Regulation of Bank Financial Service Activities, Cases and Materials (American Casebook Series)

This edition incorporates developments in bank and financial services legislation and regulation that have occurred through June 2021, including the Trump administration’s regulatory initiatives in respect of the Dodd-Frank Act. The sixth edition organizes the chapters into three thematic Parts to help focus classroom discussion. Part One surveys the depository bank business model, the dual banking system, and its layered regulatory structure, including the role of financial holding companies, bank subsidiaries, and nonbank affiliates active across financial markets. The materials emphasize that though the majority of depository institutions are thrifts, credit unions, and community banks, consolidation and conglomeration have left the lion’s share of bank assets in the hands of a few large banking organizations that dominate national and global markets, presenting unique regulatory challenges.

Part Two focuses on prudential supervision of banks and their holding companies, which reflects the distinctive demands created by deposit-taking, credit creation, and liquidity intermediation. Post-crisis reforms have dramatically changed this aspect of regulation. The materials emphasize the different ways in which banks finance their activities, including by accepting insured deposits, borrowing at market rates from wholesale lenders, using government funds available only to banks, and raising equity capital from investors. The discussion makes clear how, in addition to meeting market capital requirements that apply to all businesses, banks contend with complex regulatory standards that encourage liquidity, limit leverage, and promote the ability to absorb unexpected losses.

Part Three surveys the range of specialized financial services performed by banks and their holding companies beyond their depository functions. The materials illustrate how banks underwrite debt and equity securities, manage investment portfolios, advise investors, make markets for financial products, act as both principal and agent in derivative transactions (including credit default swaps and interest rate derivatives such as options, futures, and forwards), and provide fiduciary services as trustees, including by managing retirement and collective investment funds, offering custody for financial assets, and competing with mutual funds. The book pays special attention to consumer lending -- through mortgage finance, educational debt, and credit card loans -- an area that has grown in importance due to the CFPB.