Q:

What are standard banking regulations?

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Quick Answer

Standard banking regulations are a set of federal laws that apply to all financial institutions, dictating the method for implementing specific practices and outlining behaviors and policies to ensure the rights of its customers. The regulations include laws and rules regarding the methods the institutions use to earn a profit as well as to guidelines to ensure the safety of the banking system, and thus the country's economic system overall.

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Full Answer

All banking and financial institutions in the country must adhere to a set of regulations that cover concepts such as insuring the presence of customer funds, preventing the bank from using customer funds for specific actions or requiring institutions to make details about its earnings available publicly. Some regulations also protect customers, preventing the bank from charging fees in certain circumstances or limiting the interest terms on mortgage loans.

Many of the standard banking regulations fall under the purview of the Federal Reserve System, which consists of a board of governors that oversees the structure and flow of the nation's financial system. The Federal Reserve System also outlines the definitions for different types of financial institutions, which include special categories for credit unions and mortgage lenders in addition to national and commercial banks, which have additional stipulations and regulations to which they must adhere. These regulations typically consist of modifications on standard regulations, such as different liability thresholds or limits on lending habits.

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