Tight Controls And Banking Laws

Introduction

The current world recession and even periods of boom entail that there must be some sort of control mechanism via which the inflow and outflow of cash within an economy can be monitored. These restrictions are specific to each country, but their difference mainly lies on the system of government in prevalence along with the particular needs of every country. The general outline of tight controls and banking is the same; restrictions, requirements, regulations and guidelines.

History

Tight controls and banking in the US is highly fragmented in comparison to other countries. Some distinct features include regulation at the federal and state level, privacy fraud prevention, anti-money laundering and focus on lower income groups lending. There is a division because some individual states and cities have also enacted their own banking laws for what usury lending actually is amongst other things. The US was the first country in the world to impose deposit insurance to protect people against losses by insolvent and failing banks. Therefore, in 1933 the Federal Deposit Insurance Corporation was created to guarantee deposits at commercial banks. Next in 1934 the Federal Savings and Loan Insurance Corporation was founded to provide customers with an opportunity to deposit their savings and take out loans. However, the criterion for these savings and loans is where the tight controls and banking laws were implemented. Keeping in mind the advancement of the generation in terms of technology in 1978 the Electronic Fund Transfer Act was brought out establishing the rights and liabilities if consumers transferring money and also those on the receiving end.

Features

There are some basic tight controls and banking laws uniform for almost every country in the world. These comprise of minimum requirements, supervisory review and market discipline. Minimum requirements are usually imposed keeping in mind the interests of the regulator and are therefore closely linked to risk that the bank might face in its endeavors. The requirement which takes the front seat is minimum capital ratios. Banks cannot operate unless they’re issued a bank license by a regulator. The business can then be carried out and the regulator keeps serious check on the bank to ensure it follows suit with all requirements, and failing to do may result in consequences like receiving in depth instructions or the more severe case of imposing penalties. Tight controls and banking laws also incorporate the marketing discipline factors, which state that banks are required to disclose all their financial information so it can be brought to use by customers who can determine the level of risk and then choose banks accordingly.

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