History of the Division of Banks

Learn about the history of the Division of Banks (DOB) dating back to the Civil War.

1784: Chartering of the Bank of Massachusetts

Governor John Hancock and Senate President Samuel Adams signed this charter on February 7. It was the first of its kind to demand bank examinations.

1803: Chapter 132 of the Acts of 1802

On March 3, Massachusetts became the first state to instruct banks to make semi-annual reports to the Governor and Council.

1810-1811: Bank examinations and first "Commissioners"

In 1810, committees of attorneys began examining banks "to inquire into [their] doings." The charter of State Bank in 1811 appointed 3 "Commissioners" to examine the vaults of new banks. This was to ensure the banks had enough capital before operations began.

1816: Incorporation of the nation’s first mutual bank

The Provident Institution in the Town of Boston became the nation’s first mutual bank.

1829: Act to Regulate Banks and Banking

Massachusetts was the first state to pass comprehensive laws regulating banks. The 1829 Act to Regulate Banks and Banking brought uniformity to areas such as capital, limitations on debt, and the liability of directors.

1863: National Currency Act

Authorized the chartering of national banks and created the Office of the Comptroller of Currency (OCC). The Act made the OCC to oversee national banks, support a single currency, and help finance the Civil War.

1877: Charter of the Commonwealth’s first co-operative bank

Co-operative Savings Fund & Loan Association became Massachusetts' first co-operative bank.

1906: Formation of the DOB and appointment of Commissioner of Banks

Chapter 204 of the Acts of 1906 established the current structure of the DOB. Additionally, it created the Board of Bank Incorporated to oversee new bank charters.

Shortly after, the Board appointed Pierre Jay as the first Commissioner of Banks. Commissioner Jay supervised the nation's first savings bank life insurance law in 1907. He was also instrumental in establishing the credit union movement in Massachusetts. In 1909, Massachusetts passed the first state credit union law, inspiring similar laws in other states. The Board granted the first Massachusetts credit union charter to St. Jean's Credit Union in Lynn. Next, Massachusetts enacted the first Uniform Small Loans Law in 1911 as a result of loan sharking. All these companies would later come under the jurisdiction of the DOB.

1913: Federal Reserve Act

President Woodrow Wilson signed into law the Federal Reserve Act. This act established the United States’ Central Bank, also known as the Federal Reserve System.

1932: Deposit insurance

In 1932, the Massachusetts Legislature created the nation’s first two deposit insurers: Mutual Savings Central Fund, Incorporated (now the Depositors Insurance Fund) and the Co-Operative Central Bank.

1933: The Great Depression's First Bank Holidays and the federal Banking Act

In response to the panic of the Great Depression, Massachusetts declared a banking holiday from March 4 to March 6, 1933. President Franklin D. Roosevelt made March 6 to March 9th, 1933 a national banking holiday. On March 10, Commissioner Guy approved all institutions, except five trust companies, to resume business.

On June 16, the Banking Act of 1933 amended the Federal Reserve Act. It provided a federal safety net through the creation of the Federal Deposit Insurance Corporation (FDIC).

1961: Credit union insurance

 

This Legislature created the Massachusetts Credit Union Share Insurance Corporation. It insured shares and deposits of state-chartered credit unions.

1960's: Nation’s first truth-in lending law passed in Massachusetts

In 1966, Massachusetts enacted the Truth-in-Lending law. It would become the model for the federal law. It exempted Massachusetts state-chartered banks and credit unions from the federal truth-in-lending law and Regulation Z.

The 60's also saw the enactment of federal banking laws to ensuring fair and equal access to banking services. These laws included the Fair Housing Act, the Equal Credit Opportunity Act, the Home Mortgage Disclosure Act, and the Community Reinvestment Act.

1970's: Innovations to the industry

Many financial institutions began using electronic banking and ATM's. Money market mutual funds and disintermediation were on the rise. Massachusetts was the first to offer negotiable order of withdrawal (NOW) accounts to state banks.

Branch banking became easier over the next 20 years as restrictions loosened. Before, there were strict country limitations. Then, branches could be up to 40 miles from the main office despite county lines. In 1982, Massachusetts passed the first regional interstate banking act. This served as the model for other states. It also paved the way for interstate holding company acquisitions within broader regions. Finally, in 1994, Congress passed the Riegle-Neal Interstate Banking and Branching Efficiency Act. It allowed for nationwide banking.

1982: Community Reinvestment Act (CRA) passed

Massachusetts remains one of the few states with active CRA enforcement. We are also the only state in the country examining state-chartered credit unions for CRA compliance.

1985: Excess deposit insurance in Massachusetts

Due to statutory changes, two Massachusetts deposit insurance funds changed from primary insurers to insurers of deposits over the FDIC limits.

The late 80's were a time of high interest rates during the real estate boom/bust. These high rates put strains on financial institutions nationwide. But, Massachusetts' excess insurers were able to provide vital aid to Massachusetts banks.

1991: Mandate to license mortgage lenders and brokers

1994: 44 banks and credit unions failed

Despite the excess deposit insurance, 44 state and federal banks and credit unions failed in Massachusetts.

1996: Massachusetts companion interstate banking and branching law

This authorized the DOB to put in place the first state banking department risk based assessment system. It also provided Massachusetts state-chartered banks parity with national banks.

2007: “An Act Protecting and Preserving Homeownership”

Over 15 years, the number of licensed mortgage lenders and brokers grew. DOB's authority expanded to include mortgage loan originators under Chapter 206 of the Acts of 2007. Chapter 206 extended provisions like the Massachusetts CRA to certain mortgage lenders. It established a foreclosure database and strengthened rights of consumers facing foreclosure. The education requirements for first-time homebuyers seeking a subprime adjustable rate mortgage increased. Chapter 206 also set up a grant program for first-time homebuyer education and foreclosure counseling.

Now and into the future…

After over 200 years of service, the DOB is ready to fulfill its’ mission of supervising the ever-evolving financial services industries and protecting consumers of the Commonwealth.

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