The Regulation of International Banks: Problems and Promises

GAO discussed the changing financial services environment's impact on international bank regulation and the irrelevance of traditional banking boundaries. GAO noted that the current progressive deregulation of banking activities could create an environment: (1) which would allow any financial institution to trade any product or compete in any part of the financial sector; and (2) with larger risks and inadequate safeguards for financial institutions. GAO also noted that the trend toward progressive deregulation required: (1) a much stronger, less fragmented oversight and supervisory approach for monitoring financial service activities and continuing boundary erosion; (2) a coordinated decision making process for effective management of financial market crises; and (3) more extensive knowledge of other countries' financial markets and systems.