The international bank operations

Since 1965 fast process of distribution of branches of the American banks abroad and branches of foreign banks in territory of the USA has begun. As a result of these changes many large commercial banks carry out presently the operations worldwide.

Foreign branches of the American banks. In 1985 175 banks of the USA had 900 branches in more than 80 foreign countries and regions outside of the USA. Foreign actives of the American banks have reached 458 billion dollars, that is about one heel of their cumulative actives in the country. Expansion abroad gives the chance to banks of the USA to give the big support to multinational corporations and to give out loans in those areas, where rates of loan percent the greatest. For opening of foreign branches it is necessary for Banks-members FRS to obtain the permit from Board of governors of Federal Reserve System. We will note, however, that the facts taking place in a number-.stran экспроприации, the bank property have discouraged many banks to open foreign branches. Besides opening of branches abroad, banks of the USA have the legitimate right to place specialized branches for realization of the international business operations within the USA, but out of limits of own staff. Though such banks created according to the law of Edzha, are resolved in the USA since 1919, their number has increased with 37 in 1965 to more than 200 in 1984 to strengthen positions of the American banks in their competitive struggle against growing number of the foreign banks operating in the USA, the Law on the international bank operations of 1978 which it is essential либерализировал Zakona Edzha action has been passed. Till 1979 each credit and financial corporation created according to the Law of Edzha, could carry out operations on the international crediting only in one staff. Now such corporations can operate at all without being the constrained borders of states.

In 1981 Board of governors of Federal Reserve System has suspended set of instructions which promoted earlier that the American banks carried out bank operations from the foreign branches. It was authorized to banks of the USA to create so-called International bank (monetary) средства1 (МБС) in the USA (Federal Reserve Bulletin, July 1981, pp. 562—563). МБС aren't branches of banks; they represent the specific isolated groups of accounts in bank account books. МБС can serve deposits and loans

In any currency. In addition to it МБС all restrictions imposed on reserves can participate in large financial operations with foreign citizens, and, aren't for МБС obligatory.

Branches of foreign banks in the USA. In 1984 in the USA was about 450 branches and agency offices of foreign banks. Their actives Made more than 238 billion dollars. Number of the foreign banks functioning in the USA, has essentially grown in 1970} however in the early eighties this growth was slowed down.

Among the states giving a haven to foreign banks, states New York and California have the greatest value. In some states realization of bank operations of any sort completely is forbidden to foreign banks. In other states the number and a range of these operations are essentially limited. JB a number of states opening of bank offices only is authorized to those banks which "occur" from страй where opening - кочягор American бзиков is authorized. Instead of allowing to open to foreign banks branches which could give out loans and accept on deposits money resources both from/Americans, and from the foreigners, some states have allowed to open to foreign banks only agency offices which have no right to accept on deposits money resources of the American clients.

The law on the international bank operations of 1978 has formulated for the first time the special federal instructions regulating bank operations of foreign banks, the USA operating in territory. Smerikanskie-banks complained that federal instructions deprived of them of some advantages - in competitive struggle. While Zakon Makfeddena forbade banks of the USA to open branches outside of the staff, it was authorized to foreign banks. Besides it, it was authorized to foreign banks to be engaged in operations on conditions «андеррайтинга» (the guaranteed placing) ' and also to sell actions in the United States. It is known that activity of it родз has been forbidden the American banks by the Law on banks from June, 1933. Besides, despite rather large sizes of almost all foreign banks, rather rigid requirements of the Federal Reserve System, concerning obligatory level of reserves for the big banks, for foreign banks weren't obligatory. Therefore expenses of foreign banks on maintenance of reserves it is much less, than at American банковл Now all branches and agency offices of foreign banks should Submit to the same general requirements to reserves, as all American banks. Besides, foreign banks have acquired the right to obtain the loan in Federal Reserve banks. To open bank branch in other staff, the foreign bank should choose now any staff in quality «своего* <in the original« to the Burden of a state*-comment of the lane) Where it also will carry out the operations; Е THESE conditions he can create new branch or agency office only with the permission of that staff in which it will carry out the basic operations. New branches and agency offices outside of "the" staff can (have the right) to open depositary accounts only to the persons who are not living in this staff, or subjects of the activity concerning financing of international trade. Foreign banks, nevertheless, continue to keep some relative advantages. All bank operations which were already carried out by them by the time of acceptance of the new law, are excluded from number falling under again accepted restrictions and interdictions. Recently some foreign banks have got the American banks. It is necessary to mean that control acquisition over the American bank from foreign bank can't occur without approval of Board of governors of Federal Reserve System, and on occasion can be demanded and approval of the government of staff. So, the British National Westminster bank bought up all actions of National bank Northern. Americas, occupying 37 place among the largest banks of the USA. In the USA there are also other examples when very much big banks pass to foreign owners. However in 1979 the head of bank department of the State of New York has refused to support attempt «Bank corporation of Hong Kong and Shanghai» to get a controlling interest «the Mayoralties Midland Benk», occupying 12 place among the largest banks of the USA.

Merge of banks

According to the Law on bank merges of 1960 responsibility for authorization of bank merges is assigned to the federal bodies which are carrying out regulation of banking. In conducting the Controller of monetary circulation consideration and the statement of plans of absorption by national banks of other banks was transferred. Board of governors of Federal Reserve System solves the questions concerning the bank holding companies н to states to banks-members FRS. Questions of merge of insured banks-non-members FRS are solved by Federal Corporation on insurance of deposits <ФКСД). The law on bank merges of 1966 {the amendment to the Law of 1960 — a comment ред.) Forbids merges of banks, if they essentially weaken a competition (unless any other advantages to a society, resulting merges, won't make its desirable). In addition to the aforesaid it is necessary to specify and that the Ministry of Justice of the USA repeatedly resorted to use антитрестовского legislations to prevent some bank merges which could upset the competition mechanism seriously. In widely known business of Filadelfijsky national bank (1963) The Supreme court of the USA has approved the actions of the Ministry of Justice undertaken for prevention of merge «Philadelphia Neshnl бэнк> and *Джи-рард Trast Korn Iskschejndzh бэнк» though merge and has been approved by the Controller of monetary circulation (Irwin M. Stelzer, Selected Antitrust Cases, 3rd ed. (Homewood III.: Richard D. Irwin, 1966), pp. 130—153). In that case when the Ministry of Justice interferes, it should begin proceeding not later than in 30 days after definitive approval of federal agency; merge process stops until the question won't be definitively solved during state антитрестовского litigation.

On 4.1 it is shown, how the number of bank merges in 80th years in connection with the increased instability of bank sphere and introduction of more liberal антитрестовских measures has considerably increased. The merged banks have helped the government to cope with a problem of increase of number of bankruptcies of banks. Now the governmental bodies regulating activity of bank institutes, quite often even encourage merges of the banks functioning in different states, (see «4.1. The monetary policy in operation»). The matter is that these bodies often fairly consider that merge of the bank institute standing on the verge of bankruptcy, to more healthy bank obviously is more preferable, than its bankruptcy.

The bank holding companies

The bank holding companies represent either banks, or independent corporations which own a share of a share capital of one or several banks, sufficient to carry out complete control over them. The bank holding companies focus in one hands managerial process by the whole group of banks or group of the enterprises occupied with business, connected with bank operations.

Advantages of the bank holding companies. The first bank holding companies tried to take the advantages connected with presence of a network of branches in those states where opening of branches was forbidden. They had unique advantage to supervise the banks located in several states. One of the oldest bank holding companies, earlier called «the Western of Benkorporejshn», and now renamed in «ферст Interstejt Benkorp», supervises banks of the majority of the West. ЛВ last years many banks were reorganized and have founded the bank holding companies to expand a circle of the operations in those spheres where it is forbidden to banks to operate (it it is a question of leasing, факторинговых операциях1, participation in investment operations and granting of consulting services). Besides, before cancellation of the centralized regulation of size of interest rates under deposits, the bank holding companies could involve the money resources which are not falling under restrictions, imposed in the maximum size of the interest rates established by the federal government, as became by sale by the bank holding companies of commercial papers ' or by means of any other operations on attraction of credits ^

One more advantage of the bank holding companies is that ' the centralized control over the whole group of the banks entering into holding, can lead to decrease in costs. The central operating link of holding can with is ready smaller costs, than многочисленные.маленькие бесфилиальные banks, prosecute subjects of advertizing, auditor operations and carrying out of audits, and also investment activity; On the other hand, increasing complexity of management of excessively large bank organizations to some extent destroys these advantages; besides it, the big banks belonging and supervised by persons, not living in district (and, owing to it, not being carriers of specific local economic interests — a comment ред.) which these banks serve, can have smaller appeal in the opinion of clients, than small local banks.

Regulation of activity of the bank holding companies. The bank holding companies caused political counteraction within more than fifty years. It was based on fear before their sizes and possible concentration of economic power, on the arguments directed against opening.отделений of banks, and on counteraction to other types of commercial activity. Differentiation bank (and similar to it) activity and all other kinds of commercial activity became an overall objective of distribution of the governmental control on activity of the bank holding companies. The first attempt of such differentiation has been made in the Law on bank activity of 1933.

(The law on the bank holding companies of 1956 defines as bank; the holding company owning of 25 % and more of actions of two or more banks.: the law forbade new acquisitions of banks outside of staff and limited acquisition of additional actions with the right in other banks. Besides, this law also forbade already registered to the bank holding companies to be engaged in the activity which is not concerning bank operations that has compelled to divide some bank corporations the bank and not bank activity. 

In 1970 the sphere of the governmental regulation has been legislatively extended and on однобанковые the holding companies that has given to Board of governors of Federal Reserve System the certain power over them (see Federal Reserve Bulletin, January 1971, pp. 29—33; Roy A. Shetland, «Bank Holding Companies and Public Policy Today», in Committee on Banking, Currency and Housing, U. S. House, 94th Congress, 2nd sess. Fine: Financial Institutions and the Nations Economy: Compendium of Papers Prepared for the FINE Stude Committee Print {Washington, ' D. C: U. S. Government Printing Office, June 1976), pp. 233—283). After adoption of law of 1956 number odnobai-kovskih. The holding companies promptly increased. Since 1972 when the order about registration of all bank holding companies has followed, and till this day to sphere of regulation of Federal Reserve System has got more than 6000 bank holding companies. Из_дднвых^табл. _ 4.3 follows that in 1984 on a share of the banks which are in possession of the holding companies, 86 % of all deposits of commercial banks of the USA were necessary.

It is necessary to notice that now there is a powerful political support to initiatives about prohibition to the bank holding companies to be engaged in the operations bank and connected with them though the list of the operations, resolved to holdings (regulated ФРС) and has extended in due course rather essentially. The matter is that the commercial enterprises which are not concerning the bank holding companies, are afraid that their competitors from among branches of bank holdings can have advantages at reception of credits from bank company holding. Besides, the governmental regulating bodies are afraid that the bank holding company can't with necessary objectivity

4.1. The monetary policy in operation MERGE «WELLS of Fargo-KROKER»

Acquisition of "Kroker Nenshd Korporejshn" by the bank company <.Уадлс Fargo »n X986 became the largest merge in the history of banking of the USA. The bank« Wells Fargo* was the third, and "Kroker" — the fifth among the largest banks of the State of California. In merge process was воплечено more than 700 distances and 31 billion dollars of deposits.

Before merge has met with official approval regulating an organon, the last should decide that it essentially won't reduce competition level and if it and occurs the arisen difficulties and problems will all the same considerably less важпыми, than those conveniences which will be received by clients of banks and the wide public as a result of merge.

The measuring instrument of market concentration accepted in the Ministry of Justice of the USA, the index Gerfnidalja - Hnrshnlvd is. It рагеп to the sum of squares of percentage shares of firms in the market. The less size of an index, the more strongly a competition. If, for example, in the market only two banks operate, and the market share of everyone makes 50 % the index will be equal 5000. If in the market 10 banks operate and the market share of everyone makes 10 % the index will be more low, and will make 1000 points. Such market possesses smaller concentration. In modern conditions of a soupractice according to which the merge raising absolute size of an index to 1800, won't be authorized.

Solving a question on geographical borders of the considered market, regulating органы.должны, among other things, to define and what financial institutions should be included in number of competitors. Earlier these bodies could allocate accurately commercial banks from all weight of financial institutions. However times change, and now savings establishments and broker firms open to clients check current accounts and give loans, making a competition to commercial banks. If savings establishments and other financial institutions join in system of the market of services of commercial banks the competition measured by an index of Gerfpvdalja-Hnrsh-mana, naturally, goes down. Considering a question on merge authorization "« Wells Fargo-Kroker *, regulating bodies included much wider spectrum of financial institutions in number of competitors, than it usually becomes at an estimation of a market competition.

Correspondent relations between banks

Banks-correspondents form a specific informal network of banks cooperating among themselves. The small independent bank can establish the correspondent connexion, having placed a part of the means for the deposit in more big bank. Small banks give to the clients foreign currency and the checks which are subject to reception in foreign countries, using the correspondent balances, and deposit into these accounts special checks which don't pass through Reserve banks. Correspondent communications give to bank a number of the advantages similar to opening of branches of bank, but at the same time behind bank the property right (and independence — a comment ред remains.) and control over the operations. Big banks also can establish among themselves the similar connexion, opening depositary accounts each other.

Big banks compete among themselves for opening at them interbank deposits from smaller banks as these deposits supply big banks with the money resources necessary for last for investment. Small banks receive from the banks-correspondents of consultation on investment and legal questions, the information on an estimation of credit status of commercial borrowers, assistance in selection of employees, extra means in critical situations and the help in the international operations. Banks-correspondents can give out each other loans, and also cooperate in delivery of large loans to valuable clients.

Bank directors and employees

Holders of bank shares select Board of directors. The poll which each holder of actions has, depends on number of actions which he owns. Directors select the chairman of board of directors. Usually the Board of directors holds sessions at least once a month to solve any current questions, to analyse a situation with delivery of important loans for bank, to hear and discuss reports, and also to discuss problems and a policy of bank together with employees of bank. Directors of national banks should be owners of bank shares, and the responsibility assigned to them according to the law, surpasses responsibility of directors of usual corporations.

The president and (as it takes place in big banks) the chairman of board of directors, and also the vice-chairman form the organization top management. They run bank business, employ employees and supervise their work. The vice-presidents responsible for various concrete kinds of bank activity, workers of trust-department, the treasurer and other employees who are responsible for bank operations concern number of other large posts in bank. Employees of bank for the scornful relation to the official duties entrusted to it can be exposed to judicial responsibility. So, in 1984 the Federal corporation on insurance of deposits has raised judicial process against six higher employees failed for the sum of 138,5 million dollars "Penn Skver Neshnl Benk" {State of Oklahoma). It charged ignoring of the prevention stated by bank auditors, concerning unsafe practice of realization of bank operations taking place in bank.

Banks can establish communications among themselves, having the general directors; the independent banks connected among themselves, thus, form bank chain system. Such systems have received most a wide circulation в'тех states where opening of bank branches is forbidden and where there are no registered holding companies. In 1914 Zakon Klejtona has forbidden the general managements for the banks-members of Federal Reserve System located in one city or nearby cities, This prohibition reflects fear of the legislator that similar interrelations will interfere with a competition. In the early seventies some states have extended this prohibition of combination of management posts within one territory to all insured commercial banks, mutual savings banks and loan-and-savings associations.

The bank holding company is the corporation owning a share capital of one or more banks, sufficient for control over it (them). She can own also the companies which are engaged similar to bank operations in which to banks under the law it is forbidden to be engaged (for example, leasing, insurance, rendering of consulting services). Properly нз the data of this table, the share of the bank actives belonging to banks of the holding companies, has sharply increased during the last years