The United States: The First Formalization of Banking Supervision

Abstract

AbstractThis chapter examines the formalization of banking supervision in the United States (US), focusing on the federal level. During the “free banking era” from the late 1830s to 1864, several state governments created banking supervisory systems at the state level. Triggered by the fiscal needs of the Civil War, as well as the demand for a national currency, the US became the first country to introduce uniform nationwide banking supervision with the creation of the Office of the Comptroller of the Currency (OCC) and the national banking system. The main purpose of the OCC was to ensure that the national banks did not violate the regulations related to the new currency, the US dollar. From a historical perspective, the rapid social and economic development of the US from the 1850s provided the background for this institutional change. Although the US case demonstrates that financial crises have not always driven the formalization of banking supervision, the crises of 1907 and the Great Depression served to further strengthen the formalization of banking supervision by prompting the introduction of multi-agency banking supervision in the US.