18 Banking and Financial Systems Excellent Organization Student Focused Each chapter and section opener begins with a consistent plan of learning for success. Unit 2 Money and Regulation 123 Chapter 6 Bank Regulations 122 Check Your Banking IQ Before you begin this chapter, see what you already know about banking by taking the chapter pretest. www.g-wlearning.com/fi nance/ Scan the code to view a Biz Kid$ video. If you do not have a smartphone, visit the G-W Learning companion website. www.g-wlearning.com/fi nance/ College and Career Readiness 6 yp p y amount of risk they can take on. Compared to most industries, banking is heavily regulated. In banking, as in other industries, regulations often follow a crisis. Laws are passed to try to avoid the same mistakes that caused the crisis. Bank regulations are meant to prevent bank failures and protect bank customers, while allowing banks to be competitive. Section 6.1 Banking Regulations Objectives After completing this section, you will be able to: • Explain the conditions that existed in the banking industry during the 1920s and 1930s. • Describe the provisions of the Glass-Steagall Act. • Explain why the legislation that created FIRREA and FDICIA was needed. • Describe how the Sarbanes-Oxley Act increases transparency and accountability in banking. Setting the Stage for Failure During the Great Depression, there were huge numbers of bank failures. Over 9,000 banks closed their doors during this time. In 1933 alone, some 4,000 banks failed. Figure 6-1 shows the number of bank failures throughout the 19th and 20th century. Why did so many banks fail? There were several contributing factors, including crop failures in the Bank Regulations Section 6.1 Banking Regulations Section 6.2 Consumer Regulations Section 6.3 Recent Banking Reading Prep. As you read the chapter, think about the advantages and disadvantages of banking regulations. Do you think regulations help or hurt the banking industry? Use examples from the text to support your opinion. Terms bank run Emergency Banking Act of 1933 Glass-Steagall Act interest rate ceiling Federal Home Loan Bank Board Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) Federal Depository Insurance Corporation Improvement Act (FDICIA) Sarbanes-Oxley Act (SOX) 0 500 1000 1500 2000 2500 3000 3500 4000 1844 1854 1864 1874 1884 1 8 9 4 1 9 0 4 1 9 14 1 9 2 4 1 9 3 4 1 9 44 1 9 5 4 1 9 6 4 4500 Source: The Federal Reserve Figure 6-1. Number of Bank Failures Ch06.indd 122-123 6/29/2017 3:41:07 PM A QR code makes it convenient to use a smartphone to launch the pretest. Access the pretest without a smartphone on the G-W Learning companion website. n The Check Your Banking IQ pretest opens each chapter with an opportunity to evaluate what the student knows about the banking topic to be presented in the chapter. Objectives defi ne the goals for learning the section content and are related to the main headings in the section. Through the presentation of important business and academic terms, a framework is created to build a personal banking glossary. A QR code makes it convenient to use a smartphone to launch the Biz Kid$ video. yp p y , Chapters are divided into smaller sections for better comprehension of content that is being presented. Reading Prep sets the stage for reading by applying accepted reading strategies.