Bank Regulation
Banks
are subject to certain
bank regulations and requirements
that aim to uphold the soundness and integrity of the
financial system
.
Reserve requirements
Main article
Reserve requirements
This type of regulation have perhaps lost the role it once had in places like for example the
United States
. Today (2004)
deposits
in United States banks are roughly $8 trillion while central bank "
reserves of depository institutions
" are less than $50 billion. Since reserve requerments apply to just "
transaction deposits
" today. The reason for these reserves are both to put a limit on how much the supply of deposits (money and credit) can grow. And to work as a cushion in case of a severe recession that leads to a "
bank run
" ("
run on the bank
").
Capital requirements
Main article
Capital requirements
Internationally, the
Bank for International Settlements
's
Basel Committee on Banking Supervision
influence each country's capital requirements. In 1988, the Committee decided to introduce a capital measurement system commonly referred to as the
Basel Capital Accord
. The latest capital adequacy framework is commonly known as
Basel II
. In the United States, "
depository institutions
" are subject to risk-based capital guidelines issued by the
Board of Governors of the Federal Reserve System
(FRB).
See also
Financial supervision
Monetary policy
Money market
Risk adjusted assets
(
risk weighted assets
)
External links
Reserve requirements
Reserve Requirements - Fedpoints - Federal Reserve Bank of New York
Capital requirements
The New Basel Capital Accord - Third Consultative Paper - 29 April 2003
FDIC: Risk - Based Assessment System
Risk-weighted assets
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