How Do Regulators Deal With International Lenders?


Quick Answer

Regulation of international lenders includes on-site examinations by the U.S. Federal Reserve of each foreign banking office in United States and their parent institutions to assess their risk management, operational controls, compliance and asset quality. The Board of the Federal Reserve regulates the international lending of U.S. banks and corporations by requiring their disclosure of international assets, the establishment of transfer risk reserves and account reports for fees on international loans.

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Full Answer

The U.S. International Bank Act of 1978 was the first step in aligning rules pertaining to foreign banks operating in the United States with those pertaining to U.S. banks. The 1991 Foreign Bank Supervision Enhancement Act assigned supervision of foreign banks to the Federal Reserve. Federal Reserve Regulations, Title 12: Banks and Banking, Part 211-- International Banking Operations, Regulation K, Subpart B -- Foreign Banking Organizations delineates the Federal Reserve's supervisory role with foreign banking institutions. Subpart D -- International Lending Supervision outlines its responsibilities related to U.S. banks involved in international lending. Federal Reserve Title 12 Part 211 regulations are available at ecfr.gov, a site of the U.S. Government Publishing Office.

The Basel III International Regulations also factor in the regulation of international banking. The Bank for International Settlements developed these regulations to promote stability in the international financial system by reducing the ability of banks to take on excess risks. Steps in the U.S. Federal Reserve's implementation of Basel III Regulations are available at FederalReserve.gov.

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