Foreign Banks

During the past 20 years, the share of U.S. banking assets held by foreign banks has increased significantly. This report examines the role of foreign banks in the United States and reviews U.S. laws and regulations governing their operations. Specifically, GAO evaluates whether these laws and regulations give foreign banks operating in the United States a significant competitive advantage over U.S. banks. GAO also identifies areas in which U.S. laws and regulations have been adapted to meet the circumstances of foreign banks and examines the competitive impact of these adaptations on U.S. banks.

GAO found that: (1) most foreign banks operate in U.S. wholesale banking markets, serve their home country and U.S. corporate customers, and engage in transactions with other financial institutions; (2) by the end of 1994, foreign banks held 17 percent of U.S. domestic banking assets; (3) foreign banks attained 24 percent of all U.S. commercial and industrial loans in December 1994, but they held a negligible share of the U.S. retail banking market during that same period; (4) although foreign banks are subject to the same laws and regulations as U.S. banks, they often receive different enforcement of these laws in their home countries; (5) changes in U.S. banking laws and regulations have diminished the competitive advantages previously enjoyed by foreign banks; and (6) national treatment of foreign banks is a concern for both U.S. and foreign bankers, since proposed legislation would expand the powers of bank holding companies and have a differential impact on U.S. and foreign banking operations.