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Foreign Bank Regulation in the United States Thi

Foreign Bank Regulation in the United States

This paper will discuss the Foreign Banking Supervision and Enhancement Act of 1991 (FBSEA). The first part of the paper will briefly describe the state of federal law prior to the passage of the FBSEA. The second part of the paper will examine some of the most important parts of the FBSEA, especially the provisions regarding consolidated, comprehensive home country supervision. The third part of the paper will provide some background to home country supervision, concentrating upon the evolution of the Basle Concordat with regard to this principal. The fourth part of the paper will discuss the probable effects the FBSEA will have on foreign bank operations in the United States.

Foreign banks operating in the U.S. were not regulated by the federal government prior to the passage of the International Banking Act (IBA) in 1978. Foreign banks operating in the U.S. were instead regulated by the individual states in which they operated. As a result, foreign banks were permitted to establish offices across state lines and those which did not acquire domestic banks were not subject to the restrictions on nonbanking activities contained in the Bank Holding Company Act. Consequently, foreign banks developed a competitive edge over domestic banks within the U.S. The Federal Reserve Board also became concerned that the lack of federal regulation of foreign bank activity in the U.S. adversely affected its role as the central bank. It believed that federal regulation was necessary for it to effectively implement monetary policy.

As a result of these concerns, Congress drafted and enacted the IBA in order to create a national policy which sought parity between domestic and foreign banks in similar circumstances. By enacting this legislation, Congress rejected the alternative approach of reciprocity, which would have linked the rights of a foreign bank in the U.S. to the treatment...

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Foreign Bank Regulation in the United States Thi. (1969, December 31). In LotsofEssays.com. Retrieved 12:08, March 28, 2024, from https://www.lotsofessays.com/viewpaper/1692090.html