Professional Documents
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CH 15
CH 15
Structure, Regulation
and Performance
Chapter 15
Learning Objectives
Slide 2
Slide 3
Banking legislation
Enacted in response to Great Depression
Established Regulation Q interest rate ceilings
Separated commercial and investment banking
Created the FDIC
Regulation Q
Interest rate ceilings on deposits at
commercial banks
Established during the Great Depression
Phased out after 1980
Comptroller of Currency
Federal agency
Charters national banks
Slide 4
Chartered
Given permission to engage in business of
commercial banking
Banks must obtain charter before opening
Commercial banks in U.S. are chartered
National Bank
Bank that has received charter from
Comptroller of Currency (federal government)
Slide 5
Regulatory Responsibilities
FDIC regulates:
State-chartered, insured non-Fed
members
Insured branches of foreign banks
Slide 6
Regulatory Responsibilities
Fed regulates:
State-chartered, insured members of the
Fed
All bank holding companies
All financial holding companies
Branches of foreign banking
organizations operating in U.S. and their
parent bank
Slide 7
States regulate:
State-chartered, non-FDIC-insured
banks that are not Fed members
Structure of Commercial
Banking System
Regulators
Interested in monitoring, influencing,
controlling structure of market for
banking services
Control entry into market
Control mergers among existing firms
Control branching in effort to maintain
many small firms
Slide 8
Structure of Commercial
Banking System
Slide 9
Exhibit 155
Allowable
Activities for
Bank Holding
Companies
(Federal
Reserve
Regulation Y,
Revised
January 1,
2001)
Slide 11
Data processing
Leasing
Investment counseling
Servicing out-of-state loans
Slide 13
Merchant Banking
Direct equity investment (purchasing of
stock) by a bank in a start-up or growing
company
Slide 14
Ongoing Changes in
Structure of Banking Industry
Slide 15
Slide 16
Evolution of International
Banking
Slide 18
Asymmetric Information
Potential borrower knows more about
the risks and returns of an investment
project than bank loan officer
Slide 19
Slide 20
Bank Performance
Banks are facing increasing
competition from other FIs and
nonfinancial corporations in a global
environment.
Nonbanks
Other intermediaries and nonfinancial
companies that have taken increasing
share of intermediation
Slide 21