Bank Supervision by Federal Regulators: Overview and Policy Issues. Congressional Research Service. David W. Perkins. December 28, 2020
To identify and mitigate risks, bank regulators have the authority to monitor bank activities, condition, and performance. Bank supervision creates certain benefits, including safer banks, a more stable financial system, compliance with consumer protection and fair lending laws, and safeguards against money laundering and cyberattacks. However, it imposes certain costs on banks, including the fees they pay to their supervisors and compliance costs, which can reduce credit availability through the banking system.
All banks are supervised by a primary federal prudential regulator for “safety and soundness,” which is determined by a bank’s charter type and whether the bank is a member of the Federal Reserve System. The federal prudential regulators are the Federal Reserve (Fed), the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC). Banks are also supervised for compliance with consumer protection and fair lending laws. The Consumer Financial Protection Bureau (CFPB) is generally the primary supervisor for consumer compliance for banks with more than $10 billion, and the bank’s prudential supervisor is also the consumer compliance supervisor for banks with less than $10 billion. Banks chartered at the state level are also supervised by state-level bank regulatory agencies. Parent companies that own banks, called bank-holding companies, are supervised by the Federal Reserve. In addition, companies that perform certain activities for banks by contract are also subject to bank regulator supervision.
[PDF format, 29 pages].
