Us Activities of Foreign Banking Organizations

The International Banking Act of 1978 (IBA) provided for federal regulation of the US operations of foreign banks and granted important new responsibilities to the Federal Reserve for the supervision and regulation of such operations. Enactment of this ________followed rapid growth in the activities of foreign banks in the United States and an increase in their competitive________upon domestic markets.

The IBA created a federal regulatory and supervisory structure for the US branches and agencies of foreign_______, similar to that applicable to US banks. This policy of "national treatment" promotes competitive equality between domestic and foreign banking________in the United States by giving foreign banks operating in this country the same________and subjecting them to the same restrictions and obligations that______to US banks. As part of the implementation of national treatment, the IBA limited expansion of interstate deposit-taking and domestic non-banking ________ of foreign banks, provided the option of federal licensing for agencies and branches of foreign banks, and required FDIC insurance for branches that _______in retail deposit-taking.

At the federal level, the IBA apportioned primary supervisory responsibility for US _________ and agencies of foreign banks among the three federal banking agencies, according to the type of license and whether the banking office has deposit insurance. In addition, the Federal Reserve was given broad authority for the supervision of all federal and state-licensed branches and agencies of foreign banks ________ in the United States. In fulfilling this responsibility, the Federal Reserve must assess the impact and condition of foreign banks operating across state lines. To carry out its ________, the Federal Reserve has statutory authority to examine the assets and liabilities of all branches and agencies, but it generally relies upon examinations that state and other federal banking authorities _______ . Under the Bank Holding Company Act and the International Banking Act, the Federal Reserve also has responsibility to approve, review, and monitor the US non-banking activities of foreign banking organizations.

Words you may need:

enactment n введение закона в силу

applicable adj применимый

"national treatment" национальный режим

(retail) deposit-taking прием вкладов от населения

option n выбор, право выбора

apportion v распределять

statutory authority право, предоставленное законом; власть, предоставленная законом

assets and liabilities активы и пассивы

Discussion

Ex. 12. a) Read and discuss the texts.

b) Single out the main facts from the texts and present them in a short essay.

c) Give your answer to the question in the title.

A) Is Monetary Policy Needed?

Many people believe that central banks should conduct an active, interventionist monetary policy even though most countries are abandoning other forms of state intervention in their economies, such as price controls, income policies, and industrial planning. These and other forms of intervention, such as agricultural policies and state ownership of business enterprises, waste economic resources and distort markets.

Monetary policy, which represents government intervention in the marketplace for credit, exhibits the same negative effects. The time has come to challenge the need for monetary policy as practised by central bankers (often with finance ministry guidance). The financial markets, operating under appropriate tax and structural policies, will produce far greater price stability and smoother economic growth than central bankers can.

Some people still believe that controlled growth of the money supply will minimise inflation. In fact, the quantity of money in the industrialised nations today is essentially demand-driven. Currency, a key component of the money supply, is demand-driven when people can easily exchange unneeded currency for interest-bearing financial assets, such as bank deposits and bonds. Currency-driven inflations occur only when governments finance their deficits by paying their obligations in currency that cannot be converted easily into other assets.

Bank deposits, the main component of the money supply in the industrialised countries, are demand-driven as well. This demand reflects the willingness of individuals and businesses to provide credit to the economy in which they operate, versus investing in real assets or moving funds to other countries.

Reserve requirements on bank deposits, still a favoured monetary policy tool of some central bankers, do not restrict bank lending.

As a practical matter, monetary policy in the industrialised world today essentially takes the form of announced official rates for lending to banks and central bank "steering" of short-term rates.

In effect, civil servants, called central bankers, tell participants in the highly competitive and increasingly internationalised financial marketplace what they, the civil servants, believe short-term interest rates should be.

The credit markets do not differ from other markets. Interest, like any other price, should clear the market at a rate that balances supply with demand.

Words you may need:

interventionist policy интервенционалистская политика

abandon v отказываться от чего-л.

distort v искажать

exhibit v проявлять, показывать

demand-driven определяемый спросом, зависящий от спроса

interest-bearing приносящий процентный доход

currency-driven inflation инфляция, являющаяся следствием объема валютных средств

convert v конвертировать

versus prep против, в сравнении с

"steering" n управление, руководство

civil servant государственный служащий

credit market рынок кредитов

to clear the market (зд.) регулировать рынок

d) Say why the CBR is interested in the development and improvement of the payment system of Russia.