Regulatory Issues in Financial Services

Abstract

This article will provide an overview of the regulatory issues in financial services. The article provides an introduction to financial services, which includes a history of the financial services industry, an explanation of the market share of the industry and descriptions of the major types of services offered by financial providers. In addition, this article also explains the most significant legislative regulations that have been enacted to govern the financial services industry, including a summary of the historical statutes that laid the framework for the modern finance and banking industries: The Sarbanes-Oxley Act of 2002, The Glass-Steagall Act, the Gramm-Leach-Bliley Act, and the Dodd-Frank Act. Further, the regulatory bodies that oversee the financial services industry are also described, including the Federal Reserve Board, the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, and the various self-regulatory organizations. Finally, the regulation of financial providers includes requirements for financial institutions to enter, expand or exit the market and to appropriately manage the risks inherent in the financial services industry; this article includes a brief description of each of these factors.

Overview

Financial services have been the focus of significant attention and legislation throughout the history of the United States. Even in the formation of the fledgling republic, many important legislative battles were waged over issues concerning the regulation of the financial industry. In the years following the Great Depression, the legislators of the New Deal created a regulatory framework that would govern the banking, securities, and financial services industries. This shaped the nature and the practices of the financial services industry for over fifty years.

Recently, however, significant changes have taken place in the financial services industry. These changes have stemmed from technological advances, changing practices in financial services, and new developments in governmental oversight. Their net effect has been to render obsolete many of the laws and regulations governing the industry, even as major statutes have been enacted in recent years that have transformed the financial services industry.

The following sections provide an overview of the financial services industry and introduce some of the most significant legislation that governs financial services providers today.

Introduction to Financial Services. Financial services refers to the duties and benefits related to money management and investment services that are provided by institutions within the finance industry, such as commercial banks, investment banks, insurance companies, credit card companies, and stock brokerages. Financial services is the largest industry in the world in terms of earnings. In addition, the financial services industry is constantly changing as new technology and regulatory reforms have led to the transformation of financial institutions and significant developments in the services they provide.

The Gramm-Leach-Bliley Act of 1999 broke down some of the barriers that separated commercial and investment banking, and eliminated some of the restrictions that prevented full affiliation between securities firms and insurance underwriting activities. With the expansion of the services that financial institutions may now provide, many institutions that were formally considered banks, insurance companies, or brokerage houses transformed their service offerings by introducing the provision of a full slate of financial services. For instance, companies that once exclusively dealt in insurance may now provide investment options such as certificates of deposit ("CDs") and investment brokerage accounts. Also, institutions that once offered only basic banking services now provide a full line of brokerage products, while companies that once focused only on brokerage accounts have expanded their offerings to include bank accounts and loans.

The following sections provide a more detailed explanation of the history of financial services, the market share of financial services providers and the types of services typically offered by financial services institutions.

History of Financial Services. During the 1970s, the banking industry remained balkanized, in that most states restricted the ability of out-of-state banks to open branches in their states, and all states prevented out-of-state bank holding companies from buying their banks. Thus, rather than the large, nationally integrated banking system of today, there were thousands of banks throughout the United States, although most of them were small, local offices. Beginning in the 1970s, banking deregulation drastically changed the banking landscape. Banks could begin to open branches across state lines, and out-of-state bank holding companies could purchase banks anywhere. These changes accelerated during the 1980s, and were completed in the middle of the 1990s with federal legislation allowing banks to operate nationwide. While some regulatory constraints remain in that banks may not hold more than 10 percent of deposits nationally, the banking system in the United States has become increasingly open and integrated (Strahan, 2006).

In addition to changes in banking deregulation, legislative changes began to allow investment companies to provide consumers with basic banking services. Thus, although most Americans conducted routine checking and savings business at local banks, bank assets began to decline as consumers began to take advantage of new alternatives to conventional ways of banking, such as CDs and money market funds, which yielded higher interest. As a result of these changes, the mid-1980s saw a significant increase in the number of bank failures.

To stay competitive, banks found loopholes in the Glass-Steagall Banking Act of 1933, the reigning legislative regime that governed the banking industry and restricted the services that banks could provide, and began to offer services outside of traditional banking activities by creating mortgage and financing subsidiaries and developing conveniences such as debit cards and automatic teller machines (ATMs). By the mid-1990s, the banking and financial services industries were no longer clearly defined. Finally, a wave of mergers and acquisitions among financial institutions created powerhouse financial services companies that offer consumers an even greater range of services across a range of industries, including banking, insurance, and investment management.

Although growth and profit continued in the 1980s, the financial services industry also experienced significant losses. On October 19, 1987, the New York Stock Exchange closed with the largest single-day drop in its history, losing 508.32 points, or almost one-fourth of its value. Another significant event in the financial services industry was the failure of hundreds of savings and loan (S&L) institutions in the mid-1980s. One reason for the S&L failures stemmed from the debt burden carried due to low-interest mortgages offered in the 1970s when inflation and interest was high. A government bailout costing billions of dollars was implemented to pay the insured depositors of failed institutions.

Finally, the financial services industry experienced significant losses in the wake of the attacks on New York City on September 11, 2001. The World Trade Center, which was destroyed in the attacks, had held many banks, insurance companies, brokerages, and securities firms. Many of these companies lost personnel and important documents and records. The months following these events saw a further contraction in an already sluggishh American economy. The events of 9/11 prompted the financial service industry to once again reevaluate its service offerings, and many of these institutions introduced more comprehensive electronic and virtual financial services. This trend will likely continue into the future.

Market Share. As a result of the regulatory changes to the banking sector during the mid 1970s to 1990s, banks became larger and better diversified. For example, the share of assets held by banks rose dramatically, and banks became not only bigger but also more geographically diverse. For instance, throughout most of the 1970s, only 10 percent of the banking-system assets in most states were owned by organizations with operations outside the state. By the mid 1990s, this figure had risen to about 65 percent, as reform allowed bank holding companies to buy banks across the country (Strahan, 2006).

The changes in bank regulations not only altered the size and geographical scope of banks, but also increased their efficiency. Banking deregulation increased competition among banks and bank holding companies, and this competition drove financial institutions to improve their efficiency while offering higher quality customer service and lower priced bank services (Strahan, 2006).

The financial services industry constitutes the largest group of companies in the world in terms of earnings, although other industries log greater numbers in terms of total revenue or numbers of employees. The financial services industry remains extremely competitive, as no single financial institution dominates the market share, but rather a number of top companies continue to jostle for market superiority. Despite this fragmentation, financial service companies remain some of the most profitable companies in the world, and the financial services industry continues to grow exponentially.

Types of Services Offered. Financial institutions now offer a wide range of financial services. The major types of financial services are deposits and transfers, savings and checking accounts, short-term borrowing, long-term borrowing, insurance, investment services, and credit and debit cards. This range of services allows financial services institutions to compete and keep more of the business of their customers in-house, since consumers are able to obtain a wide range of services from the same institution. In addition, these institutions are able to lure customers from other institutions by offering better rates on the same host of services. The following sections will explain the types of services that are typically offered by financial services providers in more detail.

Deposits & Transfers. The transfer of funds with negotiable instruments, such as checks, is one of the most useful of financial services. Transfers by check provide parties with control over the amounts and timing of the transactions and with a record that can be used as evidence of payments or other transfers. Funds may also be deposited or transferred electronically, which is often less expensive than paper check transfers, in that electronic deposits and transfers are typically completed almost instantaneously. Finally, funds may also be deposited or transferred by telephone, through the use of an ATM or through a wire service.

Savings & Checking Accounts. Most banks offer checking and savings accounts for their customers. These accounts allow individuals to store their income and savings in accounts that are federally insured up to a certain dollar amount and provide convenient access to the funds through withdrawals and checking services. In addition, many of these accounts offer interest rates that, while generally minimal, allow consumers to incur some interest on the money they have deposited with the financial institution. In turn, financial institutions such as banks and credit unions pool these deposits to use as assets that enable them to extend loans and mortgages, and borrowers pay the financial institution a return on the money in the form of interest payments.

Short-Term Borrowing. Short-term borrowing consists of consumer loans that individuals may borrow or debt that is incurred by businesses through borrowing and lending in commercial paper. Consumer loans are smaller loans that individuals may borrow from banks, credit unions, and finance companies. The amounts lent and repayment terms are tailored to the demands of the borrower and the concerns of the lender. These loans may be secured by an individual's assets or they may be unsecured if the financial history of an individual borrower is exceptionally strong. Because borrowers and lenders benefit from a reasonably close, personal relationship in that borrowers are typically customers of the financial institution, lenders are able to offer some flexibility in the amounts, repayment schedules, and other terms of the loans.

Commercial paper functions essentially as an alternative to a bank line of credit. Once a business becomes large enough and maintains a high enough credit rating, then it may use commercial paper as a cheaper alternative to obtaining short-term funds using a bank line of credit. Commercial paper also permits borrowers and lenders to avoid the costs of certain federal regulations regarding borrowing and lending through banks and other financial institutions.

Long-Term Borrowing. Long-term borrowing is distinguishable from short-term borrowing with regards to the instruments that represent the indebtedness. Relatively few lenders provide individuals or businesses with debt maturing in more than four or five years that is not represented by a formal, often marketable, instrument. For individuals, these loans are generally secured with property, such as a mortgage. For businesses, the instruments usually are bonds that often are secured and that are not fully marketable unless they are registered with the Securities and Exchange Commission ("SEC").

Investment Services. Investment services provide people with the opportunity to contribute to a range of investment vehicles that are best suited for their needs according to the amount of money they wish to invest and length of time of the investment. In addition, many of these investment services are offered at very low transactions costs. These investments can be represented by a CD or money market mutual funds, which are very similar to savings accounts except that they represent a claim on specified market-valued assets. The investments are usually placed in a portfolio of assets and generally are insured through the federal government. Also, individuals may invest in US Treasury bills or other more sophisticated options that involve shares listed on stock exchanges.

Insurance Services. Insurance brokers shop for insurance, such as corporate property and casualty insurance, for their customers. In addition, some financial institutions now offer some forms of insurance, such as annuities or life insurance. Insurance for individuals is still generally underwritten by insurance companies and offered primarily through agents, insurance brokers and stock brokers. However, banking and investment corporations are increasingly offering a wide range of insurance options, including life insurance, retirement insurance, health insurance, and home and automobile policies.

Credit & Debit Cards. Throughout the 1990s, debit and credit cards became increasingly popular among American consumers. The ease of making purchases or transferring funds electronically made debit and credit cards replace cash as the purchasing method of choice. An ever-growing number of companies and associations began offering credit cards, and attempted to lure new customers by offering premiums and bonuses for the use of their cards. These offers included frequent flyer miles, credits toward purchases from affiliated companies, or a percentage of any money spent sent back to consumers in the form of cash or an account credit.

Over the last few decades, the use of credit cards has expanded from infrequent large purchases to include such everyday purchases as groceries, fast food, and gasoline. In addition, credit cards are being used by a broader cross-section of consumers. When credit cards were first offered, only individuals with solid credit and substantial incomes had access to them. Today, credit card companies target students on many college and university campuses so that these young consumers become the next generation of credit card users. Also, the wider range of credit and debit card options has allowed even individuals with poor credit or a limited credit history to obtain these cards. The use of credit and debit cards will likely only become more prevalent. In general, Americans charge more purchases with their credit cards than they spend in cash, and this disparity will undoubtedly continue to grow.

Legislative Regulation of Financial Services. The financial services industry in the United States has been regulated by federal laws and statutes almost since its inception. The US Constitution grants Congress powers to collect taxes, borrow money, regulate commerce (with foreign nations and among the states), and coin money. In exercising these powers, Congress has enacted a regulatory framework that has undergone significant changes over time in response to trends in the finance and banking sectors. The following sections describe some of the major pieces of legislation that have been enacted over the years to regulate the financial services industry.

Early Legislation. The Securities Act of 1933 was the first Congressional law to impose regulation on the securities industry. Initial public offerings were required to be registered and disclosed to investors to protect them from fraud and misrepresentations. In 1934, The Securities Exchange Act created the Securities and Exchange Commission (SEC) and specified its licensing and other regulatory duties. This law also prohibits insider trading, the misuse of confidential information not available to the general public for personal gain.

The Investment Company Act of 1940 extended the SEC's regulatory authority to mutual fund and other investment companies. After the passage of this Act, these entities were required to comply with SEC rules in addition to any other industry regulations. Congress also passed the Investment Advisers Act of 1940, which broadened the definition of an investment adviser to bring more of these activities under the purview of the SEC. This legislation was vital in that, as the investment management industry evolved, many investment professionals became investment advisers rather than brokers because the regulations governing advising were more lax. The new legislation offered investors greater protections from misleading, fraudulent, or erroneous investment advice.

Sarbanes-Oxley Act. Known also as the Corporate Responsibility Act of 2002, the Sarbanes-Oxley Act was signed in the wake of Enron and other accounting and corporate governance scandals. It instituted radical reforms in four key areas: Corporate responsibility, criminal penalties, accounting regulation, and consumer protections.

In terms of corporate responsibility, Sarbanes-Oxley requires the chief executive officer (CEO) and chief financial officer (CFO) of a corporation to certify financial reports and audits submitted by the corporation. In addition, CEOs and CFOs are required to forfeit profits and bonuses from earnings that have been restated because of securities fraud, and corporate executives are prohibited from selling company stock during blackout periods, when company employees may not modify their company retirement or investment plans. Finally, the Act requires financial employees to report company stock trades within two days and that companies must provide immediate disclosure of material changes in their financial condition.

Sarbanes-Oxley also introduced stricter criminal penalties for violations of the Act's provisions. For instance, the Act makes it a crime to destroy, alter or fabricate records in federal investigations or to defraud shareholders. These acts are punishable with a potential 20-year prison term. Sarbanes-Oxley also increases the penalties that CEOs and CFOs may face for falsifying statements or failing to certify financial reports. Finally, the Act requires that significant documents and emails related to corporate audits be preserved for five years and creates a 10-year felony for destroying such documents.

One major effect of Sarbanes-Oxley was its overhaul of corporate accounting regulations. The Act created the Public Company Accounting Oversight Board, where public companies must now be registered. Also, the Sarbanes-Oxley Act extends a statute of limitations on securities fraud to five years and liberalizes the ability of whistleblowers to sue for retaliatory actions by corporations.

Glass-Steagall Act. The Glass-Steagall Act was enacted in 1933 in the wake of the 1929 stock market crash and the Great Depression. The Act set up a regulatory firewall between commercial and investment bank activities and prohibited commercial banks from collaborating with full-service brokerage firms or participating in investment banking activities. Banks were given a year to decide on whether they would specialize in commercial or investment banking. Either way, the Act required that only 10 percent of the total income of commercial banks could stem from securities, although commercial banks could continue to underwrite government-issued bonds. Congress repealed the Glass-Steagall Act in 1999, with the passage of the Financial Services Modernization Act of 1999, also known as the Gramm-Leach-Bliley Act, which removed the regulations barring mergers among banking, securities, and insurance businesses. Since then, the distinction between commercial banks and brokerage firms has blurred and today, many banks own brokerage firms and provide investment services.

Gramm-Leach-Bliley Act. In November 1999, Congress repealed the Glass-Steagall Act with the establishment of the Gramm-Leach-Bliley Act ("GLBA"), which eliminated the prohibitions against affiliations between commercial and investment banks. Thus, GLBA was designed to monitor mergers and affiliations, customer privacy protections and lending to lower-income communities. In addition, the GLBA allowed banking and other financial institutions to offer a broader range of services, including insurance underwriting and other investment activities. The GLBA permits the banking, insurance, and securities industries to converge as long as appropriate safeguards are in place to protect the privacy of consumer financial data and guarantee the solvency of the institution.

In a significant step toward protecting sensitive financial information, the GLBA also limited the extent to which financial institutions could share clients’ personal information, and requires that financial institutions routinely inform customers about their privacy policies and practices. The law also provided consumers with some control over how financial institutions use and share their personal information.

Regulatory Bodies Governing Financial Services. The financial services industry is regulated by Congress, federal agencies and in some cases, even state agencies. The major federal agencies that regulate financial services are the Securities and Exchange Commission, Federal Deposit Insurance Corporation, and the Federal Reserve Board. In addition, numerous self-regulatory organizations also provide internal policing for many of the sectors within the financial services industry. The following sections provide more detail about these regulatory bodies.

Federal Reserve Board. The Federal Reserve Board consists of the Board of Governors of the Federal Reserve System. The board is known for its role in influencing the US money supply and economic policy, but it also has wide-ranging regulatory authority. The Federal Reserve Board regulates certain interest rates and bank mergers. The board also supervises the banking system by issuing regulations controlling the activities of bank holding companies and implements various federal statutes. The seven members of the Board of Governors are appointed by the president, subject to confirmation by the Senate.

The Securities & Exchange Commission. The Securities and Exchange Commission (SEC) is a government commission created by Congress to regulate the securities markets and protect investors. The SEC is authorized to promulgate regulations to promote full public disclosure and to protect the investing public against fraudulent and manipulative practices in the securities markets. The SEC is divided into four main divisions: Corporate Finance, Market Regulation, Investment Management and Enforcement.

The Division of Corporate Finance is responsible for overseeing the disclosure documents that public companies in the United States are required to file with the SEC. These documents include registration statements for public offerings, quarterly and annual filings, annual reports to shareholders, documents detailing mergers and acquisitions, and proxy materials that are sent out to shareholders before annual meetings. Companies are required to provide “prudent and truthful” disclosure of material information, and these documents must be filed in a timely fashion.

The Division of Market Regulation establishes and maintains markets by regulating the participants in the securities industry, such as the various brokerage and investment firms.

The Division of Investment Management preserves all rules that affect investment companies and their advisors.

Finally, the Division of Enforcement investigates violations and provides recommendations for further action if needed. This division has only civil enforcement authority, and thus cooperates with law enforcement agencies to bring about criminal charges.

Federal Deposit Insurance Corporation. The Federal Deposit Insurance Corporation (FDIC) is an independent US federal executive agency designed to promote public confidence in the banking system. In addition, it provides insurance coverage for bank deposits up to $100,000. The FDIC was established in 1933, after bank customers could not withdraw the money they had deposited because of the failure of so many banks. To ensure that this will not happen again, the FDIC provides coverage for deposits in national banks, in state banks that are members of the Federal Reserve System and in other qualified state banks. The FDIC is managed by a five-member board of directors, and the directors are appointed by the president with the consent of the US Senate.

Self-Regulatory Organizations. Self-regulatory organizations, or SROs, are bodies that assume some of the responsibility of policing their own industries. For instance, SROs have the responsibility of establishing rules to govern trading and other activities, setting qualifications for industry professionals, overseeing the conduct of their members and imposing discipline in instances of unethical or illegal behavior. The SEC oversees the SROs using authority granted to it by Congress.

Applications

Effects of Financial Services Regulations. Efficient forms of regulation emphasize market discipline. The following sections will examine various aspects of the regulation of financial services.

Regulation of Market Participants. Most institutions that provide financial services, such as banks or credit unions, are required to get a charter from a state or federal agency before entering the market. At the federal level, the Office of the Comptroller of the Currency (OCC) grants national charters to commercial banks, the Federal Home Loan Bank Board (FHLBB) charters savings and loan associations and savings banks and the National Credit Union Association (NCUA) provides charters for credit unions.

Chartered depository institutions generally must also obtain deposit insurance from a federal agency. The deposits of commercial banks and most mutual savings banks are insured by the Federal Deposit Insurance Corporation ("FDIC") and the deposits of savings and loan associations and some mutual savings banks are insured by the Federal Savings and Loan Insurance Corporation (FSLIC). Credit union deposits are insured by the National Credit Union Share Insurance Fund (NCUSIF).

When financial services providers want to expand into new markets, they must first meet any relevant regulatory requirements. Expansion of commercial banks across state lines was once limited by rigorous federal and state restrictions on interstate banking. The McFadden Act, enacted in 1927, gave states the power to regulate bank branching, including branches owned by national banks. The McFadden Act specifically prohibited interstate branching by allowing national banks to branch only within the state in which it was situated. The Riegle-Neal Interstate Banking & Branching Efficiency Act of 1994 repealed most provisions of the McFadden Act, and permitted banks to acquire branch offices, or open new ones, in any state outside their home state after June 1, 1997. Although the Riegel-Neal Act specified that state law continued to control intrastate branching, or branching within a state's borders, most states passed laws enabling branch expansions within their territory soon after the Act was passed.

When financial services providers decide to exit the market, chartered financial institutions require the permission of their chartering agency to close branches or merge with another institution. In addition, the Federal Reserve, the FDIC, FSLIC or NCUSIF must approve the change.

Industry Convergence. Consolidation of all types of business activities has been increasingly prominent over the last decade. In particular, consolidations have been among the highest in the financial sector. Most of the merger and acquisition activity in the financial sector has involved banking organizations. This convergence of companies offering financial services has all but eradicated the traditional boundaries that once separated banks, brokerage firms and insurance companies and has created a new type of financial services provider. The new financial services conglomerates aim to provide customers with a range of options relating to all aspects of financial services that may all be accessed from one company.

Consolidation of financial services providers offers some benefits. For instance, financial consolidation generally results in improvements in information technology, financial deregulation, and increased shareholder pressure for financial performance. However, the convergence in the financial services industry also has its drawbacks. Consolidation tends to reduce risk through diversification gains, but after consolidation, some firms shift toward riskier asset portfolios, and consolidation may increase operating risks and managerial conflicts for those firms. Thus, while there are both pros and cons involved in the trend in convergence in the financial services industry, further consolidations remain likely.

Risk Management. The loans made by chartered depository institutions are regulated to aid in controlling the risks of these investments for depositors and deposit insurance agencies. Legal lending limits have been set to establish the maximum amount a bank can lend to any one borrower. In addition, several federal and state laws govern the practices of lenders to ensure that loans are made fairly and yet with due consideration of a borrower's credit rating. For instance, regulations under the Reinvestment Act of 1977 forbid the alleged practice of redlining, or denying mortgage and home improvement loans on properties solely because they are old or located in older urban areas. Also, the Truth-in-Lending Act requires disclosure of a standard interest rate and other terms on consumer loans and long-term leases of consumer goods. It also regulates the content of credit advertising and credit card distribution, terms and liabilities.

Some lending and collection practices of creditors also are constrained or prohibited by various laws. The Fair Credit Reporting Act regulates the content, accuracy and disclosure of credit and investigative reports furnished to creditors, employers and insurers in connection with consumer transactions. The Fair Debt Collections Practices Act prohibits abusive and coercive collection practices and requires bill collectors to provide debtors with certain information. In addition, states have enacted laws that similarly regulate credit practices that parallel federal laws, and in some cases are more severe. Because lenders must stay within statutory guidelines in terms of the debt collection practices, they are more prone to carefully evaluate the creditworthiness of each borrower before extending a loan as an additional attempt to mitigate the risk of a borrower's default on the loan.

Conclusion

The financial services industry has changed dramatically over the last decades. The changes have been driven and prompted by shifts and developments in the regulatory framework that governs financial providers. Consolidations among financial services institutions have led to increased profits and an increased market share by the top providers. Larger national financial institutions have increasingly replaced smaller, regional entities, although many local banks and credit unions are still experiencing solid growth. These consolidations have, however, increased the range in services that financial providers may provide. In addition, the deconstruction of the prohibitions between the commercial banking and the investment banking and insurance industries, established by the Glass-Steagall Act and repealed by the Gramm-Leach-Bliley Act have also enabled financial institutions to enhance the services they provide. While consolidations and legislative changes will continue to shape the financial services industry, financial institutions will also be affected by shifts in politics, demographics, economic cycles, and emerging technology. Lawmakers, courts, and business leaders undoubtedly will continue to strive to ensure that the financial services industry is poised to meet these new challenges.

Terms & Concepts

Asset Management: In financial services, the management of a client's investments by a bank.

Bank: Banks are commercial institutions licensed to receive deposits, and whose primary business is making and receiving payments as well as supplying short-term loans to individuals.

Commercial Bank: A financial institution that provides services such as accepting deposits and giving loans to businesses.

Credit Union: A member-owned and operated financial cooperative whose profits are shared amongst the owners.

Depression: A severe and prolonged recession characterized by inefficient economic productivity, high unemployment, and falling price levels.

Federal Reserve Board: The governing body of the Federal Reserve System, comprised of seven members of the Board of Governors who are appointed by the president and confirmed by the Senate. The board sets federal monetary policy and makes key economic decisions.

Financial Institution: An organization whose business deals with financial transactions, such as investments, loans, and deposits. Financial institutions can be banks, trust companies, insurance companies or investment dealers.

Investment Bank: A financial institution that performs services such as underwriting, acting as an intermediary between an issuer of securities and the investing public, facilitating mergers and other corporate reorganizations, or acting as broker for institutional clients.

Office of Thrift Supervision: A bureau of the US Treasury Department responsible for issuing and enforcing regulations governing the nation's savings and loan industry.

Private Banking: Personalized financial and banking services offered to a bank's wealthy, high net worth clients.

Retail Bank: Mass-market banks which have many local branches of larger commercial banks and offer typical banking services.

Thrift Bank: A bank whose main purpose is to take deposits from consumers and offer home mortgages. Extended services such as corporate banking, brokering, or underwriting are not offered.

Underwriting: The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities, both equity and debt. Also, the process of issuing insurance policies.

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Suggested Reading

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