Despite Positive Effects, Further Foreign Acquisitions of U.S. Banks Should Be Limited Until Policy Conflicts Are Fully Addressed

Foreign banks, individuals, and businesses have dramatically increased their participation in the U.S. banking industry. For the most part, foreign investors have improved weak U.S. banks and maintained strong U.S. banks they acquired by adding new capital, changing management, improving loan portfolios, and stopping self-dealing transactions. Who controls a bank is not always clear. Foreign banks operate throughout the U.S. banking market. Although it is generally agreed that the current level of U.S. banking assets under foreign control is not too high, there is a general concurrence that the situation bears watching. Federal and state banking regulators generally regulate and supervise foreign and foreign-controlled banks the same as their domestic counterparts. Banking regulators are not fully able to assess the qualifications of foreign applicants to purchase U.S. banks because they cannot always verify information submitted to them; they lack the legal jurisdiction. They can also experience difficulty in recovering damages from foreign investors who harm U.S. banks.