Magazine article American Banker

Fed May Close Offices of Foreign Banks from Countries Where Oversight Is Lax

Magazine article American Banker

Fed May Close Offices of Foreign Banks from Countries Where Oversight Is Lax

Article excerpt

WASHINGTON - Some foreign bank branches that are not adequately supervised by their home countries may have to close under new rules the Federal Reserve Board is considering.

The rules, mandated by Congress in the wake of the Bank of Credit and Commerce International scandal, are aimed at forcing foreign countries to regulate their banks on a global basis.

The rules require regulators to examine 15 separate criteria before deciding if the U.S. affiliates of such institutions can remain open.

The Fed said in the proposed rules that it would only re-evaluate foreign banks that suffer from regulatory problems.

Foreign banking groups generally approved of the rules, although they did ask in comment letters that the Fed give more leeway to banks whose home countries are moving toward comprehensive supervision.

"Adding this criterion would give the board additional flexibility in the applying the proposal to specific banks"' wrote David E. Bodner, chairman of the Institute of International Bankers.

All the commenters urged the Fed to apply these criteria on a "case by case" rather than a "country by country" basis.

"This approach will recognize the differences among individual institutions as well as the differences in the home country's supervisory treatment of different types of financial institutions," Conference of State Bank Supervisors president James B. Watt wrote.

Florida International Bankers Association president Percy Elbrecht urged the Fed to subject representative offices, which cannot take deposits, to more lenient standards. …

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