As mentioned earlier the American Banking System was nonexistent before the 17th century when the nation had more than 120 individually owned private banks operating in the banking sector. However due to the increase in trade and travel taking place and the growth in the economy it was identified thatAmerica required a more focused banking system which was easier to control and monitor. As a result the American Banking System was initiated in 1781. Prior to this the private banks printed their own bank notes but after the inception of a formal banking system inAmerica only the North American bank was authorized to print currency. In 1863 theUS congress passed the Act which was termed the National Bank Act. According to this Act the greenbacks were forced to retire. The concept for the chartering for banks all over the nation was established.
The Federal Reserve System however was established as a result of the Federal Reserve Act in 1913. This enabled all the banks in the country to come collectively under the roof of the Federal Reserve. Twelve regional Federal Banks were established through which the banking system inAmericawas controlled. Till this day the banking system inAmericais that as proposed by the Federal Reserve Act. Minor changes and technological evolution have taken place but the underlying principles for operations are the same.