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. Non-Member Banks

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

    The Glass-Steagall Act was passed by the U.S. Congress in 1933 ...
  3. Regulation CC

    Regulation CC is a federal policy that sets certain standards ...
  4. Investment Company Act of 1940

    The Investment Company Act of 1940 was created through an act ...
  5. Regulation F

    Regulation F is a regulation that sets limits on the amount of ...
  6. Federal Reserve System - FRS

    The Federal Reserve System, commonly known as the Fed, is the ...
Related Articles
  1. Insights

    A Brief History of U.S. Banking Regulation

    From the establishment of the First Bank of the United States to Dodd-Frank, American banking regulation has followed the path of a swinging pendulum.
  2. Investing

    How the Federal Reserve Devises Monetary Policy

    Learn about the tools the Federal Reserve uses to influence interest rates and economic conditions. Find out the types of action a central bank may take.
  3. Personal Finance

    Retail Banking vs. Corporate Banking

    Retail banking is the visible face of banking to the general public. Corporate banking refers to the aspect of banking that deals with corporate customers. Check out more on the differences between ...
  4. 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.
  5. Insights

    How Much Influence Does The Fed Have?

    Find out how current financial policies may affect your portfolio's future returns.
  6. Tech

    The Pros And Cons Of Internet Banks

    Learn how internet banking services stack up against their brick-and-mortar peers. Find out what internet banks have to offer and where they fall short.
  7. Personal Finance

    What is Fractional Reserve Banking?

    Fractional reserve banking is the banking system most countries use today.
  8. Insights

    The World's Top 10 Banks

    Learn more about the world's largest banks and how more financial power shifts eastward as China is home to four of the world's largest banks.
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, starting with the Glass-Steagall Act ... Read Answer >>
  2. What's the difference between investment banks and commercial banks?

    Understand the principal differences between investment banks and commercial banks, and the areas of banking services that ... Read Answer >>
  3. Why do commercial banks borrow from the Federal Reserve?

    Commercial banks borrow from the Federal Reserve primarily to meet reserve requirements when their cash on hand is low before ... Read Answer >>
  4. What is the difference between an investment and a retail bank?

    Learn the primary differences between retail banks and investment banks by examining the business activities, type of clients ... Read Answer >>
  5. How do central banks acquire currency reserves and how much are they required to ...

    A currency reserve is a currency that is held in large amounts by governments and other institutions as part of their foreign ... Read Answer >>
Trading Center