International Banking

Although international banking has grown and become the foundation for the global economy, no one regulator oversees international banks to ensure the safety and soundness of the entire system. In each country, bank supervisors are responsible for the quality of their supervision efforts but coordination with supervisors in other nations is purely voluntary. This report (1) reviews efforts by the Basle Committee on Banking Supervision, the principal mechanism by which regulators work to coordinate banking supervision; (2) assesses the effectiveness of the committee's approach and the extent to which the committee is pursuing options to bolster its role; and (3) analyzes whether the U.S. Foreign Bank Supervision Enhancement Act of 1991 can be one model for implementing into national law the Basle committee standards to promote adequate international banking supervision.

GAO found that: (1) the Committee has improved international banking standards and provided a framework for worldwide banks to strengthen their capital position; (2) the Committee's framework has been fully implemented by all committee member countries and a significant number of nonmember countries; (3) although international bank supervisors have used the Committee's informal approach to set standards, improve bank supervision, and increase bank capital, recent international banking problems demonstrate the need for further compliance with the Committee's supervisory standards; (4) the Committee is considering options to increase standard compliance while preserving national banking sovereignty which include establishing a national supervisory practices clearinghouse and facilitating peer reviews among national supervisory regimes; (5) there is minimal support for creating a supranational regulatory body or increasing the Committee's regulatory power; (6) providing nations with complete and consistent information on national supervisory practices could increase national authorities' ability to make better decisions regarding foreign bank operations, avoid costly duplication efforts, and monitor bank supervisors' progress toward implementing the Committee's standards; (7) peer reviews have provided more rigorous assessments of regulatory practices through self-monitoring; and (8) banking legislation could serve as an example for other nations on how to implement the Committee's international banking supervision principles.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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