International Banking Regulations

When you hear the words “banking regulation” most tend to think of one source, a particular organization or committee that handles issues regarding banking regulations within a particular country. When the topic becomes “international banking regulation,” though, things change. International implies more than one country's involvement. Is international banking regulation as straight forward and simple to assess as it sounds? What levels of oversight are used? Who is in charge?

International banking regulation begins inside each country or nation. A country's international banking regulation is filtered by its “central bank” also called a reserve bank or monetary authority. Every country has one. A central bank is not a bank that just anyone uses. Its specific role is to maintain stability of its own currency and the money supply for that country.

U.S. banking is regulated and monitored by the Federal Reserve System, often referred to as "the Fed." The Federal Reserve System is a central bank and not only monitors the banking industry inside the U.S., but by implementing monetary policy, controlling the money supply, and managing the country's foreign exchange and gold reserve, it is also regulates international banking. It further controls the monetary system by deciding what form of currency is used, whether or not other countries currencies are used and how all currencies are used within its banking system.

The Bank for International Settlements (BIS) is the international organization for central banks. Its purpose is to serve as a bank for central banks and to cultivate international financial and monetary cooperation. Because monetary policy is always decided upon by each nation, there can be differences in policy. BIS has two areas of interest: capital adequacy (preventing overvaluing of assets) and making reserve requirements transparent.

BIS has a number of committees to address specifics about international banking. These committees look at payment and settlement systems, markets, central bank statistics, banking supervision, and global financial systems. One of the better known committees is the Basel Committee on Banking Supervision which is charged with strengthening banking supervisory systems throughout the world. This committee works to strengthen policy development and accounting and auditing standards.

War, disagreements, import/export or trade policies, political standoffs are a few of the situations that may affect international banking One of the more well-known policies affecting international banking regulations is the no trade policy the U.S. has established regarding Cuba. Since trade with Cuba is prohibited in the U.S., so is Cuban currency. The Cuban peso has no value in the U.S., which means that it is not accepted at any bank.