What agencies oversee U.S. financial institutions?

Investing

There are a vast number of agencies assigned to regulate and oversee financial institutions and financial markets, including the Federal Reserve Board (FRB), the Federal Deposit Insurance Corporation (FDIC), and the Securities and Exchange Commission (SEC). Each agency has specific responsibilities, allowing them to function independently.

Though the effectiveness and efficiency with which these regulatory entities manage financial institutions are sometimes questioned, each was formed to help achieve the overall goal of providing sensible regulation of markets and protection for investors and consumers.

The Federal Reserve Board

Probably the most well-known of all the regulatory agencies is the FRB. The Fed is responsible for influencing liquidity and overall credit conditions. Its primary monetary policy tool is open market operations that control the buying and selling of U.S. Treasury and federal agency securities.

Such purchases and sales determine the federal funds rates and alter the level of reserves available. The FRB is also responsible for regulating and supervising the U.S. banking system, which is intended to provide overall economic financial stability in the United States.

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The Federal Deposit Insurance Corporation

The FDIC is a U.S. government corporation created by the Emergency Banking Act of 1933 in the wake of the Great Depression. This agency provides deposit insurance that guarantees depositor accounts up to $250,000 at any of its member banks. As of 2018, the FDIC insured deposits at over 5,600 institutions.

This agency is also responsible for analyzing and supervising the safety and stability of financial institutions, performing consumer protection functions, and managing failed banks. The FDIC is funded by the premiums paid by banks and thrift institutions for deposit insurance coverage and by the earnings generated from investments in U.S. Treasury debt securities.

The Office of the Comptroller of the Currency

The Office of the Comptroller of the Currency (OCC) is among the oldest of all the federal regulatory agencies, established in 1863 by the National Currency Act. The OCC primarily functions to regulate, supervise, and offer charters to banks that operate in the U.S. These functions help to ensure the overall stability and safety of the U.S. banking system.

The OCC oversees several areas including capital, asset quality, management, earnings, liquidity, sensitivity to market risk, information technology, compliance, and community reinvestment. They are funded by national banks and federal savings associations, who pay for examinations and processing of their corporate applications. The OCC also receives revenue from investment income primarily in U.S. Treasury securities. 

The Commodity Futures Trading Commission

In 1974, the Commodity Futures Trading Commission (CFTC) was created as an independent regulator of commodity futures and options markets. This agency provides efficient and competitive futures markets and protects traders from market manipulation and other fraudulent trading practices. The CFTC oversees a variety of individuals and organizations, including swap execution facilities, derivatives clearing organizations, designated contract markets, swap dealers, commodity pool operators, and other entities.

Starting in 2000, the agency combined with the SEC, the overall supervisory agency of stock exchange trading, to help regulate single stock futures.

The Securities and Exchange Commission

The SEC was established in 1934 by the Securities Exchange Act and is among the most powerful and comprehensive financial regulatory agencies. The SEC enforces federal securities laws and regulates a large portion of the securities industry, including the U.S. stock exchanges and options markets.

The agency protects investors against fraudulent and manipulative practices in the market, promotes full public disclosure, and watches over corporate takeovers in the United States. Asset management, financial services, and advisory firms—including their professional representatives—must register with the SEC to conduct business.

The Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau (CFPB) is a regulatory agency that oversees all finance-related products and services provided to consumers. This agency is divided into a number of different units, including the Office of Fair Lending, consumer complaints, research, community affairs, and the Office of Financial Opportunity.

The CFPB’s ultimate goal is to educate consumers about financial products and services that are available to them and to provide another level of consumer protection through its oversight of financial services.

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