Federal financial regulation encompasses vastly diverse markets, participants, and regulators. As a result, regulators' goals, powers, and methods differ between regulators and sometimes within each regulator's jurisdiction. This report provides background on the financial regulatory structure in order to help Congress evaluate specific policy proposals to change financial regulation. Historically, financial regulation in the United States has coevolved with a changing financial system, in which major changes are made in response to crises. For example, in response to the financial turmoil beginning in 2007, the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 (Dodd-Frank Act; P.L. 111-203 ) was the last act to make significant changes to the financial regulatory structure (see Appendix A ). Congress continues to debate proposals to modify parts of the regulatory system established by the Dodd-Frank Act. In the 115 th Congress, proposals to change the regulatory structure include the Financial CHOICE Act of 2017 ( H.R. 10 ), which would modify and rename the Consumer Financial Protection Bureau (CFPB) and the Federal Insurance Office (FIO), change the relationship between the Financial Stability Oversight Council (FSOC) and the regulators, eliminate the Office of Financial Research (OFR, which supports FSOC), and make other changes to how financial regulators promulgate rules and are funded. This report attempts to set out the basic frameworks and principles underlying U.S. financial regulation and to give some historical context for the development of that system. The first section briefly discusses the various modes of financial regulation. The next section identifies the major federal regulators and the types of institutions they supervise (see Table 1 ). It then provides a brief overview of each federal financial regulatory agency. Finally, the report discusses other entities that play a role in financial regulation—interagency bodies, state regulators, and international standards. For information on how the regulators are structured and funded, see CRS Report R43391, Independence of Federal Financial Regulators: Structure, Funding, and Other Issues , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. The financial system matches the available funds of savers and investors with borrowers and others seeking to raise funds in exchange for future payouts. Financial firms link individual savers and borrowers together. Financial firms can operate as intermediaries that issue obligations to savers an d use those funds to make loans or investments for the firm's profits. Financial firms can also operate as agents playing a custodial role, investing the funds of savers on their behalf in segregated accounts. The products, instruments, and markets used to facilitate this matching are myriad, and they are controlled and overseen by a complex system of regulators. To help understand how the financial regulators have been organized, financial activities can be separated into distinct markets: Banking —accepting deposits and making loans; Insurance —collecting premiums from and making payouts to policyholders triggered by a predetermined event; Securities —issuing contracts that pledge to make payments from the issuer to the holder, and trading those contracts on markets. Contracts take the form of debt (a borrower and creditor relationship) and equity (an ownership relationship). One special class of securities is derivatives, which are financial contracts whose value is based on an underlying commodity, financial indicator, or financial instrument; and Financial Market Infrastructure —the "plumbing" of the financial system, such as trade data dissemination, payment, clearing, and settlement systems, that underlies transactions. A distinction can be made between formal and functional definitions of these activities. Formal activities are those, as defined by regulation, exclusively permissible for entities based on their charter or license. By contrast, functional definitions acknowledge that from an economic perspective, activities performed by types of different entities can be quite similar. This tension between formal and functional activities is one reason why the Government Accountability Office (GAO), and others, has called the U.S. regulatory system fragmented, with gaps in authority, overlapping authority, and duplicative authority. For example, "shadow banking" refers to activities, such as lending and deposit taking, that are economically similar to those performed by formal banks, but occur in the securities markets. The activities described above are functional definitions. However, because this report focuses on regulators, it mostly concentrates on formal definitions. Financial regulation has evolved over time, with new authority usually added in response to failures or breakdowns in financial markets and authority trimmed back during financial booms. Because of this piecemeal evolution, powers, goals, tools, and approaches vary from market to market. Nevertheless, there are some common overarching themes across markets and regulators, which are highlighted in this section. The following provides a brief overview of what financial regulators do, specifically answering four questions: 1. What powers do regulators have? 2. What policy goals are regulators trying to accomplish? 3. Through what means are those goals accomplished? 4. Who or what is being regulated? Regulators implement policy using their powers, which vary by agency. Powers can be grouped into a few broad categories: Licensing , Chartering , or Registration. A starting point for understanding the regulatory system is that most activities cannot be undertaken unless a firm, individual, or market has received the proper credentials from the appropriate state or federal regulator. Each type of charter, license, or registration granted by the respective regulator governs the sets of financial activities that the holder is permitted to engage in. For example, a firm cannot accept federally insured deposits unless it is chartered as a bank, thrift, or credit union by a depository institution regulator. Likewise, an individual generally cannot buy and sell securities to others unless licensed as a broker-dealer. To be granted a license, charter, or registration, the recipient must accept the terms and conditions that accompany it. Depending on the type, those conditions could include regulatory oversight, training requirements, and a requirement to act according to a set of standards or code of ethics. Failure to meet the terms and conditions could result in fines, penalties, remedial actions, license or charter revocation, or criminal charges. Rulemaking . Regulators issue rules (regulations) through the rulemaking process to implement statutory mandates. Typically, statutory mandates provide regulators with a policy goal in general terms, and regulations fill in the specifics. Rules lay out the guidelines for how market participants may or may not act to comply with the mandate. Oversight and Supervision . Regulators ensure that their rules are adhered to through oversight and supervision. This allows regulators to observe market participants' behavior and instruct them to modify or cease improper behavior. Supervision may entail active, ongoing monitoring (as for banks) or investigating complaints and allegations ex post (as is common in securities markets). In some cases, such as banking, supervision includes periodic examinations and inspections, whereas in other cases, regulators rely more heavily on self-reporting. Regulators explain supervisory priorities and points of emphasis by issuing supervisory letters and guidance. Enforcement . Regulators can compel firms to modify their behavior through enforcement powers. Enforcement powers include the ability to issue fines, penalties, and cease and desist orders; to undertake criminal or civil actions in court, or administrative proceedings or arbitrations; and to revoke licenses and charters. In some cases, regulators initiate legal action at their own bequest or in response to consumer or investor complaints. In other cases, regulators explicitly allow consumers and investors to sue for damages when firms do not comply with regulations, or provide legal protection to firms that do comply. Resolution. Some regulators have the power to resolve a failing firm by taking control of the firm and initiating conservatorship (i.e., the regulator runs the firm on an ongoing basis) or receivership (i.e., the regulator winds the firm down). In other markets, failing firms are resolved through bankruptcy, a judicial process. Financial regulation is primarily intended to achieve the following underlying policy outcomes: Market Efficiency and Integrity . Regulators are to ensure that markets operate efficiently and that market participants have confidence in the market's integrity. Liquidity, low costs, the presence of many buyers and sellers, the availability of information, and a lack of excessive volatility are examples of the characteristics of an efficient market. Regulators contribute to market integrity by ensuring that activities are transparent, contracts can be enforced, and the "rules of the game" they set are enforced. Integrity generally also leads to greater efficiency. Regulation can also address market failures, such as principal-agent problems, asymmetric information, and moral hazard, that would otherwise reduce market efficiency. Consumer and Investor Protection. Regulators are to ensure that consumers or investors do not suffer from fraud, discrimination, manipulation, and theft. Regulators try to prevent exploitative or abusive practices intended to take advantage of unwitting consumers or investors. In some cases, protection is limited to enabling consumers and investors to understand the inherent risks when they enter into a contract. In other cases, protection is based on the principle of suitability—efforts to ensure that more risky products or product features are only accessible to sophisticated or financially secure consumers and investors. Capital Formation and Access to Credit . Regulators are to ensure that firms and consumers are able to access credit and capital to meet their needs such that credit and economic activity can grow at a healthy rate. Regulators try to ensure that capital and credit are available to all worthy borrowers, regardless of personal characteristics, such as race, gender, and location. Illicit Activity Prevent ion . Regulators are to ensure that the financial system cannot be used to support criminal and terrorist activity. Examples are policies to prevent money laundering, tax evasion, terrorism financing, and the contravention of financial sanctions. Taxpayer Protection. Regulators are to ensure that losses or failures in financial markets do not result in federal government payouts or the assumption of liabilities that are ultimately borne by taxpayers.