Table A2
Major Legislative and Regulatory Changes Affecting Banking Consolidation |
| Year |
Description |
| 1980 |
Depository Institutions Deregulation and Monetary Control Act (DIDMCA). Raised federal deposit insurance coverage limit from $40,000 to $100,000. Phased out interest-rate ceilings. Allowed depositories to offer negotiable order of withdrawal (NOW) accounts nationwide. Eliminated usury ceilings. Imposed uniform reserve requirements on all depository institutions and gave them access to Federal Reserve services. |
| 1982 |
Garn-St Germain Act. Permitted money market deposit accounts. Permitted banks to purchase failing banks and thrifts across state lines. Expanded thrift lending powers. |
| 1987 |
Competitive Equality in Banking Act (CEBA). Allocated $10.8 billion in additional funding to the Federal Savings and Loan Insurance Corporation (FSLIC). Authorized forbearance program for farm banks. Reaffirmed that the full faith and credit of the U.S. Department of the Treasury (Treasury) stood behind federal deposit insurance. |
| 1987 |
Board of Governors of the Federal Reserve System (Federal Reserve) authorized limited underwriting activities for Bankers Trust, J.P. Morgan, and Citicorp with a 5 percent revenue limit on Section 20 ineligible securities activities. |
| 1989 |
Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA). Provided $50 billion in taxpayer funds to resolve failed thrifts. Replaced Federal Home Loan Bank Board with the Office of Thrift Supervision to charter, regulate and supervise thrifts. Restructured federal deposit insurance for thrifts and raised premiums. Re-imposed restrictions on thrift lending activities. Directed the Treasury to study deposit insurance reform. |
| 1989 |
Federal Reserve expanded Section 20 underwriting permissibility to corporate debt and equity securities, subject to revenue limit. |
| 1989 |
Federal Reserve raised limit on revenue from Section 20 eligible securities activities from 5 percent to 10 percent. |
| 1991 |
Federal Deposit Insurance Corporation Improvement Act (FDICIA). Directed the Federal Deposit Insurance Corporation (FDIC) to develop and implement risk-based deposit insurance pricing. Required prompt corrective action of poorly capitalized banks and thrifts and restricted too big to fail. Directed the FDIC to resolve failed banks and thrifts in the least costly way to the deposit insurance funds. |
| 1993 |
Court ruling in Independent Insurance Agents of America v. Ludwig allowed national banks to sell insurance from small towns. |
| 1994 |
Riegle-Neal Interstate Banking and Branching Efficiency Act (Riegle-Neal). Permitted banks and bank holding companies (BHCs) to purchase banks or establish subsidiary Banks in any state nationwide. Permitted national banks to open branches or convert subsidiary banks into branches across states lines. |
| 1995 |
Court ruling in NationsBank v. Valic allowed banks to sell annuities. |
| 1996 |
Court ruling in Barnett Bank v. Nelson overturned states' restrictions on bank insurance sales. |
| 1996 |
Federal Reserve announced the elimination of many firewalls between bank and nonbank subsidiaries within BHCs. |
| 1996 |
Federal Reserve raised limit on revenue from Section 20 eligible securities activities from 10 percent to 25 percent. |
| 1997 |
Federal Reserve eliminated many of the remaining firewalls between bank and nonbank subsidiaries within BHCs. |
| 1999 |
Gramm-Leach-Bliley Financial Modernization Act (GLB). Authorized financial holding companies (FHCs) to engage in a full range of financial services such as commercial banking, insurance, securities, and merchant banking. Gave the Federal Reserve, in consultation with the Treasury, discretion to authorize new financial activities for FHCs. Gave the Federal Reserve discretion to authorize complementary actives for FHCs. Established the Federal Reserve as the umbrella regulator of FHCs. Provided low-cost credit to community banks. Reformed the Community Reinvestment Act. Eliminated the ability of commercial firms to acquire or charter a single thrift in a unitary thrift holding company. |
| 2001 |
Federal Reserve issued revisions to Regulation K. Expanded permissible activities abroad for U.S. banking organizations.Reduced regulatory burden for U.S. banks operating abroad and streamlined the application and notice process for foreign banks operating in the United States. Allowed banks to invest up to 20 percent of capital and surplus in Edge Corporations. Liberalized provisions regarding the qualification of foreign organizations for exemptions from the nonbanking prohibitions of Section 4 of the Bank Holding Company Act. Implemented provisions of Riegle-Neal that affect foreign banks. |
| Sources: Lown, Osler, Strahan, and Sufi (2000); Kroszner and Strahan (2000); and Montgomery (2003). |
