What Is Regulation K? Brief Overview
Regulation K is a United States financial regulatory law which deals with international banking operations.
It sets guidelines for all bank holding companies whose services involve international trade and also applies to foreign banks with offices on American soil.
Regulation K allows corporations that qualify under the Edge Act to participate in a wide variety of global banking practices.
It establishes requirements that allow domestic banks to own entire nonfinancial foreign business entities.
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Regulation K: Four parts
Subpart A of Regulation K deals with the international operations of U.S. banking entities.
It defines what activities and investments are permissible for branches of foreign banks located domestically.
In addition, it:
- allows certain corporations to engage in various global banking activities
- sets lending limits and capital requirements for such entities
- establishes rules for supervision and reporting
Subpart B of Regulation K governs the operations of foreign banks conducting business in the United States.
It defines what financial activities such banks are allowed to engage in within the United States. It also:
- regulates how foreign banks can apply for U.S. offices and the standards for such approval
- mandates the disclosure of certain information to foreign supervisors
- sets forth rules for the evaluation of foreign banks operating domestically
Subpart C of Regulation K is related to export trading companies.
It gives rules for investments and credit lines made with such companies and defines procedures for the way notices are filed and processed.
Subpart D of Regulation K is titled “International Lending Supervision” and governs aspects of credit lines extended internationally, including:
- allocated transfer risk reserve
- how banks must report and disclose international assets
- how they must account for fees earned through international loans
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