Document Type
Article
Publication Title
Journal of Financial Regulation
Publication Date
8-2016
ISSN
2053-4833
Page Number
291
Keywords
banking law, monetary institutions, regulation, entry restriction
Disciplines
Banking and Finance Law | Law
Abstract
Entry restriction has a noble pedigree in banking law. Soon after the founding of the Bank of England in 1694, Parliament forbade all other business entities apart from small partnerships from issuing bank notes and their equivalents. Subsequent acts of Parliament confirmed that the object of the prohibition was to give the Bank of England the ‘privilege or power’ of ‘exclusive banking’. In the USA, similar prohibitions, called ‘restraining acts’, were established at the state level in the early nineteenth century. Later, when Congress established the national banking system in the early 1860s, it prohibited (through the device of punitive taxation) all other entities from issuing banknotes. Entry restriction remains at the core of US banking law today: it is axiomatic that no person or entity may maintain ‘deposit’ liabilities without a banking charter.
Entry restriction laws take the form of a blanket prohibition, binding not on banks but on everyone else. These laws define the privilege that a banking charter conveys; a banking charter confers an exemption from the prohibition. It is noteworthy that these prohibitions apply to a particular liability structure. The liabilities in question— bank notes and deposits—are widely understood to serve a distinctly monetary function. A central object of entry restriction laws, then, is to confine ‘money’ creation to the government itself and to one or more specially chartered bank
Recommended Citation
Morgan Ricks,
Entry Restriction, Shadow Banking, and the Structure of Monetary Institutions, 2 Journal of Financial Regulation. 291
(2016)
Available at: https://scholarship.law.vanderbilt.edu/faculty-publications/1440