9 Major Financial Regulators in the US and their Functions
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9 Major Financial Regulators in the US and their Functions

Financial regulators are government officials who oversee the financial markets in the United States. They ensure that companies follow laws, regulations, and guidelines to keep consumers safe. In this post, you’ll learn about what these regulators do and some of the biggest accomplishments by financial regulators in US history.


Financial regulators provide a variety of benefits. First, they protect the public interest by regulating banks to prevent them from being too reckless. This protects society against potential financial crashes and keeps individuals from experiencing financial hardship. 


Since regulators also work to prevent future crashes, they facilitate the process of eliminating excess risks in markets and opening up new opportunities for growth during an economic recession. Finally, regulators can work together with market participants to establish clear standards for the best practices in particular areas of finance without much effort or delay. Despite these benefits that Financial Regulators offer, there are costs associated with their existence as well.


Major Financial Regulators in the US

Several financial regulatory bodies oversee the American banking system in the United States of America. These include the Federal Reserve, the Office of the Comptroller of Currency, and The Securities and Exchange Commission. All three organizations were created in response to different types of financial crises in American history. 


Each has a unique authority over how banks function within their jurisdiction and what is required to get approval from these agencies.

These regulations have become some of the most significant aspects impacting Americans’ lives as they impact employment opportunities, lending practices, tax burdens on bank profits, branch location activities, and many

more aspects of transparency in our financial markets.

Now let’s look at the US list of major financial regulators.


The Federal Reserve Bond

The Federal Reserve Bond is a security that the US government issues with a fixed interest rate that the Treasury borrows utilizing auctions and spends on various public needs. The bonds come in different sizes and maturities, but all are sold to non-governmental investors such as other governments, banks, mutual funds, hedge funds, or money market institutions


They are often referred to as TIPS (Treasury Inflation-Protected Securities). The bond can be considered one of the safest investments because it cannot go into default like a corporation or state or municipal debt can, but when its value falls below about 50%, it might be time to sell at a loss instead of holding it forever.

Office of the Comptroller of the currency

The Office of the Comptroller of the Currency (OCC) is one of the US federal government’s oldest financial regulatory agencies. The OCC was created by President Abraham Lincoln on April 17th, 1863, and was later given a formal charter by Congress in 1865, giving it authority to oversee all national banks and have exclusive jurisdiction over such entities designated as “inactive” or “failed.”


One major task for this powerful agency is to monitor national banks for safety and soundness; in 2014, the OCC issued more than 2,700 detailed requests for information as part of its enforcement efforts.


Federal Deposit Insurance Corp

The Federal Deposit Insurance Corporation (FDIC) is a government-sponsored corporation created in 1933 to insure private deposits at the nation’s banks. There are three categories of FDIC insurance:

  • The first category is known as “Single Bank,” which protects the depositor in case the bank should fail.
  • The second category is “Multiple Banks” and protects the depositor if more than one bank in a single region fails in a given period.
  • The third category is called “National Banks,” It insures deposits against multiple failures nationwide, but not multiple banks within a region or across regions.


Office of Thrift Supervision

The Office of Thrift Supervision (OTS) was created in 1989 during the Savings and Loan crisis to regulate savings associations and registered banks. The OTS aims to identify possible threats that may lead these financial institutions into insolvency. They not only identify threats but also work to prevent them by enforcing laws, rules, guidelines, and policies that help shield these institutions from fraud, conflicts of interest, insider abuse, unsound lending practices, or any other activities which may jeopardize their safety and soundness.


Commodity futures trading commission

The Commodity futures trading commission is an independent agency of the United States government that was initially established under the Commodity Exchange Act to regulate contracts for derivatives. The commission derives its authority from the act it administers and enforces. 


Despite its name, The Commission does not regulate only futures contracts on commodities–it regulates all kinds of futures contracts, including options on financial instruments such as stocks and bonds, interest rates, and currencies. This means that it plays a major role in shaping how markets function in the US, but how they do so may not be obvious to investors or traders unfamiliar with this obscure body of law.


Financial industry regulatory authority

The Financial Industry Regulatory Authority or FINRA is a self-regulatory organization that serves as the largest independent regulator of securities firms. FINRA operates two major venues to protect investors: it administers the US regulatory system for securities and investigates and prosecutes market fraud. 


FINRA was originally founded in 2007 following a merger between the National Association of Securities Dealers (NASD) and the New York Stock Exchange’s regulatory arm – NYSE Regulation, Inc. – which had been formed in 2002 through a consolidation of NYSE Regulation’s operations with those of NASD.


State Bank regulators

State Bank regulators

In the interest of promoting financial stability, state bank regulators oversee the operations and risks faced by privately held banks. Bank regulators will ensure that owners are using their deposits to fund their business and not expanding beyond what they can afford. 


They also ensure that banks have adequate capital reserves and operating procedures to prevent negligence and protect depositors’ money. State bank regulators work closely with other federal agencies like the FDIC or SEC to identify risks a financial institution poses before it becomes an issue. Regulatory agencies work diligently to develop relevant rules, policies, risk management practices, and compliance requirements for a credible regulatory framework within which banks operate.


State securities regulators

It can feel like the markets are constantly changing, and if you’re not careful, you could be caught in the crosshairs. Fortunately, many states publish their monthly and quarterly forecasts of what they expect to happen with their stock market activity. These forecasts give valuable insights into how states view a particular period. 


For example, here is a sampling of what some US state securities regulators forecast: California State Treasurer: The coming year will see continued growth in California’s economy as steady economic expansion continues. Despite an expected growth rate not as robust as 2018, investments are anticipated to continue to grow at healthy rates due to increasing consumer confidence and low unemployment levels.


Securities and Exchange Commission

The Securities and Exchange Commission (SEC) is a United States federal agency that oversees national securities markets, including the securities of public companies in which individual American investors may invest. It is an independent agency, not subject to day-to-day supervision by any other part of the US government. 


The SEC was established in 1934 by Congress to combat potential fraud following the stock market crash of 1929 and subsequent Great Depression; it is named for its responsibility to regulate the securities industry and ensure just disclosure for investors. The SEC accomplishes its mission primarily through various divisions such as Enforcement, Corporation Finance, Investment Management, Trading and Markets, Public Affairs & Information Services.


The stepping stone toward financial literacy is learning about your country’s regulatory body.