We explain what banking law is, what operations it regulates and what its rules are. In addition, we tell you why it is important.
What is banking law?
Banking law It is a branch of law that is responsible for studying and legislating matters related to good banking practice that is, the matters of formal money lending and sale of insurance and financial instruments. These matters are usually classified into three types:
- Passive or deposit-taking operations in which a banking organization receives and keeps money from individuals in checking, savings, investment accounts, etc., and in exchange gives them a percentage of the interest accrued with the loan of their money.
- Active operations or bank loans and credits in which a banking organization provides a requested amount of money as a loan to an individual, in exchange for charging a specific interest rate.
- Neutral operations or banking services in which a banking organization allows its clients to carry out collections, transfers, deposits, investments and other types of services from which the bank does not necessarily obtain a dividend.
Banking law has its antecedents in the legislation of Ancient Rome (Roman law), since back then certain rules were imposed on the lending of money. However, given the importance of banking in the contemporary capitalist world, banking law has grown in importance and today is concerned not only with regulating the professional practice of banking, but also with contracts and banking and financial operations.
For this same reason, in the study of law there is a wide debate regarding whether banking law belongs to public law or private law. Although banking operations began in the Renaissance as a form of private business initiative, in today's world they are a central part of the economy of nations and are under close observation by the States. This is why the public sector often has to intervene in banking crises to save savers' money and prevent a social catastrophe.
These and other particularities make banking law one of the most technical branches of current law, especially complex for those who are unaware of basic legal concepts and terminology. In fact, banking law normally has specific regulations for each type of banking institution that exists.
Importance of banking law
Banking law It is of crucial importance in the functioning of modern capitalist economies, in which the flow of money is continuous and constant and generates new dividends from lending and speculation. The banking and financial sectors are some of the largest economic actors of a nation, and are closely linked to consumer dynamics, in an increasingly technological and computerized world.
Thus, for example, debit and credit cards, electronic transfers and other payment instruments depend directly on the services provided by banks, without which people would depend exclusively on the accumulation of cash.
Banks provide a margin of safety to commercial and financial operations and enable accumulation on safer terms, but precisely for this reason they require appropriate oversight and clear and formal laws since the money that appears in the banks is, precisely, the money of the citizens whom the law must protect.
Rules of banking law
Not being one of the classic branches of law, banking law It is not regulated by a specific regulatory body, but is considered part of commercial law although many of its interactions with the State are regulated by administrative law.
Given this complex nature, banking law is framed in a set of rules specific to different legal orientations, such as:
- Constitutional norms collected in the fundamental document of the legal order of a country (the National Constitution or Magna Carta). They usually delimit the powers of the State in matters of currency, credit management, banking and insurance.
- Commercial standards inherent to commercial law and the commercial code, regulate business practice and, therefore, affect banks, since the majority are private, for-profit entities.
- Administrative rules determine the financial obligations of these entities, to guarantee certain minimum margins of transparency and State oversight.
- Tax rules included in tax codes and controlled by tax institutions, ensure banks' compliance with their obligations to the State.
- Criminal regulations contemplated in the criminal code, impose sanctions on organizations and individuals linked to banking that fail to comply with the basic rules of good professional and commercial practice, and healthy coexistence.
- Labor standards determine the duties and rights of workers and employees of credit and financial institutions.
Continue with: Financial law
References
- “Banking Law” in Legal Encyclopedia.
- “Banking Law” in the Economic Dictionary of Expansión.com.
- “Banking law – part 1” (video) at the Technological Institute of Monterrey (Mexico).
- “Banking law: general considerations” by José Luis García-Pita y Lastres in the Repository of the University of La Coruña (Spain).
