THE FEDERAL REGULATION OF FOREIGN BANKING IN THE UNITED STATES: AN ANALYSIS OF ATTITUDES AND IMPLICATIONS

Since 1966 at least twelve bills have been presented to the U.S. Congress regarding the extension of Federal regulation to foreign banking activities in the United States. One reason for the vast amount of interest in regulating foreign banking has been the fact that foreign banking assets in the United States have grown almost 500 percent in less than ten years, while foreign banks have been totally free from Federal control. Beyond this, foreign banks have been permitted to engage in activities such as interstate branching and investment banking which have been prohibited by law to the U.S. banking industry. Finally, after all the years of debate, the U.S. Congress passed the International Banking Act of 1978, bringing foreign banks under Federal regulation for the first time.; The purpose of this study is to ascertain and analyze the attitudes of bankers toward the Federal regulation of foreign banking activities. To this end, a questionnaire was developed and sent to three specific groups of bankers: foreign bankers operating in the United States, U.S. bankers involved in international banking, and U.S. bankers with strictly domestic operations. The same questionnaire was sent to all three groups and the responses were analyzed to determine differences in attitudes among the groups. The statistical tests used were chi-square and analysis of variance, both tests resulting in quite similar accept/reject decisions.; At the inception of this study it was assumed that the group of U.S. bankers involved at international banking would agree, for the most part, with the group of foreign bankers. The results show that this is clearly not the case. The two U.S. banking groups express opinions, the preponderance of which supports restrictive regulation of foreign banking in the United States. The foreign bankers, on the other hand, support a more liberal approach to the regulation of all banking in the United States.; Three important objectives of foreign bank regulation which serve as a focal point for the analysis of the questionnaire results are: reciprocity of regulatory treatment, safety and soundness of the banking system, and the expansion of international banking. These objectives, as well as the attitudes expressed in the survey of bankers, serve as the framework for the recommendations for solutions to many of the major controversies involved in the question of foreign bank regulation. The study also includes discussion of the social welfare impact of the recommended regulatory changes. The recommendations presented are primarily based on a liberalized approach to U.S. bank regulation in general, particularly with regard to the questions of interstate branching and investment banking.