Since the country’s founding in the 1780s, banking in the United States has grown to be a highly influential and complex system of banking and financial Institutions.

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With New York City and Wall Street as its pillars, it is focused on a number of financial services, including private banking, asset management, and deposit security. When the Bank of Pennsylvania was established in 1780 to help pay for the American Revolutionary War, the banking industry officially got its start. The Bank of North America was established to enable more complex financial exchanges because merchants in the Thirteen Colonies required a means of exchange in the form of a currency.

As of 2018, JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, and Goldman Sachs were the biggest banks in the country. An estimated 56% of the U.S. GDP was represented by banking assets. There were 4,951 commercial banks and savings institutions in the United States as of September 8, 2021.

History:

In order to finance the American Revolutionary War, traders came to the United States from Britain in 1780 and founded the Bank of Pennsylvania (1775–1783). The Thirteen Colonies relied on unofficial trade to fund their everyday expenses at this time because they had not yet created official currency. The Bank of North America opened its doors on January 4, 1782, becoming the nation’s first commercial bank. The Bank of the United States was established by American Treasury Secretary Alexander Hamilton in 1791 as a national institution to uphold American taxes and settle foreign debt. In 1832, President Andrew Jackson liquidated the bank and transferred all bank assets to state-run banks in the United States. Rapid money production by state banks caused runaway inflation and the Panic of 1837.

With the founding of Jay Cooke & Company, one of the first issuers of government bonds, investment banking got its start in the 1860s. The National Bank Act was passed in 1863 in order to establish a federal banking system, a national currency, and public lending. However, not all states had formally joined the union at this point. H.B. Spaulding, the mayor of Muskogee in Oklahoma Territory (which did not become a state until 1907), resigned from his post as vice-president of the Territorial Trust and Surety Company in 1902 after receiving a charter to establish a private bank. Similar to 1903, many more private banks were established.

The Federal Reserve was created and started carrying out monetary policy in 1913. The “Glass-Steagall Act,” which was established to separate commercial and investment banking after the Great Depression, was repealed in 1991, which contributed to the global financial crisis of 2008.

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Regulatory Agencies:

While most nations only have one bank regulator, in the United States, banking is governed by both federal and state laws. A banking organisation may be governed by a variety of federal and state banking regulations, depending on its type of charter and organisational structure. The United States maintains separate securities, commodities, and insurance regulatory agencies—separate from the bank regulatory agencies—at the federal and state levels, in contrast to Switzerland and the United Kingdom, where regulatory authority over the banking, securities, and insurance industries is combined into a single financial-service agency. [5] Privacy, disclosure, fraud prevention, anti-money laundering, anti-terrorism, anti-usury lending, and the encouragement of lending to lower-income people are all addressed by banking regulations in the United States. Additionally, several particular cities pass their own financial regulating legislation.

Federal Reserve System:

The Federal Reserve Act, which was passed in 1913, established the Federal Reserve system as the nation’s central banking system. This was done partly in response to a series of financial panics, most notably the terrible panic of 1907. The Federal Reserve System’s structure has changed over time, along with its tasks and duties. The Great Depression and other events played a significant role in the system’s evolution. Currently, its responsibilities include managing the country’s monetary policy, supervising and regulating banking institutions, preserving the stability of the financial system, and offering financial services to depository institutions, the federal government, and foreign official entities.

Agency for Deposit Insurance Regulation:

The Glass-Steagall Act of 1933 established the Federal Deposit Insurance Company (FDIC), a U.S. government corporation. It offers deposit insurance up to $250,000 per depositor per bank, ensuring the security of deposits in member banks. The FDIC insured deposits at 6,800 banks as of November 18, 2010. Additionally, the FDIC administers banks in receiverships, conducts consumer protection duties, and regulates and inspects certain financial institutions for safety and soundness (failed banks). No depositor has ever experienced a loss of insured funds as a result of a bank collapse since the FDIC insurance programme began on January 1, 1934.

Office of the Currency Governor:

The National Currency Act of 1863 created the Office of the Comptroller of the Currency (OCC), a federal organisation in the United States with the responsibility of establishing, regulating, and overseeing all national banks as well as federal branches and agencies of foreign banks operating in the country. On April 9, 2012, Thomas J. Curry was sworn in as the 30th Comptroller of the Currency.

Thrift Supervision Office:

The Department of the Treasury oversees the Office of Thrift Supervision, a federal organisation in the United States. In 1989, it was established as a rebranded version of another government organisation (that was faulted for its role in the Savings and loan crisis). It receives funding from the banks it oversees, just as other U.S. federal bank regulators. The Office of Thrift Supervision joined the Office of the Comptroller of the Currency on July 21, 2011.

National Bank:

A national bank is a bank that is federally or nationally chartered and is permitted to conduct business in any state across the nation. A national bank benefits from not being subject to state usury laws meant to stop predatory lending by having a National Bank Act charter. [14] (However, see also Cuomo v. Clearing House Association, holding that state fair lending laws may still be enforced in spite of federal banking standards.) Currently, there is no federal rate cap. The only thing that the federal government mandates is that the consumer be informed of any rates, fees, or terms that issuers decide to impose in compliance with the Truth in Lending Act. A national bank’s corporate name must contain the words “National” or “N.A.”

State Bank:

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A state bank is a bank that has been granted state charter status, which means that it was established in accordance with state law rather than federal law. State banks used to be limited to operating in the state in which they were chartered, but this restriction has gradually eroded. With the passing of Dodd Frank in 2010, this distinction was completely abolished. State-chartered banks are currently permitted to have branches in any other state. National or Federal cannot be used in the name of a state-chartered bank.

Governmental savings institution:

The Homeowners Refinancing Act of 1933 established federal savings associations (FSAs), which also include federal savings banks (FSBs). Although they were initially concentrated on lending for residential mortgages, they have expanded their company to include a variety of banking activities. They are governed by different regulations than national banks, which permits them to, for instance, make direct investments in real estate development firms. The Office of Thrift Supervision was once in charge of overseeing FSAs, but the Dodd-Frank Act gave the Office of the Comptroller of the Currency the majority of regulatory authority.

Mergers and Closures at Banks:

In the normal course of business, banks merge for a variety of reasons, such as to create one larger bank where operations of both banks can be streamlined, to acquire the brands of another bank, or because regulators close the institution due to risky and unethical business practises or insufficient capital and liquidity. In the US, banks are not permitted to file for bankruptcy. As of October 2008, the FDIC insures depositor accounts up to $250,000 per person and per bank. The FDIC either takes over failing banks, manages them for a while, then sells or merges them with other banks. The FDIC has a list of banks that includes the assuming institutions and the institutions that were seized by regulators.

Banking Privacy:

In the United States, neither a single statute nor an unalienable right protects financial privacy and data security. Banking privacy regulations are often implemented on a sector-by-sector basis. The Gramm-Leach-Bliley Act is the most well-known federal statute governing financial privacy in the United States (GLB). This controls how banking institutions must disclose, gather, and use non-public information. Additionally, by fining those who break federal and state laws protecting financial privacy, the Federal Trade Commission (FTC) acts as the main defender of this privacy. Violations of banking privacy are often a civil offence rather than a criminal one, unlike banking in Switzerland or other European nations. However, the Financial Industry Regulatory Authority (FINRA) has a number of measures in its regulations that address banking privacy.

The Thirteen Colonies obtain funding:

The Thirteen Colonies used credit extensively. Both domestic and foreign commodities, as well as a means of repayment, were purchased with credit. Credit was a more advantageous form of payment than cash or barter because it permitted colonists to postpone making purchases of goods and services until later. Despite the hazards associated with credit, such as the debtor’s incapacity to repay, institutions accepted it.

International and Domestic:

For their early development, colonists mostly relied on outside aid from England. The majority of this foreign credit was a mercantile loan. For instance, English traders would deliver products to the American colonies and request payment just six to twelve months later. These foreign loans were offered to colonists who formed strong bonds with English merchants. Colonists were able to create a domestic credit system thanks to the overseas credit. Both book credit and promissory notes were used to handle the domestic credit. Because they included information about the debt’s amount, issue and redemption dates, method of repayment, and interest rate, promissory notes are quite comparable to bonds in this regard.

Loan terms and repayment schedules:

Loans were frequently repaid with cash, checks, or products. Some borrowers paid back their debts by giving the creditor labour. Alternatively, the creditor was “loaned” children or oxen. Domestic loans were often provided for terms ranging from a few months to a few years. The duration of the loans from abroad ranged from six months to a year. This means that some domestic loans—usually promissory note loans—were issued more frequently than foreign loans. The requirement for describing the terms of the issuance and the characteristics of the promissory note loans is explained by the longer time horizon, since the chances of default are larger for a long term maturity debt.

Interest Rates:

The introduction of interest rates by the merchants was a result of the issuing of long-term credit, and it was done so to guard against the potential of losing their investments. The merchants charged an average yearly interest rate that ranged from 3.5% to 7%. On other loans, though, some businesses imposed interest rates as high as 10%.

Banking Security:

In the United States, neither a single statute nor an unalienable right protects financial privacy and data security. Banking privacy regulations are often implemented on a sector-by-sector basis. The Gramm-Leach-Bliley Act is the most well-known federal statute governing financial privacy in the United States (GLB). This controls how banking institutions must disclose, gather, and use non-public information. Additionally, by fining those who break federal and state laws protecting financial privacy, the Federal Trade Commission (FTC) acts as the main defender of this privacy. Violations of banking privacy are often a civil offence rather than a criminal one, unlike banking in Switzerland or other European nations. However, the Financial Industry Regulatory Authority (FINRA) has a number of measures in its regulations that address banking privacy.

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List Of Banks:

As of February 11, 2014, there were 6,799 commercial banks in the US that were covered by the FDIC. The list includes every Federal Reserve System member as well as non-members who are also covered by the FDIC. JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, and Goldman Sachs were the top five banks by assets in 2011.

As of 2018, JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, and Goldman Sachs were the biggest banks in the country. An estimated 56% of the U.S. GDP was represented by banking assets. There were 4,951 commercial banks and savings institutions in the United States as of September 8, 2021.