BCCI Spurs Scrutiny of Foreign Banks

RESPONDING to the Bank of Credit and Commerce International scandal, a special New York State panel recommended Sunday that supervision of foreign banks in the state be increased.

The group suggests that the state banking superintendent be given more authority to throw out errant foreign banks, to supervise local activities of offshore branches and to review changes in ownership of banks operating in the state. New York is the headquarters for dozens of foreign banks operating in the United States, so any changes would have a wide impact on the industry.

New York State Superintendent of Banks Derrick Cephas told Reuters that many of the recommendations will become standard practice immediately, while others require approval by the state legislature.

"The study's recommendations show the seriousness of concern," Mr. Cephas said. "This is not a revamping. We are trying to point out what needs to be done in a broad sense and do technical clean-ups."

BCCI, which had branches around the world, was shut down last summer by international regulators amid charges of massive bank fraud.

Merrill Lynch vice chairman John Heimann, chairman of the study, said the group also recommended greater coordination and exchange of information between supervisors and regulators internationally.

"Home country regulators of Luxembourg-based BCCI did not do their job. We are saying that they must be doing their job before they can operate in New York," Mr. Heimann said.

Cephas said that recommendation would be "in effect as of now."

Three hundred and thirty eight foreign banking companies operate in New York, with assets of $600 billion; 276 of them, with about $500 billion in assets, are supervised by the state's banking department.