What Laws Govern Banks?

What laws govern banks? State and federal laws govern banks and your accounts in them. The National Bank Act of 1864 started the national bank system and set requirements to acquire a bank charter. State...

State and federal laws govern banks and your accounts in them. The National Bank Act of 1864 started the national bank system and set requirements to acquire a bank charter. The Federal Reserve Act of 1913 created the Federal Reserve System, which is the central banking system for the U.S... President Woodrow Wilson signed the Act into law.


The Feds main purpose is to make sure the United States has a safe, flexible and stable monetary and financial system. There have been many changes and updates over the years to account for new ways of thinking. The main areas that have evolved deal with influencing monetary policy, supervise and regulate the banking institutions, maintain stability in the financial markets and to provide financial services to the U.S., its citizens and foreign institutions.




"Banks are regulated by the state and federal laws and there are frequent audits by government regulators to ensure that the laws are obeyed. National Banks are regulated by the Office of the Comptroller of Currency," says Sharon Lee, the Executive Vice President and Director of Client Services of American National Bank, who has thirty years in the banking industry.

The main federal statutory law is Title 12 of the Code of Federal Regulations. There are eight chapters under Title 12, each one dealing with different areas of banking. Chapter I is the comptroller of the currency and department of the Treasury. Among the many parts of the Chapter are ones governing bank activities and operations, assessment of fees, fiduciary activities of national banks and information disclosure by national banks.

Chapter II of Title 12 deals with the Federal Reserve System. In these parts are rules for fair crediting reporting, truth in lending and electronic fund transfers. Chapter III is the Federal Deposit Insurance Corporation or FDIC. This agency insures your deposits in accredited financial institutions. Chapter V is the Office of Thrift Supervision under the Treasury Department. Federal mutual savings associations have their rules and regulations in this section. Other chapters under Title 12 deal with regulations for other administrations such as the Farm Credit and Export-Import banks.

The Depository Institutions Deregulation Act of 1980 (DIDRA) removed the controls that the national government had on interest rates for bank accounts. Another part of this act was to allow banks to offer money market accounts and to remove restrictions of checking accounts. Most operations pertaining to checking accounts are governed at the state level, with some extra rules from the federal level. Every state has adopted at least some portion of the Uniform Commercial Code. Parts 2, 3 and 4 govern actions by the depository bank, the payor bank and the relationship between a payor bank and its customers. Many written checks end up passing through the Federal Reserve System. Regulation J and Regulation CC affect these checks. Regulation CC is particularly important as it works on the availability of funds in your account.

New banking Acts are passed on a regular basis to keep up with current and changing national and world markets. One of the most recent was the Fair and Accurate Credit Transactions Act of 2003. It improves areas of the credit reporting system and preventing identity theft. Judicial reviews and judgment also add or change the understanding of how the current laws are interpreted and used.

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