Regulations - Focus Deck Flashcards
What are the core focuses of each of the three Basel Accords?
Basel I - minimum ratio of capital to risk-weighted assets
Basel II - capital requirements based on risk
Basel III - stress testing and capital adequacy
Federal Reserve Act (1913)
Created and firmly established the Federal Reserve as the central bank for the US
Also created national check collection and settlement system
Glass-Steagall Act (1933)
Mostly repealed except for deposit insurance (FDIC)
Separated commercial banking from investment banking
Bank cannot underwrite and securities firms can’t take deposits; repealed by Gramm-Leach-Bliley Act (1999)
Anti-tying in Bank Holding Company Act (1970)
Prohibits tying in financial services, with exception for traditional bank products
Products must be available separately to the same consumer
Gramm-Leach-Bliley Act (1999)
Permits creation of financial holding companies, with Fed as primary regulator
Consolidated capital requirements for holding company
Implemented key consumer protections
Dodd-Frank Act (2010)
More transparency across the market, especially for derivatives
Federal Reserve must conduct annual stress tests on the largest and most complex FIs
Volcker rule
E-Sign Act (2000)
Digital signatures have the same legal effect as wet-ink signatures
Check 21 (2003)
Electronic checks are valid for clearing
Red Flag Rule
If the financial institution sees something different than the normal use of the account, they will reach out to the account owner
Regulation FD
If MNPI is known to certain entities, then disclose to public
SEC Rule 2a-7
Provides regulations on money market funds and floating NAVs
Allows MMFs to utilize floating NAV due to liquidity issues “breaking the buck”
Redemption fees and redemption gates can be employed to secure liquidity
Exception of government money market funds
UCC Article 3
Negotiable instruments
Inadvertent accord and satisfaction (90 days)
UCC Coverage Areas
Negotiable instruments
Deposit reconciliation
Funds transfers (security procedures and consequential damages)
Letters of Credit
Secured Transactions (collateral)
What did the Financial Stability Board (FSB) publish proposals for in October 2021?
Enhance money market fund resilience
Dodd-Frank (2010) created which two entities?
Consumer Financial Protection Board (CFPB)
Financial Stability Oversight Council (FSOC)
Three Pillars of Basel II
Minimum capital requirements
Supervisory review (dealing with and evaluating risk)
Market discipline (disclosure requirements for risk)
Basel III Two Reform Targets
Bank-level regulation
System-wide risks
Four Requirements from Basel III
Minimum capital levels
Leverage Ratio
Liquidity coverage ratio
Net Stable funding ratio
Regulation D
Reserve requirement provision of the Federal Reserve Act of 1913
Regulation Q
(List Acts that have impacted this Regulation)
Previously restricted interest amounts on certain accounts
Glass-Steagall Act of 1933 -> DIDMCA of 1980 -> Dodd-Frank of 2010
Current version implements the Basel III minimum capital requirements and capital adequacy standards
Regulation Y
Covers acquisition of banks and bank holding companies
Defines and regulates non-banking activities bank holding companies and foreign banking organizations can do
Regulation BB
Requires banks to meet the credit needs of the entire community where they do business
Regulation VV
Volcker rule
Regulation WW
Minimum liquidity requirement on large and internationally active banking organizations
Based on liquidity coverage ratio
Volcker Rule
Generally prohibits banking entities from engaging in proprietary trading
Prohibiting investing in or sponsoring hedge funds or private equity funds
Limit exposures to hedge funds and private equity funds
Recently amended in 2019/2020 to reduce restrictions on investments in venture capital funds
Electronic Fund Transfer Act (EFTA) (1978)
Rights and responsibilities for EFT services EXCEPT WIRES
Limits liability to unauthorized transactions involving ATMs and POS terminals
Depository Institutions Deregulation and Monetary Control Act (DIDMCA) (1980)
Requires all deposit-taking institutions to maintain reserves at Fed
Fed services such as the discount window and check clearing available to all deposit-taking institutions
Fed must reduce and/or price payment system float (service)
Fed must price previously free Fed services
Regulation E
Implements provisions of the EFTA
Regulation J
Implements check collection and settlement provision of Federal Reserve Act
Regulation Z
Truth in Lending Act of 1968
Credit Card Accountability Responsibility and Disclosure Act of 2009
Promotes informed use of credit by consumers
Primarily impacts treasury through cards offered to customers
Things Prohibited under Credit CARD Act / Regulation Z
Cannot increase rate in first year
Cannot increase rate that applies to an existing balance
Can be under 21 only if they can make required payments or cosigner can
Consumer’s consent before charging fees for transactions above limit
Limits high fees for subprime credit cards
Bans two-cycle billing
Cannot allocate payments to maximize interest charges
Two-Cycle Billing
Calculate interest charges based on the average balance of the account over two billing periods
Banned as part of CARD Act
Regulation CC
Implements provisions of the Expedited Funds Availability Act of 1987
Rules to speed collection and return of checks
Endorsement standards for banks
Regulation II
Implements provision of the Durbin Amendment to the Dodd-Frank Act of 2010
Limit debit card interchange fees and increase competition in payment processing (at least two processors)
Article 3 of the UCC deals primarily with what two concepts for checks?
Accord and satisfaction
Amended to allow for 90 day period due to use of lockboxes
Bank’s failure to examine forged signature does not result in failure to exercise ordinary care
Article 4A of the UCC
Electronic funds transfers
Two Primary Provisions of Article 4A of the UCC
Security procedures - commercially reasonable for verifying payment
Consequential damages - typically the bank won’t be liable, unless in writing; incorrectly executes is responsible for interest and incidental expenses
PSD1 (2007)
Payment Services Directive 1
Legislative framework for SEPA
PSD2 (2018)
Updates PSD1 to recognize the growth in mobile and internet payment services
Limit interchanges fees on consumer credit and debit card transactions
Prohibits use of surcharges
Legal basis for open banking in the EU (greater integration)
BSA
Bank Secrecy Act of 1970
AML legislation
Deter money laundering and use of secret foreign accounts
$10,000 requires Form 8300
Form 8300
Required to be filed as part of BSA
MLCA
Money Laundering Control Act
Enhances BSA by making it a crime to purposefully structure transactions to avoid the reporting threshold
USA PATRIOT Act (2001)
Gave the FBI and DOJ increased latitude in intelligence-gathering activities
Imposes significant obligations on nonbank FIs
Includes nonfinancial entities with high-value transactions
All foreign banks in the US are subject to US jurisdiction
Prohibits US banks from maintaining foreign shell banks
Credit card issuers that are foreign must take steps to prevent usage by terrorists
Increased KYC requirements
FinCEN’s CDD Rule (2018)
Customer Due Diligence
Requires identification of beneficial owners
25% or more or have control
SEC Regulation S-X
Outlines reporting requirements
Additional guidance comes from SEC decisions
SEC Regulation G
Implements SOX
Reconcile pro-forma financial information to financial statements
Endorsement standards for checks are outlined under which regulation?
Regulation CC
