of U.S. banks in the home country of that foreign bank. The three federal bank regulatory agencies were all given roles by the IBA in the supervision and regulation of foreign banking activities in the U.S. The Office of the Comptroller of Currency (OCC) was authorized to grant federal licenses to foreign bank branches and agencies, although most foreign banks still chose to operate through state-chartered branches and agencies. The Federal Reserve was given "residual examination authority" to examine any U.S. branch or agency of a foreign bank or any U.S. commercial lending company or bank controlled by a foreign bank. Since U.S. branches and agencies were now required to apply for federal deposit insurance for their retail deposits, the FDIC was given the duty of processing these applications and supervising the insured branches of foreign banks.
The Foreign Bank Supervision Enhancement Act (FBSEA) was enacted in 1991 as part of the Federal Deposit Insurance Corporation Improvement Act (FDICIA) a result of two scandals involving foreign banks operating in the U.S.: the Bank of Credit and Commerce International (BCCI) and the Banca Nazionale de Lavoro (BNL) scandals. These two incidents pointed out the continuing problems of foreign banks operating in the U.S., particularly those which were licensed by states rather than the federal banking agencies. The IBA did not require state-licensed banks to receive federal approval for U.S. operations. Consequently, the Federal Reserve was asked by Congress to come up with recommendations concerning the federal regulation of foreign banks operating in the U.S. The resulting proposals were largely accepted by Congress and enacted into law under the FBSEA.
In its final form, the FBSEA amended the IBA and the Bank Holding Company Act (BHCA), requiring all foreign banks seeking to operate in the United States to get the approval of the Federal Reserve for such operations, reg...