Banking, the largest sector within the financial services industry, includes all depository institutions, from commercial banks and thrifts to credit unions. In their role as financial intermediaries, banks use the funds they receive from depositors to make loans and mortgages to individuals and businesses, seeking to earn more on their lending activities than it costs them to attract depositors. Over the past decade, many banks have diversified and expanded into new business lines such as credit cards, stock brokerage and investment management services. Some have also moved into the insurance business, selling annuities and life insurance products in particular, often through the purchase of insurance agencies. (See Chapter 4: Convergence.)


In July 2010 Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, sweeping legislation that dramatically changed the way that financial services companies operate in the U.S. and how they serve their customers. The act established a Financial Stability Oversight Council (FSOC) charged with identifying threats to the financial stability of the United States. The council, which is chaired by the Secretary of the Treasury, consists of 10 voting members and five nonvoting members, and brings together federal financial regulators, state regulators and an insurance expert appointed by the President. Among its responsibilities, the FSOC has authority to designate a nonbank financial firm for enhanced supervision.

Among Dodd-Frank’s key provisions is the Volcker Rule, which effectively prohibits a bank (or institution that owns a bank) from engaging in proprietary trading that is not directed by or at the behest of its customers or from owning or investing in hedge funds or private equity funds. The rule and its implementation are still subject to study by FSOC.

Since 1863 banks have had the choice of whether to be regulated by the federal government or the states. National banks are chartered and supervised by the Office of the Comptroller of the Currency (OCC), part of the U.S. Treasury. Thrift institutions, including savings and loans associations and savings banks, can be federally chartered or state chartered and subject to state regulation. The Dodd-Frank Act phased out the Office of Thrift Supervision (OTS) and shifted its responsibilities to other federal agencies. Regulation of federal thrift institutions was moved from the OTS to the OCC. The OTS’s powers regarding thrift holding companies were moved to the Federal Reserve. State banks and savings associations continue to be subject to state regulation, but their federal oversight has been shifted from the OTS to either the FDIC or the Federal Reserve.

Depository institutions with assets over $10 billion are now overseen by the new Consumer Financial Protection Bureau, created by Dodd-Frank to consolidate federal oversight and guidance concerning consumer financial products, including mortgages, credit cards and student loans. In 2011, 107 banks, accounting for 80 percent of industry assets, topped the $10 billion threshold. (See page __ for a detailed summary of the Dodd-Frank Act.)


A bank holding company (BHC) is any company (not necessarily a bank) that has direct or indirect control of at least one bank. Under the Bank Holding Company Act of 1956 and its amendments, the Federal Reserve supervises all BHCs. The act was amended by the Gramm-Leach-Bliley Act (GLB) of 1999, which allows a BHC that meets specified eligibility requirements to become a financial holding company (FHC) and thereby engage in expanded financial activities, including securities underwriting and dealing, insurance agency and underwriting activities, and merchant banking activities. GLB also allows securities firms and insurance companies to acquire a bank and thereby become a BHC eligible for FHC status. (See Convergence, page ___.) The 2010 Dodd-Frank Act increases the Federal Reserve’s oversight of bank holding companies with total consolidated assets of at least $50 billion. It also contains provisions requiring that FHCs remain “well capitalized and well maintained.”



($ billions)

Rank Institution Assests
1 JPMorgan Chase & Co. $2,266
2 Bank of America Corporation 2,137
3 Citigroup Inc. 1,874
4 Wells Fargo & Company 1,314
5 Goldman Sachs Group, Inc. 924
6 MetLife, Inc. 800
7 Morgan Stanley 750
8 U.S. Bancorp 340
9 HSBC North America Holdings Inc. 331
10 Bank of New York Mellon Corporation 326
11 PNC Financial Services Group, Inc. 271
12 State Street Corporation 216
13 Capital One Financial Corporation 206
14 TD Bank US Holding Company 201
15 Ally Financial Inc. 184
16 SunTrust Banks, Inc. 177
17 BB&T Corporation 175
18 American Express Company 152
19 RBS Citizens Financial Group, Inc. 130
20 Regions Financial Corporation 127
21 BMO Financial Corp. 117
22 Fifth Third Bancorp 117
23 Northern Trust Corporation 100
24 UnionBanCal Corporation 90
25 KeyCorp 89
26 BancWest Corporation 78
27 M&T Bank Corporation 78
28 Discover Financial Services 69
29 BBVA USA Bancshares, Inc. 63
30 Comerica Incorporated 61
31 Huntington Bancshares Incorporated 54
32 Zions Bancorporation 53

Source: SNL Financial LC.

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The Federal Deposit Insurance Corporation (FDIC) was created in 1933 to restore confidence in the banking system following the collapse of thousands of banks during the Great Depression. The FDIC, which is an independent agency within the federal government, protects against the loss of deposits if an FDIC-insured commercial bank or savings association fails. The basic insurance amount, $100,000 per depositor per insured bank, was raised temporarily to $250,000 as part of the federal government’s 2008 rescue program for the financial services industry. The Dodd-Frank Act, enacted in July 2010, made the increase permanent.

During the savings and loan crisis of the late 1980s and early 1990s, over 1,000 institutions holding over $500 billion failed, leading to a broad restructuring of the industry. The economic downturn that began in 2008 spawned an increase in bank failures. Twenty-five banks, with assets of $371.9 billion, failed in 2008, following three failures in 2007 and none during the previous two years. In 2009 140 banks with $170 billion in assets failed, marking the highest number since 1992, when 179 banks failed. This was followed by the failure of 157 banks with $92 billion in assets in 2010. In 2011, 92 banks failed; most were acquired by other institutions.


Year Number of failures  Assets of failed banks ($ billions)
2002 11 $2.9
2003 3 0.9
2004 4 0.2
2005 0 0.0
2006 0 0.0
2007 3 2.6
2008 25 371.9
2009 140 169.7
2010 157 92.1
2011 92 34.9

(1) Based on failures of banks and savings and loan associations insured by the FDIC.

Source: Federal Deposit Insurance Corporation (FDIC).

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  • 39 FDIC-insured banks failed in the United States during the first eight months of 2012.