Banking Law - Guide to Bank and Bank Regulation Law
What is Banking Law?
Banking law covers the many state and federal regulations governing financial institutions. Attorneys who practice in this area of the law handle everything from customer disputes and complaints against a bank, to complex litigation between domestic and foreign institutions, their investors, the government, and other parties. However, most banking law attorneys are hired to provide advice concerning regulatory compliance. Banks may choose to maintain in-house counsel for this purpose, or to seek assistance from an independent law firm.
Given the vast number of regulations with which banks must comply, it is not surprising that their officers and directors seek legal counsel before making important decisions. The Dodd-Frank Act, a banking reform measure passed by the federal government in 2010, alone contains more than 1,500 separate provisions, including nearly 400 rule mandates. Depending on where they were chartered and how they operate, banking institutions may be regulated by the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve System (“the Fed”), the Office of the Comptroller of the Currency (OCC), as well as state regulatory agencies.
In the current regulatory environment, banks have no choice but to make compliance a priority. This can involve an expensive and labor-intensive process that will affect everyone within the organization. First, the applicable rules and regulations must be identified and ranked in order of the risk associated with noncompliance. This evaluation by itself will often require input from an attorney familiar with the bank’s operations. The next step will be to design and implement a compliance plan.
An effective compliance plan must be comprehensive, and here too the bank will benefit from the advice of counsel. The new efforts must be integrated with existing compliance systems to produce a complete, streamlined approach. All aspects of the bank’s compliance activities should be subject to monitoring and oversight by management, with procedures in place to alert the appropriate personnel when the bank is in danger of violating a particular regulatory provision. That way, the bank can act proactively to remedy a concern before it becomes a true liability.
Staff members must also be educated on regulations pertaining to their duties, and kept abreast of changes in the law. There is a conception that banking law attorneys spend all of their time litigating, but this is untrue. Many practitioners are employed to conduct trainings and to act as a resource for banking professionals concerned with compliance issues. Considering the severe consequences of non-compliance, managers should consider a regulatory awareness program to be money well spent.
Defending Enforcement Actions
Of course, if a bank is already the subject of a regulatory investigation or enforcement action, the objective changes. Now the goal is to defend against inaccurate allegations and to protect individuals within the organization who have been singled out. There are many examples of overzealous regulators abusing their authority to the detriment of innocent directors, officers, and employees. Imprudent enforcement actions can also harm a bank’s reputation and disrupt day-to-day operations.
If non-compliance has occurred, regulators have the power to impose strong sanctions on the bank, including termination of deposit insurance, issuance of “cease and desist” orders, and imposition of civil fines. Monetary penalties can also be issued to individuals within the organization. In extreme cases, individuals may even be targeted for criminal prosecution. In addition to taking immediate remedial action with respect to the non-compliance issue, banks should consult with legal counsel about the possibility of settling the enforcement action informally through direct negotiations with the regulators.
Assistance with Transactional Matters
Banking law also deals with the various transactions that arise as a financial institution goes about serving its customers and growing its business. Legal documents may need to be drafted to address individual accounts, such as a workout agreement for a customer who wants to avoid the repercussions of default. On a larger scale, a bank may need to develop standardized customer agreements in conjunction with new products or lending programs. Transactional matters can also involve the establishment of a de novo charter, the sale or purchase of a branch, or the creation of a new holding company.
In each instance, the bank must take steps to avoid conflicts with relevant consumer protection laws and industry regulations. For example, customer agreements for deposit accounts must comply with federal legislation such as the Truth in Savings Act (TISA), which requires the disclosure of certain interest and fee information, and the Expedited Funds Availability Act (EFAA), which regulates how long a bank can hold funds from a deposited check. Because banking laws change frequently, the assistance of an attorney in these matters is highly recommended.
Selecting a Banking Law Attorney
If your institution is looking to avoid regulatory action and the cost associated with it, you need experienced legal counsel. Many law firms have retired banking executives and government regulators on staff, providing valuable real-world experience. Contact a banking law attorney to learn more.
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Articles on HG.org Related to Banking Law
- Georgia Court of Appeals Denies Grading Contractors' ClaimsA grading subcontractor was not paid for putting in the roads in a new subdivision; after the construction lender foreclosed upon the project developer, the subcontractor sought payment from the bank. After the trial court awarded the subcontractor its full claim plus attorneys fees, the Georgia Court of Appeals reversed. Some very important lessons for subcontractors and lien claimants are made clear in the ruling.
- Willfulness and the Civil FBAR PenaltyIn 2008, when it was revealed that wealthy individuals around the world were utilizing accounts and trusts in Liechtenstein to evade taxes, the United States initiated a coordinated effort with foreign governments to combat tax evasion through the use of offshore trusts and accounts. The U.S. Department of Justice (DOJ) has since launched criminal investigations of several foreign banks, many of which are ongoing.
- Class Action Lawsuit Against Life Partners Will Move Forward Following Judge’s RulingA Texas judge has rejected a motion by Life Partners Holdings, Inc. to toss a class action lawsuit filed by investors who allege they were misled by the life settlements company. Three Life Partners executives were also named in the lawsuit, which alleges that the company fraudulently misrepresented the nature of life settlements that were sold to investors, making them appear more valuable than they actually were.
- Managing Retirement Benefits of Trust or Trusteed IRACongratulations on making the decision to plan for your retirement accounts through a trust or trusteed IRA. You’ve selected a cost-effective, responsible plan for your future. Now the question is, “What do I do in this plan?”
- IRS Changing Terms for Offshore Account HoldersU.S. taxpayers hiding assets abroad should take note of the Internal Revenue Service’s plan to sharply increase penalties for such acts, while those who unintentionally fail to disclose offshore accounts will experience much more leniency.
- Planning for the Million Dollar Balance Retirement AccountA million dollar retirement account sounds like a significant sum. If something tragic were to happen, a retirement account of this size would seem to financially care for it’s beneficiaries for a long time. However, studies have shown that a typical inheritance is spent within 17 months.
- Divorce and Credit Card Debt – Known and UnknownMore and more couples are racking up excessive amounts of debt. To make matters worse, some debt, especially credit card debt, is hidden from the other spouse. Some blame this phenomenon on the fact that more marriages consist of two-income couples. Each spouse may find it difficult to relinquish control of his or her own money. But when divorce is on the horizon, how is this debt ultimately divided?
- Protect your Financial Security During and After DivorceA growing number of people are divorcing late in life. No matter what the reason it is imperative to protect your financial security throughout and after the divorce process. You have accumulated a lot of things during the marriage—now is the time to retain as many as possible. There are savings and investment accounts, real estate and other personal and in some cases business assets to consider. An estate plan must be updated, health and other insurance replaced and the list goes on.
- Extra! Extra! Read All About It! IRS Commissioner Announces That Changes Are In the Offing For OVDP 2012On June 3, 2014 the new IRS Commissioner, John A. Koskinen, gave a speech before the International Business - OECD International Tax Conference. His speech covered the history of the offshore enforcement initiative since the UBS debacle in 2009. His remarks acknowledge what most professionals in the tax community have recognized since the inception: that OVDP needs more tweaking in order to meet the overall goals of enforcement and fairness.
- U.S. District Court Upholds Multiple Willful FBAR Penalties Against TaxpayerIn a case that has raised eyebrows in the tax community, a jury in the Southern District of Florida has sustained the IRS’s assessment of multiple willful FBAR penalties against an American business man and bank director.
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United States Federal Reserve Banks
Banking Law - US
- ABA Section of Business Law - Banking Law
This Committee offers attorneys of diverse backgrounds common meeting ground to educate themselves and update their knowledge, as well as to exchange ideas search for issues regarding the representation of financial institutions.
- Bank Secrecy Act
The Bank Secrecy Act of 1970 (or BSA, or otherwise known as the Currency and Foreign Transactions Reporting Act) requires U.S.A. financial institutions to assist U.S. government agencies to detect and prevent money laundering. Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments, file reports of cash transactions exceeding $10,000 (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities.
- Banking - Key Laws and Regulations
Bankersonline brings key laws and regulations, including all of the Federal Reserve's "lettered" regulations, in a user-friendly form. Each regulation or law has its own table of contents page. Each section is laid out on a separate page to make them faster to load and easier to print.
- Code of Federal Regulations, Title 12 - Banking and Banks
Title 12 of the United States Code outlines the role of Banks and Banking in the United States Code.
- Export-Import Bank of the United States
The Export-Import Bank of the United States (Ex-Im Bank) is the official export credit agency of the United States. Ex-Im Bank's mission is to assist in financing the export of U.S. goods and services to international markets.
- Federal Reserve System - Purposes and Functions
Provides a detailed look at the structure, responsibilities, and operations of the Federal Reserve System. Revised in 2005 to reflect changes in monetary, regulatory, and other policy areas. Incorporates major changes in the law and in the structure of the financial system in the past decade.
- Financial Crimes Information Network (FinCen)
FinCEN’s mission is to enhance U.S. national security, deter and detect criminal activity, and safeguard financial systems from abuse by promoting transparency in the U.S. and international financial systems.
- FTC - Electronic Fund Transfer Act
(a) The Congress finds that the use of electronic systems to transfer funds provides the potential for substantial benefits to consumers. However, due to the unique characteristics of such systems, the application of existing consumer protection legislation is unclear, leaving the rights and liabilities of consumers, financial institutions, and intermediaries in electronic fund transfers undefined. (b) It is the purpose of this title to provide a basic framework establishing the rights, liabilities, and responsibilities of participants in electronic fund transfer systems. The primary objective of this title, however, is the provision of individual consumer rights.
- United States Department of the Treasury
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