COUNTRY PROFILE
Total land area:.................. 9,158,960 sq. km.
Official language:................ English
Administrative divisions:..... Fifty states and the District of Columbia
Legal system:..................... Based on English common law; judicial
review of legislative
acts; accepts compulsory ICJ jurisdiction, with reservations.
Executive branch:.............. Chief of state and head of government‹president
and vice president.
Legislative branch:............. Bicameral Congress consisting of Senate
(100 seats, one-third
are renewed every two years; two members are elected from
each state by popular vote to six-year terms) and House of
Representatives (435 seats; members are directly elected by
popular vote to two-year terms).
Judicial branch:.................. Supreme Court. Justices are appointed
for life by the president
with confirmation by the Senate.
ECONOMIC PROFILE
Currency: United States dollar (US$)
Nominal GDP: US$8,526.5 billion (98Q3)
GDP (annualized % chg.): 3.3 (98Q3)
GDP annual % chg.: 3.3 (1998 forecast); 1.9 (1999 forecast); 2.8 (2000
forecast)
GDP per capita (purchasing power parity): US$28,600 (1996 est.)
Consumer price index (year over year % chg.-SA): 1.4 (September 1998);
Total treasury budget balance: US$38.2 billion (September 1998)
Current account balance: -US$56.525 billion-SA (98Q2)
Main exports: Capital goods, automobiles, industrial supplies and raw
materials, consumer
goods, agricultural products.
Main imports: Crude oil and refined petroleum products, machinery,
automobiles, consumer
goods, industrial raw materials, food and beverages.
SA :Seasonally Adjusted
BANKING SYSTEM
Total number of banks in the system: 10,779
Types of banks: Commercial banks and savings institutions
Total amount of assets: US$6,151 billion (March 1998)
Total amount of deposits: US$4,175 billion (March 1998)
Total amount of capital or net worth: US$521 billion (March 1998)
BANKING INSTITUTIONS
I. Banking Supervision
1. The United States operates under a dual banking
system consisting of both federally
chartered banks, referred
to as "national banks," and banks with state charters, referred
to as "state banks" . By
law, all national banks and some state banks belong to the
Federal Reserve System;
they are called "member banks", in contrast to "nonmember
banks," which do not belong
to the Federal Reserve System. Member banks are subject
to three layers of regulation.
The U.S. Treasury, through the Comptroller of the
Currency, the Federal Deposit
Insurance Corporation (FDIC), and the Federal
Reserve itself all share
the job of supervision. Thus, national banks are supervised
by the Comptroller of the
Currency and state member banks are supervised by the
Federal Reserve in conjunction
with state banking authorities. The FDIC has
certain backup supervisory
authority, for safety and soundness purposes, over national
and state member banks.
Finally, state nonmember banks are subject to FDIC
regulations, primarily,
and to state banking authorities.
2. The Office of the Comptroller of the Currency
is part of the U.S. Treasury, and the
Treasury Department
is part of the federal government. The Federal Reserve System
and the FDIC are independent
agencies created by Congress.
3. The Federal Reserve reports to Congress
and the U.S. Treasury. The Comptroller of
the Currency and the
FDIC report to the U.S. Treasury.
4. The Federal Reserve examines state member
banks every 12 to 18 months.
5. The examination ratings and criteria used
to conduct bank examinations are explained
in the next
answer (I.6).
6. The examiner¹s conclusions are summarized
in a composite rating assigned in
accordance with the
guidelines of the Uniform Interagency Bank Rating System,
CAMELS: Capital, Asset
Quality, Management, Earnings, Liquidity, and Sensitivity
to Market Risk. The
score is on a scale of one to five, with one as the highest or
best possible score.
When appraising the six key assessment areas and assigning
a composite rating,
the examiner weighs and evaluates all relevant factors. The rating
system for U.S. branches
and agencies of foreign banking organizations (FBOs)
is a management information
and supervisory tool designed to assess the condition
of a branch and to
identify significant supervisory concerns in a systematic and
consistent fashion.
The rating system (ROCA) has been revised from the previous
rating system, which
measured asset quality, internal controls and management (AIM).
This revision allows
the Federal Reserve to better assess the condition of a branch
within the context
of the FBO (of which it is an integral part) and to focus on the key
areas of concern in
a branch office. For Edge corporations, the regulator uses the
rating system known
as CAMEO: Capital, Asset Quality, Management, Earnings,
and Operations and
Internal Controls. Each component is rated on a scale of one
to five in ascending
order of supervisory concern.
II. Consolidated Supervision
1. U.S. federal banking authorities
are capable of performing consolidated supervision.
The Federal
Reserve has the authority to supervise bank holding companies and their
state member
banks or nonbank subsidiaries. If a bank is a nationally chartered
institution,
or a state chartered nonmember bank, other federal and state regulatory
agencies will
share their reports and supervisory information with the Federal Reserve.
The Federal
Reserve also shares reports and supervisory information on banks and
nonbanks with
other agencies.
2. Foreign branches may be established
by any member bank having capital and surplus
of $1 million
or more, an Edge corporation, or an agreement corporation. The specific
approval of
the Federal Reserve Board of Governors is typically required. Unless the
organizations
have been notified otherwise, no prior Board approval is required for an
organization
to establish additional branches in any foreign country where it operates
one or more
branches. After giving the Board prior written notice of 45 days, an
organization
that operates branches in two or more foreign countries may establish
a branch in
an additional foreign country, unless notified otherwise by the Board.
3. Authority to establish branches through
prior approval or prior notice shall expire one
year from the earliest
date on which the authority could have been exercised, unless
the Board extends
the period. Any organization that opens, closes or relocates a
branch shall report
such change to the Board.
4. Rights to gather information from cross-border
establishments do not appear to be
applicable to the
Federal Reserve or United States.
III. Interest Rates
1.Banks borrow
and lend excess reserves to each other in the federal funds market.
The rate at which such lending and borrowing occurs is the federal
funds rate.
When the Federal Reserve cuts the growth of bank reserves, the supply of
reserves available to the banking system tightens, relative to its demand.
The
tightening tends to raise the funds rate, which, in turn, tends to raise
other
short-term interest rates. Thus, any easing or tightening by the
Federal Reserve
begins in the reserves market, influences the federal funds rate and other
short-term interest rates and, through adjustments in bank balance sheets,
affects the money supply. In other words, the Federal Reserve, the banking
system, and providers and users of credit each have some influence
(direct or indirect) on the level of interest rates, the pattern of deposit
pricing,
and the term structure.Thus, the market establishes the rates on both assets
and liabilities. The prime rate is used as a reference rate for ifferent
markets.
2. The market
establishes the rates for both assets and liabilities.
IV. Insurance on Deposits
1. The FDIC is the
independent deposit insurance agency created by Congress to
maintain stability and public confidence in the nation¹s banking system.
The FDIC
reports to the U.S. Treasury.
2. The FDIC guarantees
deposits up to $100,000 per customer, per banking institution.
V. Trade Finance
1. Trade finance is
the process of moving commodities from country to country in
the channels of international trade. Although the U.S. does not refer to
a specific
definition of trade finance when performing its duties, the Country Exposure
Report
FFIEC009 instructions describe trade financing as total extensions of credit
and
legally binding commitments with maturities one year and under that are
directly
related to imports or exports and will be liquidated through the proceeds
of
international trade. Provided these conditions are met, such extensions
of credit
may include customer's liability on acceptances outstanding, own
acceptances
discounted, acceptances of other banks purchased, pre-export financing
where
there is a firm export sales order and commercial letters of credit, as
well as
other loans and advances whenever such extensions directly relate to
international trade. Funding is provided by the seller, thebuyer, the seller's
bank, or by another bank. Generally, the issuance of letters of credit
is governed
by Article 5 of the Uniform Commercial Code (UCC). However, if the credit
is
issued under New York law, the credit will be governed by the Uniform Customs
and Practice for Documentary Credits (UCP). The parties may also stipulate
that
the UCP rather than the UCC applies. Letters of credit can also be governed
by
foreign law. Working capital, pre-export finance and letters of credit
are treated as
regular loans.
2. In the United States,
banks are typically responsible for bearing the risk of export,
import, pre-export, working capital and capital goods finance, as well
as of letters of
credit, acceptances and drafts.
3. As a general rule,
the Federal Reserve does not perform liquidations and, therefore,
does not have specific guidelines for the treatment of trade finance under
such
circumstances.
4. The FDIC is the
agency typically involved in bank liquidations.
VI. Capital Adequacy
1. There is no Federal
Reserve minimum capital dollar amount for new banks.
2. To operate a bank,
state-chartered banks must meet the respective state's
requirements and national chartered banks must meet the Office of the Comptroller's
(OCC) requirements. Both the state and OCC look at institutions on a case-
by-case basis and consider many variables, including a bank¹s location
and growth
plans.
3. Federal banking
agencies are required to take certain supervisory actions promptly,
based on the capital levels of insured depository institutions (Section
131, Federal
Deposit Insurance Corporation Improvement Act, 12 U.S.C 1831o). As a result,
banking agencies have established capital ratios to serve as capital "triggers."
Based on these capital ratios, each institution is assigned one of five
capital levels:
(1) well- capitalized; (2) adequately capitalized; (3) undercapitalized;
(4) significantly
undercapitalized; and (5) critically undercapitalized. An institution may
be moved from
one level to another based on one of the noncapital elements of the CAMELS
rating
system. A federal banking agency may also reclassify an institution if
it finds that the
institution is in unsafe or unsound condition. There are also bank and
bank holding
company capital adequacy guidelines to assist in the assessment of the
capital
adequacy of these institutions in the examination and supervisory process.
The
guidelines are based on risk-based capital measures developed jointly by
supervisory
authorities from the countries represented on the Basle Committee on Banking
Regulations and Supervisory Practices. Banks are expected to meet a minimum
ratio of qualifying total capital to weighted-risk assets of 8%, of which
at least 4
percentage points should be in the form of Tier 1 capital. Banks should
also maintain
a minimum level of Tier 1 capital to total assets of 3%. In general, institutions
are expected to operate above minimum capital levels, while high-risk organizations
are expected to compensate for these risks.
VII. Asset Quality
1. The standard
system used throughout the U.S. banking industry for classification
of credits categorizes loans into pass, special mention, substandard, doubtful
and
loss. The ratings are based on the degree of risk and likelihood of orderly
repayment of credits, and their overall effect on a bank¹s safety
and soundness.
2. Reserve requirements
for U.S. institutions are based strictly on the institution's
liabilities. Regulation D, Reserve Requirements for Depository Institutions,
defines
the different types of liabilities and the respective reserve requirements.
3. Loans made by a
national bank are subject to lending limits contained in Section
5200, Revised Statutes (12 U.S. Code 84). Loans made by a state-chartered
bank
(including state-chartered banks that are members of the Federal Reserve
System)
are generally subject only to the lending limits imposed by applicable
state law.
However, Regulation O of the Board of Governors of the Federal Reserve
System
(12 C.F.R., Part 215) imposes the national bank lending limit on loans
made to
insiders of state-chartered banks unless the applicable state lending limit
is more
restrictive. An insider is an executive officer, director or principal
shareholder and
includes any related interest of such persons as defined in Regulation
O. If the
respective state law is more restrictive than Section 5200, then the state
legal lending
limit would apply to insider loans. As a practical matter, this means that
loans to an
insider of a state- chartered bank must be checked against the applicable
state limit
and Section 5200 on a case-by-case basis, since either limit may be more
(or less)
restrictive. This is because the two limits may use different definitions
for capital, have
different exemptions or incorporate different limits for specific types
of collateral. The
legal lending limit for any one borrower is 15% of the bank¹s total
equity plus loan loss
reserve and any subordinated debt approved by the appropriate federal banking
agency, for unsecured or not fully secured loans (Section 5200). A bank
may extend
an additional 10% of capital if the additional portion is fully secured
by readily
marketable collateral. Readily marketable collateral is collateral with
a market value
that can be determined by reliable and continuously available price quotations
such
as stocks, bonds, commercial paper, negotiable certificates of deposit
and banker's
acceptances.
4. Investments subject
to Statement of Financial Accounting Standards No. 115 are
classified into three categories: Held-to-maturity, trading and available-for-sale
accounts.
5. In May 1993, the
Financial Accounting Standards Board issued Statement of
Financial. Accounting Standards No.115, Accounting for Certain Investments
in
Debt and Equity Securities. This standard addresses investments in equity
securities that have readily determinable fair values and all investments
in
debt securities. Investments subject to the standard are classified into
three
categories and accounted for as follows:
a) Held-to-maturity account: Debt securities that the institution has the
positive
intent and ability to hold to maturity are classified as held-to-maturity
securities
and reported at amortized cost.
b) Trading account: Debt and equity securities that are bought and held
principally for
the purpose of selling them in the near term are classified as trading
securities and
reported at fair value, with unrealized gains and losses including in earnings.
Trading
generally reflects active and frequent buying and selling, and trading
securities are
generally used with the objective of generating profits on short-term differences
in
price.
c) Available-for-sale account: Debt and equity securities not classified
as either
held-to-maturity securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded
from earnings and reported as a net amount in a separate component of
shareholder's equity. Under FASB 115, mortgage-backed securities that are
held for sale in conjunction with mortgage anking activities should
be
reported at fair value in the trading account. The new standard does not
apply to loans, including mortgage loans that have not been secured.
6. The trading account category of investment, with unrealized gains and
losses,
affects earnings. The available-for-sale category, with unrealized gains
and losses,
affects shareholders¹ equity.
VIII. Liabilities
1. Reserve requirements for U.S. institutions are based strictly on the
institution's
liabilities. Regulation D, Reserve Requirements for Depository Institutions,
defines
the different types of liabilities and the respective reserve requirements.
2. All types of deposits are permitted in local and foreign currencies.
3. There is no limit on deposits.
4. There is no specific regulation establishing a limit per type of deposits;
however,
supervisory authorities consider suggested limits of concentration.