Banking and international operations is governed by Regulation K which was set out by the Federal Reserve Bank. Regulation K is the governing ‘say’ over all international banking done in the United States. It offers a wide range of information, guidance and support for bank holding companies which do business in the international trade or foreign banks that would be located in the US. This regulation also limits the amount of action a foreign bank located in the US can see. This would mean limiting the amount of foreign trade and financial transitions a foreign bank could participate in when they are located within the US boarders.
There are opportunities for corporations, under Regulation K and that qualify under the Edge Act, to participate in many different practices of global banking. This also allows a domestic bank to own the entirety of a nonfinancial foreign company or business. A banking Edge firm will purchase and sell notes, bills of exchanges and drafts in addition to anything that complements the international banking activities parent company bank.
Many changes have been applied to the Edge Act since its inception back in late 1919. Several banking institutions will receive special charters from the US government in order for them to be able to do business without complying various state-to-state banking laws. These banks could set up an Edge Act corporation, then the United States banks are able to gain more exposure to financial investing operations not available to them under the many standard banking laws.
International airlines, trade and shipping firms were allowed to provide various banking services through the Edge Act revisions of 1984, the first such revisions since 1919. These changes came about because of the economical landscape that includes a more global presence. These full banking services also included granting loans and taking deposits.
As a precautionary measure, the Federal Reserve retains the right, through the Edge Act and the Regulation K plan, to monitor the ownership of the corporations, all future investments and their business activities. In order to maintain their status as an international banking member, these companies will have to make sure all their dealings are related to international transactions. This is true of the international trade, shipping and airline services that are doing business here in the US as well as outside the boarders.
In 2001, the Federal Reserve Board issued another change to the Regulation K, a comprehensive revision which allows permissible activities to expand abroad for the US banking organizations and dropping associated regulatory burdens. This ruling also affects the same burden of regulatory issues on operating foreign banks in the US. This is done by reorganization of the notice and application processes.
Some of these changes include allowing the banks to invest up to 20 percent of their surplus and capital in Edge corporations. Under the general consent procedures, permissible foreign activities of banking organizations in the US, including investments and securities activities, are to be expanded. These latest revisions were the latest since the 1997 sweeping changes.
The banking and international operations are an important part of the overall financial wellbeing of the US and all foreign countries that do business within the US. There are certain guidelines that must be followed in order to meet the standards put forth by the Federal Reserve. When these guidelines are met, then all the banking needs of the companies within the US that do business outside the states and all the foreign companies that do business within the states will know what is acceptable.