International Banking Facilities Have Improved the Competitive Position of Banks in the United States

NSIAD-84-128: Published: Aug 7, 1984. Publicly Released: Aug 7, 1984.

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The Federal Reserve System permits U.S. banks to establish international banking facilities, which allow banks to conduct transactions with foreign customers and thereby compete in the international banking market. GAO studied the impacts of such facilities to determine whether the Federal Reserve's objectives and other projected benefits of such facilities have been realized.

GAO found that the competitive position of U.S. banks in the international banking market has been enhanced as a result of the establishment of international banking facilities. GAO measured U.S. competitiveness in the market as a ratio of foreign dollar assets of banks in the United States to foreign dollar assets of banks elsewhere, and it determined that there was a 67-percent increase in this ratio between September 1981, when international banking facilities were established, and June 1983. In addition, the rapid expansion of the U.S. competitive position in international banking provides evidence that restrictions placed on international banking facilities by the Federal Reserve have not restrained the growth of international banking in the United States. GAO also found that: (1) international banking facilities have probably mitigated increases in unemployment during the current international debt crisis; (2) the establishment of such facilities has not affected the share of U.S.-chartered banks in the international banking market; and (3) such facilities have not affected the worldwide volume of international banking.

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