Question

What changes to foreign bank operations in the United States have been brought about by the Foreign Bank Supervision and Enhancement Act of 1991?

Answer 1

The Foreign Bank Supervision Enhancement Act (FBSEA) is an act enacted on December 19, 199, to increase the Federal Reserve's authority over foreign banks seeking entry into the United States.

• Part of the Federal deposit Insurance Corporation Improvement Act (FDICIA) of 1991.
• The act enabled the Fed to not only supervise authorization of foreign banks applying for operating ability in the U.S., but also existing foreign banks already operating within the country.
• The Foreign Bank Supervision Enhancement Act was in large part a response to several highly publicized scandals in the early 90s.
• The international banking community responded by revisiting international banking activities.
• The passage of FBSEA in 1991 altered the manner in which foreign bank operations were regulated in the U.S., thereby demanding heightened levels of accountability from all foreign participants.
• These changes reflected a growing international consensus that each nation should regulate its market to make market access dependent on the structure of bank regulation in the international banks' home country.
• At the time of passage in 1991, the U.S. was the first major marketplace to adopt new international standards which likely went a long way in solidifying the U.S. as a drive or international banking orthodoxy.
• In the most serious cases, the U.S. activities of a foreign banking institution can be terminated, and the institution can be expelled from the United States.