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According to the Congressional Research Service, the Glass-Steagall Act, also known as the Banking Act of , was enacted to limit the interaction between investment and commercial banks. Commonly, Glass-Steagal refers to four specific provisions of the law. These four provisions separated commercial and investment banking by preventing member banks of the Federal Reserve from dealing in non-governmental securities for customers, investing in non-investment-grade securities for themselves, underwriting and distributing non-governmental securities, or affiliating with any company involved in these activities.
This separation also prevented investment banks from accepting deposits from customers. In the s, bank regulators and the Office of the Comptroller of the Currency issued interpretations of the act that allowed banks and affiliates to engage in increasing amounts of securities activities. Beginning in the s, the United States Congress debated repealing the act. The act was repealed in via the Gramm—Leach—Bliley Act. According to some politicians and economists, this repeal contributed to the financial crisis of According to economist Joseph Stiglitz, "As we stripped back the old regulations, we did nothing to address the new challenges posed by 21st-century markets.
In a interview, former president Bill Clinton, who signed the Gramm—Leach—Bliley Act into law, said, "There's not a single, solitary example that [the repeal of Glass-Steagall] had anything to do with the financial crash. Deposit insurance covers a depositor's accounts dollar-for-dollar in the event of a bank failure or closing, ensuring that depositors do not lose their money as a result of a bank's actions.
Bank failures occur when banks are unable to meet their financial obligations and thus become insolvent. As banks failed, many depositors began withdrawing money from their own banks, fearing that they too would also become insolvent.
These mass withdrawals, referred to as bank runs, further eroded trust in the banking system, as banks closed after being unable to handle the volume of withdrawal requests. The FDIC does not receive public funds. Instead, the FDIC is funded by membership dues paid by member banks.
While no federal law mandates participation, most states require banks to be members in the FDIC to be chartered in the state. Members serve six-year terms. The NCUA is organized through five regional offices, which cover specific states and territories. All federally-chartered credit unions are required to participate, and thought it is not required of them, most state-chartered credit unions also participate.
The Fed was established on December 23, , as part of the Federal Reserve Act, as a result of financial crises that some believed showed a need for central control of the nation's monetary system. Financial crises, such as the Great Depression and the Great Recession, led to the expansion of the Fed's authority and responsibilities. The Fed is composed of the Board of Governors who are presidentially appointed , the Federal Open Market Committee, twelve Federal Reserve Banks, privately owned member banks, and advisory councils.
As the Fed is the central bank of the nation, the United States government receives the profits of the system, after a dividend is paid to member banks. The rest was used to fund a surplus account for federal infrastructure projects. Kentucky's banking laws are contained in Chapter This chapter grants authority to the Division of Depository Institutions to enforce the state's banking laws and sets requirements for chartering banks in Kentucky.
Blue sky laws regulate the sale of securities. Blue sky laws are enacted at the state level and are enforced by state regulatory agencies. State governments may charter, regulate, and supervise depository institutions. States are the primary regulators in the insurance field. States also have authority over securities companies, mortgage lending companies, personal finance companies, and other types of companies offering financial services.
The Department of Financial Institutions DFI is responsible for the regulation of banks, security firms, and other financial institutions in Kentucky. The DFI is made up of several divisions, each regulating certain industries. State-chartered banks, credit unions, and other depository institutions are regulated by the Division of Depository Institutions, a division of the Department of Financial Institutions.
Securities activities in Kentucky are regulated by the Securities Division, a division of the Department of Financial Institutions. The division is tasked with enforcing the Kentucky's blue sky law, Chapter of the Kentucky Revised Statutes.
Devised by the Mercatus Center at George Mason University, the federal regulation and state enterprise FRASE index score measures the impact of federal financial regulations on a state's economy. A score higher than 1 means federal regulations have a higher impact on the state than on the nation, and a score less than 1 means they have a lower impact on the state.
Federal regulations vary from state to state according to industry concentrations. For example, a state like New York with a large financial sector will face different impacts from financial regulation than states like Michigan, where the primary industry is manufacturing. According to the Mercatus Center, restrictions imposed by regulatory bodies, which are regulations that include legal obligations such as "shall," "must," and "prohibited," grew from 55, in to 65, in , an increase of 1.
After the passage of the Dodd-Frank Act in , restrictions grew from 65, in to 78, in , an increase of 9. Depository institutions include banks, savings and loan associations, and credit unions. When banks fail, or become insolvent, there are implications for the economy as a whole.
To analyze the banking system, it is useful to look at the number of depository institutions, the number of institutions that fail, the amounts of deposits, and the number of newly created banks. For the purposes of the table below, commercial banks include national banks, state-chartered commercial banks, loan and trust companies, stock savings banks, private banks under state supervision, and industrial banks.
Branches include all offices of banks operating more than one office. Offices include multiple service offices, military facilities, drive-in facilities, loan production offices, consumer credit offices, seasonal offices, administrative offices, messenger service offices, supermarket banking offices and other offices. The table below compares these numbers with those of neighboring states.
In , no new financial institutions opened in Kentucky, and 11 closed. The table below compares institution figures in Kentucky with those of neighboring states. For the purposes of the table below, new charters are newly chartered or licensed financial institutions. Conversions refer to existing institutions that convert to any type of entity that meets the definition of a commercial bank and receives FDIC insurance; conversions also include relocations from one state to another.
Unassisted mergers refer to voluntary mergers or consolidations, while failures represent mergers, consolidations, or closures that were a result of supervisory actions. In July , FINCEN mandated electronic filing for all complaints and reports, which may explain the general spike in reported crimes that occurred between and Considering the trends in financial crimes is one way to gauge the effectiveness of financial regulation in preventing fraud and abuse.
The following is a list of recent finance policy bills that have been introduced in or passed by the Kentucky state legislature. To learn more about each of these bills, click the bill title. This information is provided by BillTrack50 and LegiScan. Note: Due to the nature of the sorting process used to generate this list, some results may not be relevant to the topic. If no bills are displayed below, then no legislation pertaining to this topic has been introduced in the legislature recently.
The link below is to the most recent stories in a Google news search for the terms Kentucky financial regulation. These results are automatically generated from Google. Ballotpedia does not curate or endorse these articles.
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The Department of Financial Institutions' mission is to serve Kentucky residents by promoting access to a stable financial industry, implementing effective. Department of Financial Institutions. Executive. Public Protection. Visit Website. address. Mero Street Frankfort, KY Get Directions. phone. DFI's mission is to serve Kentucky residents and protect their financial interests by maintaining a stable financial industry, continuing effective and.