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More recently, and equally significant, was the passage of the Foreign Bank Supervision Enhancement Act of 1991 ("FBSEA") which took effect on December 19, 1991.This act was passed as a direct reaction to the well- publicized improprieties of two foreign banks namely the Bank of Credit and Commerce International ("BCCI"), a Middle Eastern bank chartered in Luxembourg, and Banca Nazionale Del Lavoro ("BNL"), an Italian bank.
By 1970, there were 28 agencies and 19 branches of foreign banks in New York with aggregate assets of $10.5 billion.This growth in state-licensed institutions was achieved despite the available federal option.The expansion of foreign banking in New York was even more dramatic in the 1980s, fueled by the unrelenting globalization and interdependence of financial markets.Prior to passage of the Act, authorization for foreign banks to conduct business in the United States and the subsequent responsibility for their supervision was vested solely in the state regulatory agencies.There was no federal option, unlike the choice available to domestic banks.Congress considered legislation to remedy these inequities for four years, ultimately enacting the International Banking Act of 1978 ("IBA").
The IBA created a federal regulatory structure for agencies and branches, thereby promoting competitive equality between domestic and foreign banking institutions in the United States.
In achieving such parity the IBA: In addition to these restrictions, it permitted foreign banks to directly own Edge Act Corporations.
The IBA also created a dual banking system for branches and agencies of foreign banks.
The New York State Banking Department has a long and distinguished history of supervising foreign banks.
Soon after the establishment of the Department in 1851, Canadian banks entered the New York market.
To date, no third party liability holders in this country have lost money because of the activities of these institutions and none is expected to. FBSEA gave the Board of Governors of the Federal Reserve a more direct role in the supervision of foreign bank activity in the United States.