A new agreement with U.S. regulators will streamline state-licensed foreign bank supervision but bar institutions from selecting which state coordinates its oversight.
The Nationwide Foreign Banking Organization Supervision and Examination Coordination Agreement, the pact's formal name, will coordinate the supervision and examination of foreign banks that have operations in several states.
The agreement, initiated by the Conference of State Bank Supervisors, affects more than 85% of the foreign banks operating in the United States. The Federal Reserve Board and the Federal Deposit Insurance Corp. signed a separate deal to share exam information about foreign banks.
Until the two agreements were signed last week, state-licensed foreign banks were supervised independently by each of the involved states and by the Fed.
But the final document denies foreign banks the choice of a coordinating state-an option U.S. banks enjoy. Foreign banks also may not be able to change their home states. The opinion of the institutions' management will be taken into consideration but only as one factor among many.
"Should the banks be able to choose their home state? Yes!" said Edward W. Bjelke, senior vice president and co-head of the U.S. operations of Sanwa Bank Ltd. Mr. Bjelke said the issue would not pose a practical problem for his bank but is a matter of principle.
Foreign banks also will not be able to opt out of the new agreement.
Achieving national treatment may require legislative action, according to Lawrence R. Uhlick, executive director and general counsel of the Institute of International Bankers.
But state regulators are not convinced.
"The supervisors have to ultimately make the decision," said Art Simon, director of the Florida division of banking. Banks' comments would be important, he said. Ms. Chapman is editor of International Banker, an American Banker newsletter.