As its name implies, banking law focuses on banks and other financial institutions. Thus, to understand banking law, one must first understand what a bank is. There are at least three ways to define what a bank is.

First, a bank can be defined by its business entity. Generally, a bank is chartered by a federal or state government. The business entity must include the word bank or trust in the name of its business entity.

Second, a bank can be defined by the services it offers. Generally, a bank accepts deposits and makes loans. While it may provide other services, these are its core services.

Third, a bank can also be defined by its economic function. Banks are financial intermediaries that provide transaction services to customers. As a financial intermediary, banks allow diversification, economies of scale, expertise on transactions, convert illiquid investments to liquid ones, and a safe place to store money.

Transaction services involve an accounting system of exchange which permits transferring wealth through bookkeeping entries. It also involves maintaining accounts at the Federal Reserve. This is more efficient than transacting in currencies themselves. This function is unique to banks.

With these concepts in mind, we can consider how banks are regulated. Let’s look at the banking regulatory structure now.