Regulation H
What Is Regulation H?
Regulation H frames the requirements that state-chartered banks must comply to after becoming members of the Federal Reserve System (FRS). It likewise records the procedures for membership and draws certain lines and conditions on some loan types. Regulation H determines the duties expected of and privileges accessible to every member bank of the Federal Reserve System.
How Regulation H Works
Part of the regulation specifies that a bank's capital must be adequate for the condition of its assets, liabilities, and other corporate obligations. The capital required for every member bank is assessed by the standards of Regulation H. Member banks can't pay out dividends and different distributions on the off chance that they don't meet the capital requirements.
Loans and Deposits
Regulation H contains several limitations on loans and deposits. Part of the assessment cycle by the Federal Reserve System looks at the loan-to-deposit ratio at banks. Interstate branches must not be utilized essentially for deposit production.
The Federal Reserve additionally surveys the loan operations of member banks. The Fed checks to check whether they are putting forth reasonable attempts to serve the credit needs of the networks in which they operate branches.
Stocks and Other Securities
The regulation additionally states the rules with respect to the securities-related activities of member banks. The Securities Exchange Act of 1934 forced these requirements on banks acting as transfer agents. Regulation H contains specific provisions in regards to dealing in government securities. There are likewise special reporting requirements when a bank enrolls its own securities.
Real Estate Lending
Regulation H incorporates several rules connected with real estate lending. Member banks must have written policies for real estate lending that are predictable with sound banking standards. There are additionally specific rules for expanding real estate loans in areas designated as flood hazards by the Federal Emergency Management Agency (FEMA). Member banks may not make, increase, or recharge such loans except if the property additionally has suitable flood insurance.
Special Considerations: Crime Prevention
Member banks must apply security measures directed against certain crimes as illustrated by the Bank Protection Act. Regulation H requires member banks to file reports on suspicious activity. Members must likewise follow Bank Secrecy Act (BSA) requirements for recording and reporting foreign transactions.
Regulation H and the CFPB
The Consumer Financial Protection Bureau (CFPB) likewise has a Regulation H, which isn't to be mistaken for the Fed's Regulation H. This regulation spreads out requirements for the licensing of mortgage loan originators, in view of the statutory commands of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the SAFE Act). After the 2008 financial crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act transferred rule-production authority for the implementation of the SAFE Act from the Fed to the recently settled CFPB, and the Fed canceled its SAFE Act regulations.
However both of these regulations share the assignment "H" and include banks and lending, they are separate and ought not be confounded.
Features
- Regulation H frames the requirements that state-chartered banks must comply with after becoming members of the Federal Reserve System.
- The capital required for every member bank is assessed by the standards of Regulation H.
- Member banks must have written policies for real estate lending that are steady with sound banking standards.
- The regulation additionally spreads out the rules with respect to securities-related activities by member banks.
- This term may likewise allude to a regulation adopted by the Consumer Financial Protection Bureau (CFPB) managing mortgage originators.
