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.
menu of sources
- Laws regulating Federal Savings and Loan Associations - 12 U.S.C. §§ 1461 - 1470
- The Expedited Funds Availability Act - 12 U.S.C. §§ 4001 - 4010
- Garn-St. Germain Depository Institutions Act - 12 U.S.C. § 371a
- Federal Deposit insurance Corporation - 12 U.S.C. §§ 1811 - 1832
- Other Portions of the U.S. Code:
- 12 U.S.C.- Banks and Banking
- 18 U.S.C. §§ 212 - 215 - Criminal Offenses
- 28 U.S.C. § 1348 - Banking Associations as Parties to Civil Litigation
Federal Agency Regulations
- Title 12 of the Code of Federal Regulationscontains federal agency regulations that concern banks and banking.
- Chapter I of that title contains regulations promulgated by the Comptroller of the Currency, Department of the Treasury.
- Chapter II, regulations governing the Federal Reserve System.
- Chapter III, the regulations of the Federal Deposit Insurance Corporation.
- Chapter V, the regulations of the Office of Thrift Supervision of the Department of the Treasury.
- Other chapters contain contains the regulations of the Export-Import Bank, Farm Credit Administration, Natural Credit Union Administration, Federal Financing Bank, Federal Finance Institutions Examination Council, Farm Credit System Insurance Corporation, Thrift Depositor Protection Oversight Board, and the Resolution Trust Corporation.
Federal Judicial Decisions
- Supreme Court:
- U.S. Circuit Courts of Appeals: Recent Decisions on Banking
- Article 3 of the Uniform Commercial Code
- Article 4 of the Uniform Commercial Code
- Article 4A of the Uniform Commercial Code
- Article 5 of the Uniform Commercial Code
- Article 8 of the Uniform Commercial Code
- Uniform Commercial Code as Adopted in Various States
- State Statutes Dealing with Financial Institutions
State Judicial Decisions
- NY Court of Appeals:
- Appellate Decisions from Other States
Key Internet Sources
- Federal Agencies:
- ABA Section of Business Law, Committee on Banking Law
- American Bankers Association
- Conference of State Bank Supervisors
- Senate Committee on Banking, Housing, and Urban Affairs
- House Committee on Banking and Financial Services
Useful Offnet (or Subscription- $) Sources
- Good Starting Point in Print: Ann Graham et al., Banking Law, Matthew Bender Inc. and Company, New York, NY (1981, with updates)