Leslie A. Woolley
Deputy to the Chairman for Policy
Federal Deposit Insurance Corporation
Institute of International Bankers
Annual Washington Conference
March 4, 1997
Thank you. I'm delighted -- once again -- to join FDIC Chairman Helfer as a speaker at the Institute's annual Washington conference.
Foreign banking organizations play an increasingly significant
role in the U.S. banking system. With the growth of the Internet
and other electronic communications networks, the business of
banking is becoming increasingly global. As of the end of 1995,
foreign banking organizations in America held about $974 billion in
total U.S. assets.
During the past year, to better focus on international banking
and bank supervision, the FDIC created an International Branch
within our Division of Supervision. We're very excited about this
new branch and the services it is providing, and we know that you
will benefit from its work.
Christie Sciacca, a veteran of many years in bank supervision
at the FDIC, is the new Assistant Director heading up the
international branch, which opened for business here in Washington
in September of 1996. If you haven't met Christie yet, you should!
This new branch is the central area at the FDIC for gathering
and analyzing information about the strength of individual foreign
banking organizations in the U.S. and worldwide. We are working
closely with the other regulators in this process -- sharing
information, coordinating examination schedules, developing
regulations, and so on.
The new branch also is monitoring today's "hot topics" in
international banking, and anticipating what could be important
tomorrow to the banks we supervise.
The branch is not yet fully staffed, but we expect that within
the next few weeks it will be at full strength -- with analysts
focusing on different regions of the world, and review examiners
focusing on individual institutions. But even with the small crew
of employees on board so far, the international branch has already
been very busy and, we believe, very productive. I'd like to tell
you about some of the programs and issues we are working on that
could directly affect foreign banks in the United States.
One of the top priorities of the FDIC and the other U.S. bank
regulators is to reduce the regulatory burden on the industry. In
fact, Chairman Helfer believes so strongly in reduced regulatory
burden that she gave Joe Neely, an FDIC Board member, the day-to-day
responsibility for monitoring our progress in that area.
We know that laws and regulations governing safety and
soundness, criminal activities, consumer protection and yes,
international banking supervision, impose significant costs on
banks. We have been working hard to reduce that burden.
Last year, the FDIC began reviewing each of its 120
regulations and written policies to see if they could be simplified
or eliminated completely. In April, the FDIC completed the reviews
and began implementing the recommendations. Since then, the FDIC
has streamlined 25 of its rules and written policies, and
eliminated 15 others. FDIC staff have identified 45 more rules and
policies they believe can be trimmed back or abolished. We hope to
get these proposals out for public comment before the end of this
year. When this process is over, we expect that the FDIC will have
revised or rescinded two-thirds of the rules and policies on our
In the international area, the FDIC's new branch is doing its
part by reviewing all of its relevant regulations and closely
coordinating with the other banking agencies to ensure consistent
Also among our top priorities in terms of reducing the burdens
on banks is to simplify and speed up the applications process.
We recognize that, in some respects, the applications process
in international banking supervision has been cumbersome and, at
times, frustrating. We know that delays in getting regulatory
approvals can mean lost business opportunities for international
banks, and we don't want the FDIC applications process to put them
at a competitive disadvantage.
That's why our international branch is looking into options
for streamlining our applications process for well-capitalized,
well-run banks. Some of the ideas under consideration are pretty
basic. They involve such things as having our front-line
supervisors in the regional offices share applications immediately
with our Washington staff. This will create a "parallel track" --
two levels of review occurring at the same time, and not one after
Other ideas include changing some applications from well-managed
banks into notices that do not require specific approval
from the FDIC. Or, perhaps giving regional FDIC offices more
authority to approve certain applications. Or, allowing well-managed
institutions to obtain what securities regulators in the
U.S. call a "shelf" registration -- essentially, advance approval
to engage in certain activities if and when the bank later decides
to conduct them.
These are only staff ideas under consideration. They have
not yet been endorsed by the FDIC's Board or our Division
Directors. But we are actively reviewing our application process
and working to improve it.
Still another important part of our work to reduce regulatory
burden involves bank examinations.
The U.S. banking agencies recently adopted an interim rule
enabling well-managed banks with $250 million or less in assets to
be examined every 18 months instead of every 12 months. The
agencies have asked for comment by April 14th on how to implement
that rule for U.S. branches and agencies of foreign banks, and we
encourage the Institute and your member banks to write to us. We
have no preconceived ideas about this, and all comments received
will be given full consideration and analysis. We expect that the
banking agencies will refine the rule and begin applying the new
standards with examinations of foreign banks by 1998.
As you can see, the FDIC is committed to reducing burdens in
the examination process. But we also must remember the lessons of
the 1980s -- the worst period of bank failures since the Great
Depression. From the '80s, we learned that there are no substitutes
for regular, on-site examinations and strong internal controls.
This has been highlighted recently by the Daiwa situation. Because
of the critical importance of internal controls, our examiners are
making sure that weaknesses found in external or internal audits
are being addressed and corrected.
Another area we closely review during examinations is
management. Many foreign banks use management from the home
country on a rotational basis. We know that moving new managers in
and out of the bank may be good training, but it may pose a
potential problem for the continuity and consistency of the bank's
U.S. operations. That's why FDIC examiners will continue to pay
attention to how effectively the bank's home office monitors its
U.S. operations, and how well the U.S. managers are performing.
And finally, in our overall review of newly chartered foreign
institutions, we try to determine whether managers have a good
understanding of the U.S. rules and regulations that apply to them.
With our new international branch in place, the FDIC is proud
to be expanding our representation on the Basle Committee. We are
actively involved in each of the Basle Committee's five subgroups
and task forces -- with FDIC experts in accounting, capital
markets, policy, international issues and other areas contributing
significantly to those groups.
Additionally, we have been working closely with the Basle
Committee on issues related to electronic money and banking. The
regulators in America are actively monitoring the risks and issues
associated with electronic banking, specifically stored-value
cards, electronic cash, banking over the Internet, and other
The FDIC has been keeping up-to-date with developments in
electronic banking. In July of 1996, our Board of Directors
approved a legal opinion -- General Counsel Opinion Number 8 --
clarifying the conditions under which the funds underlying
stored-value cards may be considered deposits for insurance purposes.
We followed up on that announcement with requests for written
comments, and we held a public hearing, so that we could hear from
bankers and consumers about their concerns with electronic banking.
The comments made clear that bankers and consumers wanted
additional guidance from the FDIC about how electronic banking
programs could operate effectively and safely. As a result, the
FDIC has issued procedures to guide examiners -- and bankers -- in
evaluating electronic banking activities in areas such as strategic
planning and internal controls. These new procedures have been
made publicly available and may serve as an excellent resource for
bankers. This and other valuable supervisory information is
available on the FDIC's Internet site at www.fdic.gov.
I know I've covered many topics in a short amount of time.
However, I hope my comments have been helpful, because we believe
we can all work together to foster growth and prosperity while
maintaining the safety and soundness of our financial institutions.