Foreign Banks:

Implementation of the Foreign Bank Supervision Enhancement Act of 1991

GGD-96-187: Published: Sep 30, 1996. Publicly Released: Sep 30, 1996.

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Pursuant to a congressional request, GAO provided information on the Federal Reserve's implementation of the Foreign Bank Supervision Enhancement Act, focusing on: (1) the Reserve's examination process and process for approving foreign bank applications for U.S. entry and expansion; and (2) enforcement actions that the Federal Reserve has taken since 1993.

GAO found that: (1) the act established minimum standards for foreign bank entry and expansion into the United States, strengthened federal bank supervision and regulation, and required that the Federal Reserve approve foreign banks' applications for acquiring bank subsidaries; (2) although the Federal Reserve approved 45 applications after determining that the applicant banks met the act's standards, Federal Reserve staff believed that the application process was too lengthy; (3) new guidelines, established in 1993, reduced application processing times; (4) between 1993 and 1995, the Federal Reserve met its mandate to coordinate with the other federal and state bank supervisors to examine foreign branches and agencies once every 12 months; (5) the Federal Reserve also examined over half of the representative offices of foreign banks operating in the United States even though it did not establish a time frame for such examinations; (6) the foreign banks examined were generally in satisfactory condition and only 3 percent of the foreign branches and agencies received low safety and soundness ratings in 1995; and (7) of the 40 formal enforcement actions the Federal Reserve issued against U.S. foreign banks between 1993 and 1995, 6 required voluntary terminations of deposit insurance, 4 required the use of civil money penalty authority, and one foreign bank was ordered to terminate its U.S. banking operations.

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