DEFINITION of 'Monetary Control Act'

The Monetary Control Act is a two-title act passed in 1980 that changed bank regulations significantly. The act was signed in by Jimmy Carter on March 31, 1980. 

BREAKING DOWN 'Monetary Control Act'

The Monetary Control Act was legislation that changed banking considerably in the early 1980s, and it represented the first significant reform in the banking industry since the Great Depression.

The Monetary Control Act of 1980 (MAC) required that banks accepting deposits from the public periodically report to the Federal Reserve System (FRS). One of the aims of the act was to put tighter controls on Federal Reserve member banks, making services charged to them in line with banks and other financial institutions.

Prior to the act, certain services charged to the member banks were free, but the act ensued the price of financial services to be competitive, and in line with the banks. Starting in September 1981, the Fed charged banks for a range of services historically provided for free, like check-clearing, wire transfer of funds and the use of automated clearinghouse facilities. 

Title 2 of the Monetary Control Act (MAC) 

Title 2 of this act was the Depository Institutions Deregulation Act of 1980. This legislation deregulated banks, while simultaneously giving the Fed more control of non-member banks

It required non-member banks to abide by Federal Reserve decisions but, perhaps most notably, the bill allowed banks to merge. It also deregulated interest rates paid by depository institutions such as banks, making them a matter of private discretion (previously this was regulated under the Glass-Steagall Act). It allowed credit unions to offer transaction accounts, which included checking accounts and savings accounts. The bill also opened the Fed discount window and extended reserve requirements to all domestic banks.

The Monetary Control Act also contained several provisions relating to bank reserve and deposit requirements. It created the popular Negotiable Order of Withdrawal (NOW) accounts, which are accounts that have no limits on the number of checks that can be written. Additionally, it raised the amount of FDIC insurance protection from $40,000 to $100,000 per account.

 

 

 

RELATED TERMS
  1. Bank

    A bank is a financial institution licensed as a receiver of deposits. ...
  2. Non-Member Banks

    Non-member banks are banks that are not members of the U.S. Federal ...
  3. Glass-Steagall Act

    The Glass-Steagall Act was passed by the U.S. Congress in 1933 ...
  4. Reserve City Bank

    A reserve city bank is a bank in the U.S. located in certain ...
  5. Securities Act Of 1933

    The Securities Act Of 1933 is a federal piece of legislation ...
  6. Truth in Savings Act

    The Truth in Savings Act is a US federal law that was one of ...
Related Articles
  1. Insights

    Financial Regulations: Glass-Steagall to Dodd-Frank

    Here are some of the most important financial regulations that have been established.
  2. IPF - Banking

    The History Of The FDIC

    Find out why this corporation was developed and how it protects depositors from bank failure.
  3. Financial Advisor

    Why Banks Don't Need Your Money to Make Loans

    Contrary to the story told in most economics textbooks, banks don't need your money to make loans, but they do want it to make those loans more profitable.
  4. Insights

    How the Federal Reserve Manages Money Supply

    The Federal Reserve was created to help reduce the injuries inflicted during the slumps and was given some powerful tools to affect the supply of money.
  5. Insights

    Central Bank

    They print money, they control inflation, they are known as the "lender of last resort". Check out the role of Central Bank nd how its role evolved overtime.
  6. Managing Wealth

    Controller: Job Description & Average Salary

    Learn about becoming a controller and what the job entails. Understand the education and skills required, and how much money you can expect to make.
  7. Investing

    The Globalization Of Financial Services

    The key to survival for many financial institutions will be to efficiently serve a global customer base.
RELATED FAQS
  1. How are investment banks regulated in the United States?

    Read about the extensive regulations placed on investment banks in the United States, beginning with the Glass-Steagall Act ... Read Answer >>
  2. What happens if the Federal Reserve lowers the reserve ratio?

    If the Federal Reserve decides to lower the reserve ratio through an expansionary monetary policy, commercial banks are required ... Read Answer >>
  3. What are the 9 major financial institutions?

    There are nine major types of financial institutions. Understand the major types of financial institutions that exist and ... Read Answer >>
Trading Center