Raj Bhala


Post-BCCI legal developments regarding the regulation of foreign banks raise serious concerns of protectionism. The Foreign Bank Supervision Enhancement Act of 1991 and revisions to Federal Reserve Regulation K impose significant new legal burdens on foreign banks seeking to establish a physical presence in the U.S. The new legal regime reflects a tragic sacrifice of the principle of free trade in banking services in order to placate a fear of "bad" foreign banks. Ironically, the sacrifice of this principle by Congress and the Federal Reserve is incongruous with efforts of the United States Trade Representative (USTR). The USTR has negotiated a final General Agreement on Trade in Services which could liberalize market access for banks around the world. The tragedy and irony of post-BCCI legal developments are highlighted by the case of a hypothetical foreign bank, the Maharajah Bank of India. Greater efforts to ensure that the U.S. banking market remains open are necessary, or else the significant economic benefits from foreign bank presence in the U.S. will be lost. Accordingly, a market- oriented approach to foreign bank regulation is proposed.

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48 Southern Methodist University Law Review 11-62 (1994)