Banking Law

The banking law typically provides for the formation and operation of banks and, some­times, nonbank financial institutions. The law should deal with the requirements for the opening of a bank; the minimum share of capital; the fit-and-proper criteria for sharehold­
ers, managers, directors, and owners of banks; the provisions with respect to terminating licenses; the powers of banks to accept deposits and to carry on banking business; and the prudential supervision of banks, including the obligation on banks to furnish informa­tion on their activities regularly to the banking regulator. The law should also deal with distressed banks and with the power of the regulator to implement a range of remedial measures, to withdraw a license, to impose new management, and to ensure orderly liq­uidation and restructuring with the goal of maintaining financial stability. In addition, the law should deal with issues of confidentiality and bank secrecy. Anti-money-launder­ing measures are usually enshrined in separate legislation, but this legislation should be closely linked to the banking law framework. The legal aspects of banking supervision have already been considered in detail in chapter 5. The legal and institutional frame­work for anti-money-laundering activities and for countering the financing of terrorism are covered in chapter 8.

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