The Debate on the Structure of Federal Regulation of Banks

The federal bank regulatory structure is discussed with emphasis on the three federal agencies that regulate and supervise commercial banks--Federal Deposit Insurance Corporation (FDIC), Federal Reserve System, and Comptroller of the Currency. Restructuring proposals are centered on consolidation of federal bank supervision in FDIC, the Federal Reserve, the Department of the Treasury, or in a new agency.

The arguments for consolidation of federal bank supervision include: (1) increased effectiveness in handling problem or failing banks; (2) increased effectiveness in dealing with bank holding companies; (3) more efficient operation because of elimination of duplication; (4) increased accountability to Congress and the public; and (5) interaction of bank supervision and monetary policy. Arguments against consolidation include removal of a system that works well, excessive centralization of power, restrictions on innovations, and weakening the dual banking system. The present system was endorsed by a majority of bankers surveyed, with the exception of bankers from problem banks.