depository bank can delay before making the amount of a deposited check available for withdrawal.
The UCC also bears on checks and other negotiable instruments. UCC Article 3 governs the relationship between parties who receive and transfer checks. Certificates of deposit (CDs) may also be negotiable instruments and subject to Article 3. The UCC contains further provisions related to banking. For example, UCC Articles 4A, 5, and 8 respectively govern funds transfers, letters of credit, and securities.
The 1930s banking crisis led to the development of federal insurance for deposits, administered by the Federal Deposit Insurance Corporation (FDIC). The FDIC guarantees a standard insurance amount of $250,000 per depositor, per insured bank. Funding for the FDIC comes from premiums paid by member institutions.
Federal agency regulations that concern banks and banking are codified in Title 12 of the Code of Federal Regulations.