European Community:

U.S. Financial Services' Competitiveness Under the Single Market Program

NSIAD-90-99: Published: May 21, 1990. Publicly Released: May 24, 1990.

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Pursuant to a congressional requirement, GAO assessed: (1) how the European Community's (EC) Single Market Program could affect U.S. financial firms; (2) the extent to which U.S. financial firms participated in EC markets; (3) potential opportunities and challenges for U.S. financial firms; and (4) how U.S. government agencies were working to ensure full and fair access to European markets.

GAO found that: (1) U.S. firms held over $200 billion in EC bank assets, a 5-percent share; (2) U.S. financial firms had new opportunities to expand their EC business because of its great size; (3) U.S. firms would face few EC-imposed restrictions, partly due to U.S. government agencies' actions to make U.S. interests known; (4) new powers and market access would particularly affect retail markets, and U.S. financial firms could benefit from the increased demand for financial services; (5) many U.S. financial firms did not plan to expand beyond their wholesale operations because of capital limitations and their expanded U.S. activities; (6) some firms believed that U.S. restrictions on their activities would put them at a competitive disadvantage in the European market; and (7) the U.S. government timely responded to protect the U.S. financial community's interests as EC was developing its regulations.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: In considering legislation to expand bank powers, Congress did assess the impact of the current structure in the ability of banks to compete in EC after 1992, and decided that no change was warranted.

    Matter: EC endorsement of the universal banking model for its more open financial markets gives greater urgency to the ongoing congressional debate over how broad U.S. bank powers should be. The decision to modify the existing requirements is a judgmental one. In weighing the pros and cons of the existing structure, Congress may wish to consider the impact of those requirements on the ability of U.S. banks to compete in EC after 1992.

 

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