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Brief Departmental History and Regulatory Responsibility

Early History

Starting in 1857, banking enterprises in California were granted charters under the General Corporation Laws. Savings banks were authorized under the provisions of an act passed in 1862.

The Board of Bank Commissioners 1878 - 1909

The year 1878 marks the advent of actual banking supervision in California. In that year, an act was passed creating a three person Board of Bank Commissioners and placing under its jurisdiction "every savings bank and banking company incorporated under the laws of this state, or any other state or country and doing business in this state".

The State Banking Department 1909 - 1997

Over time, it became apparent that the Board’s weak regulatory powers and inadequate bank chartering and examination practices were insufficient to properly protect depositors. In 1909, the Bank Act was passed, creating the State Banking Department with the Superintendent of Banks appointed by the Governor to a term of four years. This was changed in 1911 to provide that the Superintendent hold office "at the pleasure of the Governor".

The Bank Act was completely revised in 1949 and was codified in 1951 as Division I of the Financial Code. The Banking Law was again extensively revised in 1979 to bring it in line with General Corporate Law and Generally Accepted Accounting Principles.

The Department of Financial Institutions

California began a new chapter in bank regulation with the Department of Financial Institutions (DFI), which became operative July 1, 1997. This new Department combines responsibility for the safety and soundness of California’s depository institutions under one roof. DFI is better able to reduce unneeded regulations and costs for state-chartered credit unions and industrial loan companies formerly regulated by the Department of Corporations, and commercial banks, savings and loan associations, and trust companies, and other licensees formerly regulated by the State Banking Department. Reduced regulatory costs are derived primarily from combining technology and reducing duplicative overhead expenses. Also, DFI is better able to focus on further regulatory reforms for all of California’s depository institutions and to help create a climate for financial institution innovation.