Foreign Bank Regulation in the United States Thi

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

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. When supervision is not consolidated, the regulators of both the home and host countries usually become confused as to their respective duties. In addition, cooperation between the two groups is usually lacking and examination of specific entities is incomplete. In the case of BCCI, several years passed between the time that international regulators became aware of serious problems and the time that effective action was taken. Even when the worldwide operations of BCCI was placed under the supervision of a "college of supervisors" drawn from the countries in which BCCI did most of its business, action was ineffective because the members of this college were unable to cooperate. Home country supervision is not always superior to host country supervision, however. From a practical viewpoint, attempts by the home country to regulate the foreign offices or branches of a bank will likely be resisted by the host countries, who may see such regulation as an infringement upon national sovereignty. When the affiliate bank is a subsidiary of the parent, this reluctance is heightened, because subsidiaries have independent legal standing in the host countries. Reluctance to share authority over banks domiciled in host countries
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Some common words found in the essay are:
Company Act, Basle Committee, Basle Concordat, Federal Reserve, Reserve Board, Basically Board, Sabadell SA, Committee FBSEA, Cross-Border Establishments, Minimum Standards, home country, foreign bank, foreign banks, host countries, host country, federal reserve, country supervision, home country supervision, country regulators, international banking, bank holding, foreign banks operating, home country regulators, federal reserve board, bank holding company,
Approximate Word count = 3445
Approximate Pages = 14 (250 words per page)