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.
Know Your Rights!
Articles on HG.org Related to Banking Law
- How to Improve the Quality of Expert Witness TestimonyExpert witness testimony is often crucial to enlightening a judge or jury of certain matters or removing confusion about a case or claim with numerous or confounding factors. There are several ways that improving the testimony may provide a better picture of the matter or increase the chances of success in either a criminal or civil case.
- Financial Expert Witness Requirements for a Money Laundering CaseA financial expert witness in a money laundering case may provide the best details and explanation of accounting and financial books for the prosecution in convicting the defendant of these criminal acts. However, for an expert to remain within the case, he or she must possess certain requirements in his or her credentials that prove he or she is up to the case.
- Bank Fraud: Lack of Intent Can Still Result in a ConvictionBank fraud schemes and incidents occur often with and without any intent to actually defraud the bank involved in the criminal activity, and when facing certain charges, the prosecution does not need this intent to convict the person. It was in the Supreme Court in 2016 that the decision occurred to provide evidence without the necessary intent to defraud for convictions in these charges.
- Challenging Expert Witness Testimony Bankruptcy LitigationChallenges to the testimony of an expert witness occur often when the opposing legal team wants to try to disqualify the expert for the case, and in bankruptcy litigation, this is often important for the company. However, the rules work primarily the same for each case where the expert must have relevance in the subject matter and reliability in testing methods.
- Are Expert Witness Communications with a Lawyer Considered Attorney Work Product?Communications, drafting, reviews and expert reports may all consist of attorney work product, but this could depend on a few different factors and may affect lawyer and client privilege. Knowing what work product protections cover may help the those involved understand better everything that may remain safe between the professional confines.
- Expert Witness Testimony in School Shooting CasesAn expert witness may become part of a school shooting case to help remove confusion about the evidenced or reconstruct the incident, so a criminal case may progress or a lawsuit for compensation may happen with a clearer understanding of the circumstances. Through his or her experience and knowledge, testimony about the case may hold less fear and lack of comprehending.
- Can I Hire the Opponent’s Expert Witness Who Removed Himself from the Case?Sometimes, a lawyer has the opportunity to hire the opposing expert witness for his or her case when the professional is no longer part of the process. However, these situations must involve certain circumstances before the expert may change lawyers that generally includes any lack of conflict of interest and knowledge of the opposing lawyer’s case.
- Role of Expert Witnesses in Cryptocurrency LitigationWhen cryptocurrency is part of a claim either for illegal activity or to when the plaintiff needs compensation for online transactions, an expert is necessary to explain what this type of online currency is and how it affects the case. The role of this expert witness often has a greater impact in clearing confusion about what and how cryptocurrency is and works.
- Potential Testimony of Forensic Accountant Expert WitnessesA forensic accountant expert witness may become necessary to unravel a confusing issue with a claim or case within a company such as when the bookkeeper or accountant hired for the business engages in illegal activity either alone or on behalf of the owner. Through the professional’s specialized experience, it is possible to understand and determine if a claim is valid or has sufficient evidence.
- Expert Witnesses and the Preparation of Affidavits of MeritExperts have the task of proving that a claim has merit through an Affidavit of Merit, and this may have a direct connection to a medical malpractice suit or when the medical device used causes injury to the patient. Through this affidavit, the expert explains that the claim has sufficient strength to proceed through trial or to a hearing with a judge.
- All Banking and Finance Law Articles
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
The Treasury Department is the executive agency responsible for promoting economic prosperity and ensuring the financial security of the United States. The Department is responsible for a wide range of activities such as advising the President on economic and financial issues, encouraging sustainable economic growth, and fostering improved governance in financial institutions. The Department of the Treasury operates and maintains systems that are critical to the nation's financial infrastructure, such as the production of coin and currency, the disbursement of payments to the American public, revenue collection, and the borrowing of funds necessary to run the federal government.