How the U.S. Financial Industry Is Regulated  

Below is a broad overview the U.S. regulatory system comprising federal, state, and private institutions. In general, federal institutions oversee regulation issues that are national in scope, while state institutions oversee regulation issues within their states. However, a patchwork system, power struggles, and overlapping roles can result in turf wars and investor confusion.

In the wake of the financial crisis that began in 2007, industry participants and policymakers realized the need for a more efficient, effective regulatory structure. Reforming regulations can better protect investors and ensure the stability of the economy in the long term. The proposed reforms will give a single federal agency the power to oversee the entire industry and vest the FDIC with broader resolution authority (the power to manage financially troubled companies).

View an interactive graphic from the Financial Times explaining the industry's regulatory structure before Dodd-Frank is implemented.

 

National Regulatory Institutions  

The Office of Thrift Supervision (OTS) is an independent federal government agency of the U.S. Treasury that regulates federal savings associations, known as “thrifts.”

The Office of the Comptroller of the Currency (OCC) is an independent federal government agency of the U.S. Treasury that oversees all national banks. It also supervises the federal branches of foreign banks operating in the U.S., and the international activities of national banks.

As the central bank of the U.S., the Federal Reserve is responsible for regulating the monetary system to promote price stability and economic growth. It is the only central bank in the world that does not produce its own currency (the domain of the U.S. Department of the Treasury).

The Federal Deposit Insurance Corporation (FDIC) is an independent federal government agency that insures deposits in banks and thrift institutions for at least $250,000 per depositor, per bank. The FDIC has the authority to manage bank failures.

The National Credit Union Administration (NCUA) is an independent federal agency that oversees federal credit unions. Backed by the full faith and credit of the U.S. government, its National Credit Union Share Insurance Fund (NCUSIF) insures savings held in federal and most state-chartered credit unions.

The Commodities Futures Trading Commission (CFTC) is an independent federal government agency that regulates commodity futures and option markets.

The Financial Industry Regulatory Authority (FINRA), a private corporation, is a self-regulatory body overseeing securities firms. Firms and brokers that do business in the U.S. must be licensed and registered by FINRA.

The Securities and Exchange Commission (SEC) is an independent federal government agency that oversees securities markets and provides guidance on accounting rules.

 

State Regulatory Institutions  

State bank regulators oversee state-licensed and state-chartered financial institutions such as bank branches, trust companies, and credit unions.

The National Association of Insurance Commissioners, state insurance regulators for all 50 states, DC, and five U.S. territories, oversee insurance companies within their state.

State securities regulators enforce state securities laws (“blue sky” laws) by overseeing securities transactions within their state.

In addition to the SEC, state attorneys general can become involved in regulating financial institutions, especially in states with a large financial industry, such as New York.

Continue reading about Industry Basics: Important Laws Regulating the Financial Industry.