Capital Briefs: Fed Extends Reach Over Foreign Banks

The Federal Reserve Board has clamped down on the offshore activities of foreign bank branches in the United States.

In a rule adopted Tuesday, the Fed said foreign bank branches that operate offshore shell corporations are subject to the same rules that govern domestic banks.

Previously, foreign banks could control offshore shell corporations from the United States without abiding by U.S. restrictions on securities underwriting and investments. U.S. banks, however, had to follow these limitations.

The rule does not apply to full-service branches, which are subject to the host country's laws.