What Is the Meaning of Foreign Banks?

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Investopedia describes foreign banks as banks that have branches in the United States and main headquarters in another country. Foreign banks are subject to the banking regulations of the home country and those of the United States. A bank may choose to open foreign bank branches to meet the needs of multinational corporate customers.

The Federal Reserve notes that it manages a supervisory program to regulate the banking practices of foreign banks in the United States. A part of this program is to assess the bank's financial condition in the United States and its home country to make sure that the bank can meet its support obligations to its U.S. branches. The Federal Reserve also monitors and approves the non-banking activities of foreign branches in the United States.

The State of Connecticut Department of Banking explains that a foreign bank can establish both freestanding banks and bank holding companies in the United States. The primary difference between a freestanding bank and a holding company, or agency, is that a freestanding bank can accept deposits, whereas a holding company may not be able to do so. To operate in the United States, a foreign bank must register with the Federal Reserve and obtain a license from the states in which the bank intends to conduct business.