My subject today pertains to an area in which reforms have yet to be made – the regulation of the U.S. operations of large foreign banks.1 Applicable regulation has changed relatively little in the last decade, despite a significant and rapid transformation of those operations, as foreign banks moved beyond their traditional lending activities to engage in substantial, and often complex, capital market activities.
The crisis revealed the resulting risks to U.S. financial stability. In taking a fresh look at regulation of foreign banks in the United States, I by no means want to imply that the United States should revoke its welcome to foreign banks. On the contrary, this reconsideration reflects the important role foreign banks have played.