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Page 1: International Banking - Carolina Academic PressInternational Banking Cases, Materials, and Problems Fourth Edition Michael P. Malloy Distinguished Professor and Scholar University

International Banking

Page 2: International Banking - Carolina Academic PressInternational Banking Cases, Materials, and Problems Fourth Edition Michael P. Malloy Distinguished Professor and Scholar University
Page 3: International Banking - Carolina Academic PressInternational Banking Cases, Materials, and Problems Fourth Edition Michael P. Malloy Distinguished Professor and Scholar University

International Banking

Cases, Materials, and Problems

Fourth Edition

Michael P. MalloyDistinguished Professor and Scholar

University of the PacificMcGeorge School of Law

Carolina Academic PressDurham, North Carolina

Page 4: International Banking - Carolina Academic PressInternational Banking Cases, Materials, and Problems Fourth Edition Michael P. Malloy Distinguished Professor and Scholar University

Copyright © 2019 Michael P. Malloy

All Rights Reserved

Carolina Academic Press700 Kent Street

Durham, North Carolina 27701Telephone (919) 489-7486

Fax (919) 493-5668www.cap-press.com

ISBN 978-1-5310-1418-6e-ISBN 978-1-5310-1419-3LCCN 2019946246

Page 5: International Banking - Carolina Academic PressInternational Banking Cases, Materials, and Problems Fourth Edition Michael P. Malloy Distinguished Professor and Scholar University

This book is dedicated toSusie A. Malloy

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Page 6: International Banking - Carolina Academic PressInternational Banking Cases, Materials, and Problems Fourth Edition Michael P. Malloy Distinguished Professor and Scholar University
Page 7: International Banking - Carolina Academic PressInternational Banking Cases, Materials, and Problems Fourth Edition Michael P. Malloy Distinguished Professor and Scholar University

SUMMARY OF CONTENTS

Table of Contents . . . . . . . ixTable of Cases . . . . . . . . xxiTable of Figures . . . . . . . . xxviiPreface to the Fourth Edition . . . . . . xxixPreface to the Third Edition . . . . . . xxxiPreface to the Second Edition . . . . . xxxiiiPreface to the First Edition . . . . . . xxxvAcknowledgments . . . . . . xxxvii

Chapter 1: The Regulatory Environment . . . . 31. Introduction . . . . . . . 32. The Meaning of “International Banking” . . . 143. Contemporary Developments . . . . . 24

Chapter 2: National Supervision of International Banking . . . 411. U.S. Federal Regulation . . . . . . 412. Role of State Regulators . . . . . . 483. Host Country Regulation . . . . . . 58

Chapter 3: International Supervision . . . . . 651. Introduction . . . . . . . 652. Bank for International Settlements and the Group of Ten . . 663. BIS Capital Adequacy Guidelines . . . . . 99

Chapter 4: Entry by U.S. Banks Into Foreign Markets . . . 1211. Introduction . . . . . . . 1212. U.S. Statutory and Regulatory Provisions . . . . 1263. Branches and their Liability . . . . . . 1484. Subsidiaries and their Liability . . . . . 167

Chapter 5: Entry by Foreign Banks Into U.S. Markets . . . 1711. Introduction . . . . . . . 1712. The International Banking Act of 1978 . . . . 199

Chapter 6: International Lending . . . . . 2131. Introduction . . . . . . . 2132. Regulatory Considerations . . . . . . 2133. Enforcement of Loan Agreements . . . . . 2184. Lending Limitations . . . . . . 2385. Lending Supervision . . . . . . 242

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viii INTERNATIONAL BANKING

Chapter 7: Problems of Sovereign Debt . . . . . 2471. Introduction . . . . . . . 2472. Debt-for-Equity Swaps: Federal Reserve Amendments . . . 2633. Sovereign Immunity Issues . . . . . . 2684. Act of State Doctrine . . . . . . 304

Chapter 8: International Deposits And Other Activities . . . 3411. Introduction . . . . . . . 3412. International Deposit-Taking . . . . . 3413. Letters of Credit . . . . . . . 3634. Bankers’ Acceptances . . . . . . 4065. Underwriting and Syndication . . . . . 4076. Export Trading Companies . . . . . . 435

Chapter 9: Conflicts of International Policy . . . . 4391. Introduction . . . . . . . 4392. Bank Secrecy . . . . . . . 4393. Economic Sanctions and International Banking . . . 494

Selected Bibliography . . . . . . . 527

Index . . . . . . . . . 539

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CONTENTS

Table of Cases . . . . . . . . xxiTable of Figures . . . . . . . . xxviiPreface to the Fourth Edition . . . . . . xxixPreface to the Third Edition . . . . . . xxxiPreface to the Second Edition . . . . . xxxiiiPreface to the First Edition . . . . . . xxxvAcknowledgments . . . . . . xxxvii

Chapter 1: The Regulatory Environment . . . . . 31. Introduction . . . . . . . 3

Notes and Comments 1.1. What is “banking”? . . . . . 3

Texas State Bank v. United States . . . . . 5Notes and Comments

1.2. Dodd-Frank Act and U.S. bank regulation . . . 61.3. The Dodd-Frank Act and international banking . . 10

Michael P. Malloy, Banking Law and Regulation § 15.06[B] . . 10Notes and Comments

1.4. Dodd-Frank under attack . . . . . 111.5 . . . . . . . . 121.6. Banking and regulators . . . . . 12

Stern Rebuke: In a Signal to Japan, U.S. Bars Daiwa Bank and Indicts Institution . . . . . . 12

Notes and Comments 1.7 . . . . . . . . 15

2. The Meaning of “International Banking” . . . . 15Notes and Comments

1.8 . . . . . . . . 15 Haley & Seligman, The Development of International Banking by the United States . . . . . 15

Notes and Comments 1.9 . . . . . . . . 171.10. . . . . . . . 17

J. Wendt, The Role of Foreign Banks in International Banking . . 18 Notes and Comments

1.11. . . . . . . . 233. Contemporary Developments . . . . . 24

a. European Union Regulation . . . . . 24 Notes and Comments

1.12. Heading for the Exit . . . . . 25 Michael P. Malloy, Banking Law and Regulation § 15.02[A] . 25b. After NAFTA, Laughter. . . . . . 26

Notes and Comments

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x INTERNATIONAL BANKING

1.13 . . . . . . . 28c. Emerging Regulatory Regimes . . . . . 29

Notes and Comments1.14 . . . . . . . 30

d. Financial Services Regulation in a Non-Western Tradition . . 30Notes and Comments

1.15. . . . . . . . 30J. Michael Taylor, Islamic Banking–The Feasibility of

Establishing an Islamic Bank in the United States . . 30Notes and Comments

1.16. . . . . . . . 391.17. What’s in a name? . . . . . 391.18. . . . . . . . 39

Chapter 2: National Supervision of International Banking . . . 411. U.S. Federal Regulation . . . . . . 41

Notes and Comments 2.1 U.S. Regulation of International Banking under

the FDICIA . . . . . . 462. Role of State Regulators . . . . . . 48 Notes and Comments

2.2 . . . . . . . . 48Conference of State Bank Supervisors v. Conover . . . 49National Commercial Banking Corp. of Australia, Ltd. v. Harris . 52

Notes and Comments 2.3 . . . . . . . . 57

2.4 . . . . . . . . 57 2.5. Role of state regulators under FDICIA . . . 573. Host Country Regulation . . . . . . 58 Korsvik, Legal and Regulatory Constraints within Other Countries . 58 Notes and Comments

2.6 . . . . . . . . 59 2.7 . . . . . . . . 59 2.8 . . . . . . . . 60 2.9 . . . . . . . . 60 2.10 . . . . . . . 61 2.11 . . . . . . . 61 Michael P. Malloy, Principles of Bank Regulation § 9.10 . . 62

Chapter 3: International Supervision . . . . . 651. Introduction . . . . . . . 65 Notes and Comments

3.1 . . . . . . . . . 66 3.2 . . . . . . . . . 66 3.3 . . . . . . . . . 662. Bank for International Settlements and the Basel Committee . . 66 Committee on Banking Regulations and Supervisory Practices,

Principles for the Supervision of Banks' Foreign Establishments(Basle Concordat 1983) . . . . . . 67

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Notes and Comments 3.4 . . . . . . . . 723.5 . . . . . . . . 723.6 Further developments concerning the Concordat . . 73

Basle Committee on Banking Regulation and SupervisoryPractices: Supplement to the Basle Concordat Ensuring ofAdequate Information Flows between Banking SupervisoryAuthorities . . . . . . . 73

Basle Committee on Banking Regulation and SupervisoryPractices: Report on Minimum Standards for the Supervisionof International Banking Groups and Their Cross-BorderEstablishment . . . . . . 76

Notes and Comments 3.7 Bank Secrecy and the Concordat Supplement . . . 803.8 BIS Minimum Standards and the BCCI scandal . . 803.9 Core Principles for Effective Banking Supervision – Its origins . 813.10 Core Principles – Current version . . . . 81

Michael P. Malloy, Banking Law and Regulation § 15.02[C][1][b] . 82Notes and Comments

3.11 Comparative Developments in the EU . . . 83Reorganisation and Winding up of Credit Institutions, Directive

2001/24/EC (4 April 2001) . . . . . 83Notes and Comments

3.12. Beyond the Concordat . . . . . 91Michael P. Malloy, Banking Law and Regulation § 15.06[A] . . 91Notes and Comments

3.13 . . . . . . . 993. BIS Capital Adequacy Guidelines . . . . . 99

Notes and Comments3.14 . . . . . . . 993.15 . . . . . . . 99

Michael P. Malloy, Capital Adequacy and Regulatory Objectives . 99Notes and Comments

3.16 . . . . . . . 1073.17 Furtherance of the BIS capital adequacy guidelines

under FDICIA . . . . . . 1073.18 Adjustment in the capital adequacy rules . . . 107

. 108

. 108 3.19 Proposed revision of the BIS capital adequacy accord

Michael P. Malloy, Capital Regulation and International Banking Notes and Comments

3.20 . . . . . . . 1123.21 . . . . . . . 1123.22 The financial crisis intervenes . . . . 112

Michael P. Malloy, Banking Law and Regulation § 15.02[C][1][c]Notes and Comments

3.25 . . . . . . . 119

3.23 . . . . . . . 1183.24 . . . . . . . 118

. 113

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Chapter 4: Entry by U.S. Banks Into Host Markets . . . 1211. Introduction . . . . . . . 121

Notes and Comments 4.1 . . . . . . . . 1214.2 . . . . . . . . 1214.3 . . . . . . . . 1234.4 Entry and e-Banking . . . . . 1234.5 . . . . . . . . 125

2. U.S. Statutory and Regulatory Provisions . . . . 126Notes and Comments

4.6 . . . . . . . . 1264.7 . . . . . . . . 1264.8 . . . . . . . . 1264.9 . . . . . . . . 1264.10 . . . . . . . 1264.11 . . . . . . . 126

Comptroller of the Currency, 12 C.F.R. pt. 28 . . . 126Board of Governors of the Federal Reserve System,

12 C.F.R. pt. 211 . . . . . . 1283. Branches and their Liability . . . . . . 148

Notes and Comments4.12 . . . . . . . 148

Vishipco Line v. Chase Manhattan Bank . . . . 148Garcia v. Chase Manhattan Bank, N.A. . . . . 152Perez v. Chase Manhattan . . . . . . 157Notes and Comments

4.13 . . . . . . . 1614.14 . . . . . . . 1624.15 Branch-home office liability revisited . . . 1644.16. . . . . . . . 164

X AG v. A Bank . . . . . . . 164Libyan Arab Foreign Bank v. Bankers Trust Company . . 166

4. Subsidiaries and their Liability . . . . . 167Notes and Comments

4.17 . . . . . . . 167S.E.C. v. Banco Della Svizzera Italiana . . . . 167American Law Institute, Restatement of Foreign Relations

Law of the United States (3d) . . . . . 168Notes and Comments

4.18 . . . . . . . 170

Chapter 5: Entry by Foreign Banks Into U.S. Markets . . . 1711. Introduction . . . . . . . 171

Notes and Comments 5.1 The U.S. Regulatory Environment and Entry . . . 1715.2 . . . . . . . . 171

Comptroller of the Currency, 12 C.F.R. pt. 28 . . . 172Board of Governors of the Federal Reserve System,

12 C.F.R. pt. 211 . . . . . . 175

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Notes and Comments5.3 . . . . . . . . 195

Federal Reserve System, ICICI Bank Limited, Mumbai, India,Order Approving Establishment of a Branch . . . 195

Notes and Comments5.4 . . . . . . . . 1985.5 . . . . . . . . 1985.6 . . . . . . . . 1985.7 Representative Offices . . . . . 1985.8 Uses of Representative Offices: Andhra Bank . . . 1995.9 Uses of Representative Offices: International

Bank of Azerbaijan . . . . . 1992. The International Banking Act of 1978 . . . . 199

Notes and Comments 5.10 . . . . . . . 199

Conference of State Bank Supervisors v. Conover . . . 199Notes and Comments

5.11 . . . . . . . 2085.12 Effect of the 1991 amendments to the IBA . . . 2085.13 Regulatory implementation of the FDICIA . . . 2095.14 . . . . . . . 2095.15 Effect of IBBEA on interstate operations of

non-U.S. banks . . . . . . 2095.16 Community credit needs and foreign bank operations . . 2115.17 . . . . . . . 2115.18 . . . . . . . 2115.19 Effect of the 1990 BIS Concordat Supplement . . 2115.20 Effect of BIS Minimum Standards . . . . 211

Chapter 6: International Lending . . . . . 2131. Introduction . . . . . . . 213

Notes and Comments 6.1 . . . . . . . . 213

2. Regulatory Considerations . . . . . . 213Notes and Comments

6.2 . . . . . . . . 213Comptroller's Handbook for National Bank Examiners § 805.1 . . 214Notes and Comments

6.3. Effect of FDICIA on lending by U.S. branches and agencies of foreign-based banks . . . 217

6.4. Regulatory implementation of FDICIA . . . 217Federal Deposit Insurance Corporation, 12 C.F.R. Part 347

International Banking . . . . . . 217Notes and Comments

6.5 . . . . . . . . 2183. Enforcement of Loan Agreements . . . . . 218

Notes and Comments 6.6 . . . . . . . . 218

Libra Bank Ltd. v. Banco Nacional de Costa Rica . . . 219

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Allied Bank Int'l v. Banco Credito Agricola de Cartago . . 224A.I. Credit Corp. v. Government of Jamaica . . . . 225Lloyds Bank PLC v. Republic of Ecuador . . . . 228Kahale, Does a choice-of-law clause waive immunity? . . 234

4. Lending Limitations . . . . . . 238Notes and Comments

6.7 . . . . . . . . 2386.8 . . . . . . . . 238

Comptroller of the Currency, 12 C.F.R. § 32.5 . . . 238Notes and Comments

6.9 . . . . . . . . 2415. Lending Supervision . . . . . . 242

Notes and Comments 6.10 . . . . . . . 2426.11 . . . . . . . 242

Comptroller of the Currency, 12 C.F.R. pt. 28 . . . 242Notes and Comments

6.12. . . . . . . 2446.13 . . . . . . . 245

Chapter 7: Problems of Sovereign Debt . . . . . 2471. Introduction . . . . . . . 247

Notes and Comments 7.1 . . . . . . . . 2477.2 Alternative Approaches to Official Debt Default . . 249

Walker F. Todd, A Brief History of International Lending,From a Regional Banker's Perspective . . . . 249

Notes and Comments 7.3 . . . . . . . . 2547.4 The Brady Plan to the Rescue . . . . 255

Lloyds Bank PLC v. Republic of Ecuador . . . . 255Pravin Banker Associates, Ltd. v. Banco Popular del Peru . . 255Elliott Associates, L.P. v. The Republic of Panama . . . 259Notes and Comments

7.5 Proposal for debt relief for leastdeveloped countries . . . . . 262

7.6 New initiative for HIPCs . . . . . 2632. Debt-for-Equity Swaps: Federal Reserve Amendments . . . 263 Notes and Comments

7.7 . . . . . . . . 263Federal Reserve Board, Amendments to Regulation K (1987) . . 263Federal Reserve Board, Amendments to Regulation K (1988) . . 264Federal Reserve Board, International Banking Operations . . 266

3. Sovereign Immunity Issues . . . . . . 268Notes and Comments

7.8 . . . . . . . . 268Foreign Sovereign Immunities Act . . . . . 269Kahale, Does a Choice-of-Law Clause Waive Immunity? . . 274Allen v. Russian Federation . . . . . 274

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Callejo v. Bancomer, S.A. . . . . . . 283De Sanchez v. Banco Central de Nicaragua . . . . 290Croesus EMTR Master Fund L.P. v. Federative Republic of

Brazil . . . . . . . 297Notes and Comments

7.9 . . . . . . . . 3027.10. . . . . . . . 3037.11. . . . . . . . 303

Allen v. Russian Federation . . . . . 3034. Act of State Doctrine . . . . . . 304

Notes and Comments 7.12 . . . . . . . 305

Libra Bank Ltd. v. Banco Nacional de Costa Rica . . . 305Callejo v. Bancomer, S.A. . . . . . . 312Allied Bank Int'l v. Banco Credito Agricola de Cartago . . 318Blanchard & Co., Inc. v. Barrick Gold Corp. . . . 319Notes and Comments

7.13 Effect of IMF Policy on the Application of the Act of State Doctrine . . . . 321

Gerhard Wegen, 2(b) or Not 2(b): Fifty Years of Questions–The Practical Implications of Article VIII Section 2(b) . . 322

Libra Bank Ltd. v. Banco Nacional de Costa Rica . . . 329Callejo v. Bancomer, S.A. . . . . . . 334Allied Bank Int'l v. Banco Credito Agricola de Cartago . . 338

Chapter 8: International Deposits And Other Activities . . . 3411. Introduction . . . . . . . 3412. International Deposit-Taking . . . . . 341

Notes and Comments8.1 . . . . . . . . 3418.2 Examination cycle for banks operating in the United States . 341

Federal Deposit Insurance Corporation, 12 C.F.R. pt. 347International Banking . . . . . . 342

Notes and Comments 8.3 . . . . . . . . 343

Board of Governors of the Federal Reserve System,12 C.F.R. pt. 204 . . . . . . 343

Notes and Comments 8.4 Effect of FDICIA on deposit-taking . . . . 3518.5 Effect of IBBEA on deposit-taking . . . . 351

Federal Deposit Insurance Corporation, 12 C.F.R. pt. 347International Banking . . . . . 352

Notes and Comments 8.6 Eurodollar deposits . . . . . 355

Citibank, N.A. v. Wells Fargo Asia Limited . . . . 355Wells Fargo Asia Limited v. Citibank, N.A. . . . . 361

3. Letters of Credit . . . . . . . 363Notes and Comments

8.7 . . . . . . . . 363

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Comptroller’s Handbook for National Bank ExaminersSection 811.1 . . . . . . 363

Notes and Comments 8.8 Commercial Letters of Credit . . . . 364

Maurice O’Meara Co. v. National Park Bank of New York . . 365United Bank Ltd. v. Cambridge Sporting Goods Corp. . . 368Bank of Cochin Ltd. v. Manufacturers Hanover Trust . . . 371Notes and Comments

8.9 . . . . . . . 378Uniform Customs and Practice for Documentary Credits (UCP600) . 379Notes and Comments

8.10. Substantial compliance under the UCP . . . 380Blonder & Co., Inc. v. Citibank, N.A. . . . . 380Notes and Comments

8.11 . . . . . . . 3848.12 . . . . . . . 3848.13 . . . . . . . 3848.14 Electronic transmittal of L/C documents–

Revised UCC Article 5 . . . . . 3848.15 Electronic transmittal of L/C documents–UCP . . 385

eUCP Version 1.1 . . . . . . 385Notes and Comments

8.16 . . . . . . . 3878.17 . . . . . . . 387

Comptroller of the Currency, 12 C.F.R. § 7.1016 . . . 388Notes and Comments

8.18 . . . . . . . 3898.19 Standby Letters of Credit . . . . 389

Henry Harfield, Legality of Guaranty Letters of Credit . . 389Notes and Comments

8.20 . . . . . . . 3918.21. . . . . . . . 391

American Insurance Ass'n v. Clarke . . . . 392American Bell International, Inc. v. The Islamic Republic of Iran . 393Notes and Comments

8.22 . . . . . . . 398Michael P. Malloy, Principles of Bank Regulation § 9.21 . . 398Notes and Comments

8.23 . . . . . . . 3998.24 . . . . . . . 399

Sava Gumarska in Kemijska Industria d.d. v. Advanced Polymer Sciences, Inc. . . . . . 400

4. Bankers’ Acceptances . . . . . . 406Notes and Comments

8.25 . . . . . . . 4068.26 . . . . . . . 407

5. Underwriting and Syndication . . . . . 407Notes and Comments

8.27 . . . . . . . 407

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8.28 . . . . . . . 4088.29 Functional regulation of financial services . . . 4098.30. Implementing regulations . . . . 409

Board of Governors of the Federal Reserve System,12 C.F.R. pt. 211 . . . . . . 409

Board of Governors of the Federal Reserve System,12 C.F.R. pt. 225 . . . . . . 411

Notes and Comments8.31. Questions concerning financial services of banks

and holding companies . . . . . 4248.32 . . . . . . . 4248.33 . . . . . . . 425

Investment Services in the Securities Field . . . . 425Notes and Comments

8.34 . . . . . . . 4348.35 . . . . . . . 4348.36 . . . . . . . 4358.37 . . . . . . . 435

Trade Development Bank v. Continental Insurance Co. . . 4356 Export Trading Companies . . . . . . 435

Notes and Comments 8.38 Banking and Commerce . . . . . 435

Board of Governors of the Federal Reserve System,12 C.F.R. pt. 211 . . . . . . 436

Notes and Comments 8.39 . . . . . . . 4388.40 . . . . . . . 4388.41 . . . . . . . 4388.42 . . . . . . . 438

Chapter 9: Conflicts of International Policy . . . . 4391. Introduction . . . . . . . 4392. Bank Secrecy . . . . . . . 439

a. Bank Secrecy under U.S. Law and Policy . . . . 439Notes and Comments

9.1. Increased U.S. focus on foreign- or international-related financial information . . . . 440

9.2. Statutory narrowing of RFPA and ECPA protections . 4409.3. Renewed prominence of anti-money laundering

provisions in the wake of terrorist attacks on the United States . . . . . 441

9.4. Major money laundering provisions of USA PATRIOT Act . . . . . 441

9.5. What counts as "money laundering" . . . 4439.6 . . . . . . . 443

Walker v. S.W.I.F.T. SCRL . . . . . 443Notes and Comments

9.7. Contrast with Belgian, Swiss, EU Privacy Law . . 4479.8 . . . . . . . 448

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9.9 . . . . . . . 448L & J Crew Station, LLC v. Banco Popular De Puerto Rico . 448Medical Supply Chain, Inc. v. US Bancorp, NA . . . 449Stone v. Ritter . . . . . . 451Notes and Comments

9.10. . . . . . . . 4549.11. . . . . . . . 4549.12. . . . . . . . 454

Lopez v. First Union National Bank of Florida . . . 454Walker v. S.W.I.F.T. SCRL . . . . . 460Notes and Comments

9.13. . . . . . . . 462Coronado v. Bank Atlantic Bancorp, Inc. . . . 462Notes and Comments

9.14. . . . . . . . 4669.15. . . . . . . . 467

Stoutt v. Banco Popular De Puerto Rico . . . . 467b. Nature and Effects of Foreign Bank Secrecy Laws . . . 470

Notes and Comments9.16. . . . . . . . 470

Swiss Banking Law of 1934, Article 47 . . . . 470Swiss Penal Code, Article 273 . . . . . 471Honegger, Demystification of the Swiss Banking Secrecy

and Illumination of the United States-SwissMemorandum of Understanding . . . . 471

Notes and Comments 9.17. . . . . . . . 4749.18 Effect of the 1990 Supplement to the Basle Concordat . 4749.19 Effect of the 1992 BIS Minimum Standards . . 4749.20. . . . . . . . 474

c. U.S. Policy toward Foreign Bank Secrecy . . . . 475Notes and Comments

9.21. . . . . . . . 475S.E.C. v. Banca Della Svizzera Italiana . . . . 475Notes and Comments

9.22. . . . . . . . 480Fuhr v. Credit Suisse AG . . . . . 481Notes and Comments

9.23. . . . . . . . 4849.24. . . . . . . . 4849.25. . . . . . . . 485

American Law Institute, Restatement of the Foreign Relations Law of the United States (3d) § 403 . . 485

Notes and Comments 9.26. . . . . . . . 4869.27. . . . . . . . 486

Strauss v. Credit Lyonnais, S.A. . . . . 486Notes and Comments

9.28. . . . . . . . 494

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INTERNATIONAL BANKING xix

9.29. . . . . . . . 4943. Economic Sanctions and International Banking . . . 494

a. Introduction . . . . . . . 494Notes and Comments

9.30. . . . . . . . 494Republic of Panama v. Republic Nat. Bank of N.Y. . . 495Notes and Comments

9.31. . . . . . . . 498b. Statutory Authority for Economic Sanctions . . . 498

Notes and Comments9.32. . . . . . . . 498

Trading With the Enemy Act § 5(b) . . . . 498United Nations Participation Act § 5 . . . . 500International Emergency Economic Powers Act . . . 500Notes and Comments

9.33. . . . . . . . 5039.34. . . . . . . . 503

Walker v. S.W.I.F.T. SCRL . . . . . 503c. Effects of Economic Sanctions on International Banking . . 504

Notes and Comments9.35. . . . . . . . 504

Michael P. Malloy, Principles of Bank Regulation §§ 9.28-9.30 . 504Notes and Comments

9.36 The Nusquami Assets Control Regulations . . 5069.37. . . . . . . . 512

Libyan Arab Foreign Bank v. Bankers Trust Company . . 512

d. Sanctions and Terrorism . . . . . 5171. Presidential Emergency Action . . . . 5172. U.N. Security Council Action . . . . 5183. Implications for Transborder Banking. . . . 5194. USA PATRIOT Act and Financial Services . . . 521

Notes and Comments9.42. . . . . . . 521

Board of Governors of the Federal Reserve System,12 C.F.R. pt. 211 . . . . . 521

Notes and Comments 9.43. . . . . . . 522Exec. Order No. 13876, Imposing Sanctions

With Respect to Iran . . . . 5229.44. . . . . . . 524

Selected Bibliography . . . . . . . 527

Index . . . . . . . . . 539

Notes and Comments 9.38 - 9.41 . . . . 517

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TABLE OF CASES

Principal cases, excerpted in the casebook, are indicated by boldface type.

A.I. Credit Corp. v. Government of Jamaica, 225Airline Pilots Ass'n v. Taca Int'l Airlines, 311, 314Alfred Dunhill of London, Inc. v. Republic of Cuba, 149, 155, 161, 304, 305, 313, 315Allen v. Russian Federation, 274, 303Allen v. Wright, 444Allied Bank Int'l v. Banco Credito Agricola de Cartago, 224, 316, 318, 325, 338, 359Alvarado v. Litscher, 503American Bell International, Inc. v. The Islamic Republic of Iran, 393American Industrial Contracting, Inc. v. Johns-Manville Corp., 478American Insurance Ass'n v. Clarke, 392Application of Chase Manhattan Bank, 477Arango v. Guzman Travel Advisors Corp., 287, 293, 314Arizonans for Official English v. Arizona, 445Ayyash v. Koleilat, 170, 480

Baker v. Carr, 310Banca Del Sempione v. Provident Bank of Maryland, 378Banco do Brasil, S.A. v. A.C. Israel Commodity Co. Inc., 330Banco Nacional de Cuba v. Chemical Bank of New York, 306, 315Banco Nacional de Cuba v. First Nat. City Bank, 140Banco Nacional de Cuba v. Sabbatino, 155, 305, 306, 313, 334Bank of China v. Wells Fargo Bank &

Union Trust Co., 497Bank of Cochin Ltd. v. Manufacturers Hanover Trust, 371 Bank of Montreal v. Recknagel, 376Bank of New York & Trust Co. v. Atterbury Bros., 376Banque Populaire, In the Matter of, 478Barclays v. Mercantile Nat'l Bank, 390Behring Int'l Inc. v. Miller, 505Beyene v. Irving Trust Co., 375, 376Bivens v. Six Unknown Agents of Fed. Bureau of Narcotics, 450Blair v. United States, 466Blanchard & Co., Inc. v. Barrick Gold Corp., 319Blanco v. Pan-American Life Insurance Company, 331Blonder & Co., Inc. v. Citibank, N.A., 380Blum v. Bacon, 204Board of Governors v. First Lincolnwood Corp., 99Bradford v. Vento, 405Braka v. Bancomer, S.A., 283, 286, 315, 336Braka v. Bancomer, S.N.C., 315, 359Braka v. Multibanco Comermex, 283Braka v. Nacional Financiera, 283Brehm v. Eisner, 452Brill v. Chase Manhattan Bank, 331British Int’l Ins. Co., Ltd. v. Seguros La Republica, S.A., 488, 491Brush v. Republic of Cuba, 140Buchbinder v. Natanzon, 460Buchholz v. Trump 767 Fifth Ave., 384Burnett v. Al Baraka Inv. & Dev. Corp., 282Burrows v. Superior Court, 447Burton v. United States, 6

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California Bankers Ass’n. v. Shultz, 446Callejo v. Bancomer, S.A., 283, 312, 320, 334Casas v. Am. Airlines, Inc., 451Caulfield v. Board of Education, 395Cermak v. Bata Akciova Spolecnost, 324Chairmasters, Inc. v. Public Nat'l Bank & Trust Co., 376Chase Manhattan Bank, Application of, 477Cicippio v. Islamic Republic of Iran, 281Citibank, N.A. v. Benkoczy, 361Citibank, N.A. v. Wells Fargo Asia Limited, 355Citigroup S'holders Litig., In re, 451City of Douglas v. Fed. Reserve Bank of Dallas, 6CKB & Assocs., Inc. v. Moore McCormack Petroleum, Inc., 402Clerici, In re, 482Collins v. Seaboard Coastline R.R. Co., 484Compania de Gas de Nuevo Laredo v. Entex, Inc., 313, 314Compania Engraw Commercial E. Industrial S.A. v. Schenley Distillers Corp., 152Confederation Life Association v. Ugalde, 332Conference of State Bank Supervisors v. Conover, 49, 53, 199, Conference of State Bank Supervisors v. Heimann, 53Conley v. Gibson, 300, 447Coronado v. Bank Atlantic Bancorp, Inc., 462Corporacion de Mercadeo Agricola v. Pan American Fruit & Produce Corp., 374, 375Corporacion Venezolana de Fomento v. Vintero Sales Corp., 361Cort v. Ash, 451Crane v. N.Y. Zoological Soc'y, 304Credit Franc,ais International, S.A. v. Sociedad Financiera de Comercio, C.A., 227Croce v. Kurnit, 227

Croesus EMTR Master Fund L.P. v. Federative Republic of Brazil, 269, 297Cronan v. Schilling, 170, 480Cross-border Trucking Services, In Re, 42Crown Life Insurance Co. v. Calvo, 332

Daliberti v. Republic of Iraq, 302de Abreu v. Bank of America Corp., 122De Sanchez v. Banco Central de Nicaragua, 290Dickinson v. First Nat. Bank in Plant City, Fla., 42Doe v. DiGenova, 465Doe v. Smith, 503Doe I v. State of Israel, 280Dole Food Co. v. Patrickson, 277Doughty v. Cummings, 467Dunn v. Bank of Nova Scotia, 362

Ecco High Frequency Corp. v. Amtorg Trading Corp., 383Elliott Assocs., L.P. v. Republic of Panama, 230, 259EM Ltd. v. Republic of Argentina, 302

F. Palicio y Compania, S.A. v. Brush, 140, 297FEC v. Democratic Senatorial Campaign Committee, 205Fidelity Bank v. Lutheran Mutual Life Ins. Co., 391Fidelity Federal Savings & Loan Association v. de la Cuesta, 55Filetech S.A.R.L. v. France Telecom, 486First Empire Bank-New York v. FDIC, 393First Nat'l Bank in Plant City v. Dickinson, 209First National Bank of Bellaire v. Comp- troller of the Currency, 103, 104First Nat. Bank of Eden v. Department of the Treasury, 99First National Bank of Logan v. Walker Bank & Trust Co., 201, 209First National Bank of New York v. Internal Revenue Service, 477

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INTERNATIONAL BANKING xxiii

First National City Bank v. Banco Nacional de Cuba, 305, 313Fischer v. United States, 446Flatow v. Islamic Republic of Iran, 259, 302Foremost-McKesson, Inc. v. Islamic Republic of Iran, 281Frankel v. Banco Nacional de Mexico, 283, 286Free v. Bland, 55French v. Banco Nacional de Cuba, 336Fuhr v. Credit Suisse AG, 481, 485

Garcia v. Chase Manhattan Bank, N.A., 152, 359, 360GATX Leasing Corp. v.. DMB Drilling Corp., 403Gibbons v. Udaras na Gaeltachta, 285Goodman Holdings v. Rafidain Bank, 299, 301Grand Jury Proceedings, In re (Marsoner), 486, Groos Nat. Bank v. Comptroller of the Currency, 99Gutch v. Fed. Republic of Germany, 279

Hamilton Bank N.A. v. Kookmin Bank, 460Hanna v. Plumer, 152Harris v. Balk, 149, 155, 156, 157, 161, 307, 308, 309, 312Harris v. VAO Intourist, 288Hilton v. Guyot, 258Honda v. Clark, 154Hunt v. Bennett, 450Hunt v. Mobile Oil Corp., 320

IAM v. OPEC, 286, 304, 314, 320In the Matter of Banque Populaire, 478Industrial Inv. Dev. Corp. v. Mitsui & Co., 304, 305, 314Ings. v. Ferguson, 477, 480Ins. Co. of N. Am. v. Morris, 405Intercontinental Planning, Ltd. v. Day- strom, Inc., 361Iowa Independent Bankers v. Board of Governors of the Federal Reserve System, 200Ipitrade International SA v Federal

Republic of Nigeria, 246

J. Zeevi & Sons v. Grindlays Bank [Uganda], 139, 330, 361Jafari v. Islamic Republic of Iran, 297John Doe I v. Unocal Corp., 498Jungquist, et al. v. Sheikh Sultan Bin Khalifa Al Nahyan, 282

Keene Corp. v. United States, 278Kellerman v. MCI Telecommunications, 55Klaxon Co. v. Stentor Elec. Mfg. Co., 361Kleinwort, Sons & Co. v. Ungarische Baumwolle Industrie Aketengesellshaft [sic] & Another, 516Kondo v. Katzenbach, 154

Labadie Coal Co. v. Black, 278L & J Crew Station, LLC v. Banco Popular De Puerto Rico, 448 Lee v. Bankers Trust Co., 469Letelier v. Republic of Chile, 286Libra Bank Ltd. v. Banco Nacional de Costa Rica, 219, 220, 305, 315, 324, 326, 328, 329Libyan Arab Foreign Bank v. Bankers Trust Company, 166, 512The Loewen Group, Inc. v. United States of America, 42Lloyds Bank PLC v. Republic of Ecuador, 228, 255Lopez v. First Union National Bank of Florida, 454, 467, 469Lujan v. Defenders of Wildlife, 444, 450

Mackinnon v. Donaldson Lufkin & Jennette Securities Corporation, 167Madanes v. Madanes, 489Maltina Corporation v. Cawy Bottling Company, 306, 310, 311, 315, 316Manas y Pineiro v. Chase Manhattan Bank, N.A., 150, 308Marino Indus. v. Chase Manhattan Bank, N.A., 375Marlowe v Argentine Naval Com- mission, 247Marsoner v. United States, 486

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Maurice O'Meara Co. v. National Park Bank of New York, 365, 369McCready v. eBay, Inc., 503McShan v Omega Louis Brandt et Frere, SA, 246Medical Supply Chain, Inc. v. US Bancorp, NA, 449 Menendez v. Saks and Co., 149, 155, 161, 307Minpeco S.A. v. Conticommodity Servs., Inc., 488, 489Miranda De Villalba v. Coutts & Co. (USA) Intern., 467Misco Leasing Inc v Vaughn, 246Mwani v. bin Laden, 280

N. Joachimson v. Swiss Bank Corporation, 167National Coalition Government of the Union of Burma v. Unocal, Inc., 498National Commercial Banking Corp. of Australia, Ltd. v. Harris, 52National Equipment Rental Ltd v. Szukhent, 235, 309NML Capital, Ltd. and EM Ltd. v. Banco Central de la República Argentina, 302North American Mars. Export Assocs. v. Chase Nat'l Bank, 376NRLB v. Brown, 207

Oil Country Specialists, Ltd. v. Philipp Bros., Inc., 403Omaha National v. First National of St. Paul, 390Ohntrup v Firearms Center Inc, 247

Pan-American Life Insurance Co. v. Blanco, 154Papandreou, In re, 302People for the Ethical Treatment of Animals v. Rasmussen, 450Perez v. Chase Manhattan, 157, 360, 362Perutz v. Bohemian Discount Bank in Liquidation, 324, 331Peterson v. Royal Kingdom of Saudi Arabia, 279Philipp Bros., Inc. v. Oil Country Specialists, Ltd., 403

Phoenix Consulting v. Republic of Angola, 302, 303Pineland State Bank v. Proposed First National Bank of Bricktown, 202Princz v. Federal Republic of Germany, 281, 300Pravin Banker Associates, Ltd. v. Banco Popular del Peru, 255Public Employees' Retirement System of Mississippi v. Merrill Lynch & Co., Inc., 9

R. v. Grossman, 167Rales v. Blasband, 451Red Lion Broadcasting Co. v. FCC, 204Reino De Espana v. Am. Bureau of Shipping, 488, 489Reiter v. Sonotone Corp., 208Republic of Argentina v. NML Capital, Ltd., 303Republic of Argentina v. Weltover, 280, 300Republic of Iraq v. First Nat. City Bank, 139, 305, 306, 312, 315Republic of Panama v. Republic Nat. Bank of N.Y., 495Resource Dynamics International Ltd v General People's Committee for Com- munications & Maritime Transport, 247Robinson v. Toyota Motor Credit Corp., 462Rong v. Liaoning Province Gov't, 280Rovello v. Orofino Realty Co., 382Ruiz Coronado v. BankAtlantic Bancorp, Inc., 462Rush-Presbyterian-St. Luke's Med. Ctr. v. Hellenic Republic, 281Russek v. Angulo, 154

Salimoff & Co. v. Standard Oil Co., 297Saunders v. Michigan Ave. Nat’l Bank, 462Saudi Arabia v. Nelson, 280, 281, 299Sava Gumarska in Kemijska Industria d.d. v. Advanced Polymer Sciences, Inc., 400Schmidt v. Magnetic Head Corp., 381Schooner Exchange v. McFaddon, 290

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INTERNATIONAL BANKING xxv

S.E.C. v. Banco Della Svizzera Italiana, 167, 475, 480, 484, 485SEC v. Jerry T. O’Brien, Inc., 460Second Amendment Found. v. U.S. Conference of Mayors, 304Sergeeva v. Tripleton Int'l Ltd., 482Shaffer v Heitner, 139Sierra Club v. Morton, 445Sletteland v. Federal Deposit Ins. Corp., 42Smith v. Nat'l Resort Communities, Inc., 405Smith v. Washington Sheraton Corp., 279SmithKline Beecham Corp. v. Doe, 405Société Internationale Pour Participations Industrielles et Commerciales, S.A. v. Rogers, 476, 478Société Nationale Industrielle Aérospa tiale v. U.S. Dist. Court for S. Dist. of Iowa, 482, 488Sokoloff v. National City Bank, 150, 151, 159Sooner Prods. Co. v. McBride, 450Southwestern Shipping Corp. v. National City Bank, 324, 331Springfield Rare Coin Galleries, Inc. v. Johnson, 54SRS Prods. Co. v. LG Eng'g Co., 403Ssangyong v. Vida Shoes Int’l, Inc., 493State of New York v. Monastero, 222State of Ohio v. Arthur Andersen & Co., 478Stone v. Ritter, 451Stone ex rel. AmSouth Bancorporation v. Ritter, 451Stoutt v. Banco Popular De Puerto Rico, 467Strauss v. Credit Lyonnais, S.A., 486, 487Stromberg-Carlson Corp. v. Bank Melli Iran, 399Sun Life Assurance Co. v. Klawans, 332Sun Marine Terminals, Inc. v. Artoc Bank & Trust Ltd., 404Synergy Ctr., Ltd. v. Lone Star Franchising, Inc., 404Sztejn v. Schroder Banking Corp., 369

Tabacalera Severiano Jorge, S.A. v. Standard Cigar Co., 155, 310, 311, 313, 315Teamsters Allied Benefit Funds v. McGraw-Hill Companies, Inc., 9Texas State Bank v. United States, 5Texas Trading & Milling Corp. v. Federal Republic of Nigeria, 285, 286, 289, 293, 313Timberlane Lumber Co. v. Bank of America, 486Toprak Mahsulleri Ofisi v. Finagrain Compagnie Commercial Agricole et Financiere S.A., 515Trade Development Bank v. Continental Insurance Co., 435, 478, 484, 490, 494Transamerican S.S. Corp. v. Somali Democratic Republic, 303Trugman-Nash, Inc. v. New Zealand Dairy Board, 486Trujillo-M v. Bank of Nova Scotia, 160Two Grand Jury Subpoenas Duces Tecum Served Upon Union Bank of Switzerland, In re, 490

Underhill v. Hernandez, 155, 304, 305, 320United Bank Ltd. v. Cambridge Sporting Goods Corp., 368, 398 United Bank Ltd. v. Cosmic International, Inc., 155, 305, 307, 308, 310, 311, 315United Commodities-Greece v. Fidelity Int'l Bank, 375United States v. Belmont, 297, 315United States v. Calandra, 465, 466United States v. First National Bank of Chicago, 493United States v. First National City Bank, 477, 478, 492United States v. Miller, 439, 440, 443, 446, 447, 448, 460United States v. Nippon Paper Indus. Co., 486United States v. Philip Morris, Inc., 304United States v. Students Challenging Regulatory Agency Procedures, 445United States v. Vetco, Inc., 478

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United World Trade Co. v. Mangyshlakneft Oil Prod. Ass'n, 282Upton v. Empire of Iran, 300

Varas v. Crown Life Ins. Co., 321, 324Vencedora Oceanica Navigacion v. Compagnie Nationale Algerienne de Navigation, 285, 288Venture Associates Corp. v. Zenith Data Systems Corp., 443Verlinden BV v. Central Bank of Nigeria, 246, 247, 285, 293, 302Victory Carriers Inc. v. United States, 385, 391Vishipco Line v. Chase Manhattan Bank, 148, 155, 156, 159, 161, 308Voest-Alpine Int'l Corp. v. Chase Manhattan Bank, N.A., 302, 375, 376Volkswagenwerk Aktiengesellschaft v. FMC, 207

Walker v. S.W.I.F.T. SCRL, 443, 460, 503Ward v. Utah, 450Warth v. Seldin, 450

Weiss v. National Westminster Bank PLC, 487Welch v. Kennedy, 505Wells Fargo Asia Limited v. Citibank, N.A., 164, 227, 360Wernsing v. Thompson, 444Weston Banking Corporation v. Turkiye Garanti Bankasi, 308Wheeler v. Caterpillar Tractor Co., 55Wichita Eagle & Beacon Pub. Co. v. Pacific Nat'l Bank, 391Wilson, Smithett & Cope Ltd. v. Terruzzi, 326Winkler v. Gates, 444Wolf v. Banco Nacional de Mexico, 287,289, 491

X AG v. A Bank, 164, 167

Yayasan Sabah Dua Shipping SDN BHD v. Scandinavian Liquid Carriers Limited, 125

Zedan v. Kingdom of Saudi Arabia, 282

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TABLE OF FIGURES

Figure

1.1 Financial Intermediation . . . . . . 41.2 The Credit Function . . . . . . 52.1 Depository Institutions and Their Regulators:

International Banking Activities . . . . . 432.2 Examples of Tax-like and Quota-like

Restrictions on Foreign Banks . . . . . 608.1 Typical Documentary Letter of Credit . . . . 3648.2 Typical Standby Letter of Credit . . . . . 3928.3 Bankers' Acceptance: Typical Transaction . . . . 407

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PREFACE TO THE FOURTH EDITION

In the six years since the publication of the third edition of this casebook, the trendtowards increasingly globalized, interactive markets has continued apace. In a verydistinctive way, this development has thrown into sharp relief the dynamics of the financialservices market. On the one hand, banking and other financial services naturally flow acrosspolitical boundaries, following their markets wherever those markets lead them. On the otherhand, banking and financial services remain intensely national, at least in terms of theirregulatory structures and environment. The result is a rather odd intersection—a natural flowof transnational market activity eddying around the barriers and shallows of nation-basedregulation and supervision. Much of the material in this book is a study of the ways in whichthat intersection operates.

While it may seem safe to assume that the natural state of things in the banking worldin transnational, recent developments seem to contradict that assumption. With recentlegislation like the Economic Growth, Regulatory Relief, and Consumer Protection Act inMay 2018, there has been a reassertion of protectionism, at least for smaller and mid-sizedfinancial institutions. Likewise, the Brexit process—implementing the 2016 affirmative voteby British citizens for withdrawal by the United Kingdom from the European Union—hasundercut expectations about the direction in which regional banking was heading. These areamong the current issues that this book seeks to address, while still providing a solidfoundation for a student’s understanding of the regulation of international financial services.

As with past editions, I owe considerable thanks to many people for their assistance andsupport for my work on this new edition. Friends and colleagues inside and outside of theacademy have offered useful advice and insights that helped me to reconceive and revisematerial in this edition. In addition, I benefitted from the invaluable assistance of Ms. WendyYoung, Senior Faculty Support Specialist, who shielded me from bureaucratic burdens whileI worked on this project, and Mr. Paul Howard, Head of Faculty Services & InternationalResearch, who was generous of his time and provided student research assistants from theLaw Library.

Finally, special thanks are also due to my wife, Susie A. Malloy, for her encouragementof this project.

–– Michael P Malloy Athens July 2019

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PREFACE TO THE THIRD EDITION

Three years after the second edition of this casebook was published, the financialservices sector, domestically and internationally, was transformed into a blast zone. Thecollapse of the U.S. residential mortgage market had an impact internationally, because the“securitization” of mortgage-related products spread mortgage risk directly into the securitiesmarkets creating vulnerabilities in capital markets. The United States continues to strugglewith the effects of this crisis, unresolved by the 2010 Dodd-Frank Act, and our tradingpartners suffer along with us. External debt is no longer a “less developed country” problem,but a serious sovereign debt crisis affecting a broadening variety of states. Hence, not onlyhas the landscape of international banking changed considerably, many assumptions andtools have been thrown into doubt. Is managing capital levels of internationally active banksthe most effective way to manage risk? Are the structures of international bank supervisionadequate to their tasks and objectives? These are just some of the issues explored in this newedition.

Making this situation more complicated are the uncertainty and incompletenesssurrounding Dodd-Frank, the lead U.S. statutory response to the crisis. Many of the mostsignificant changes mandated by the act will take years to implement fully. This is the resultof effective dates of key provisions that stretch out over two years following the enactmentof Dodd-Frank, as well as a lengthy and complex process of regulatory implementation ofthe provisions of the act. Most recently, the Congress itself has begun to question the wisdomof the aggressive restructuring of the regulatory system initiated by Dodd-Frank, and thisfailure of vision will only complicate the structure even further.

These and other major developments make a challenging field of study even moredaunting in its complex mix of issues. Hopefully, the problem-oriented approach of thisedition, a hallmark of the book from its beginning, will continue to present students withgenuine opportunities to confront developments and challenges that are likely to be with usfor years to come.

Special thanks are due to many persons for their assistance and support for my work onthis new edition. Many friends and colleagues inside and outside of the academy haveoffered useful advice and observations about the previous edition that helped me toreconceive, revise, or replace material in this edition.

In addition, I benefitted from the encouragement of Francis J. Mootz, III, Dean of theMcGeorge School of Law at the University of the Pacific, and Anne Bloom, Associate Deanfor Faculty Scholarship. A special word of thanks must be given to Ms. Janice Johnson,supervisor of the Faculty Support Office, and the FSO staff. They have kept vexingbureaucratic burdens from my door while I worked on this project. I also received invaluableaid from my student research assistant, Ms. Maria Kim, of the Pacific McGeorge Class of2013, and from the professional staff of the Law Library.

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xxxii INTERNATIONAL BANKING

All of this assistance notwithstanding, producing a new, third edition would have beenburdensome without the encouragement of my wife, Susie A. Malloy, who continues, asalways, to make the scholarly life an adventure.

–– Michael P Malloy London December 2012

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PREFACE TO THE SECOND EDITION

In the six years since the first edition of this casebook appeared, the regulation offinancial services enterprises has grown in importance and complexity. A wide range ofsignificant historical and political developments have had a marked impact on internationalmarkets as well as on day-to-day existence. The European Union has edged ever closer topolitical and regulatory integration. U.S. banks and bank holding companies have beengranted broader authority to participate in activities that are “financial in nature,” includingsecurities and insurance activities. The terrorist attacks on the United States that occurred inSeptember 2001prompted a renewal of U.S. statutory and regulatory interest in bothoffensive and defensive supervision of the banking system to combat terrorism, and anemerging international consensus has focused on antiterrorism and anti-money launderingin response to international terrorism. Regional financial services regulation under NAFTAcelebrated its tenth anniversary, followed by the General Agreement on Trade in Servicesat the multilateral level. These and other major developments join an even wider variety ofcontinuing regulatory concerns–competitive equality among enterprises, coordination of thesupervisory efforts of different national regulators, and the growing need for transactionalrules for e-commerce and e-banking activities, to name a few. As with the previous edition,this casebook tries to draw together these and other regulatory issues in a way that will pre-sent them coherently and that will make the practical importance of these issues under-standable to the student.

While the casebook still focuses primarily on U.S. regulation of international bankingat the federal level, it includes more extensive material on international and comparativeaspects of financial services regulation, including more material on the EU, NAFTA, EasternEurope and Islamic banking. U.S. practice remains a convenient point of departure for studyof international banking, and the problems and notes that appear throughout the casebookcontinue to offer a very concrete and practical context for the exploration of the issues,concepts and rules embodied in the cases and secondary materials excerpted in the casebook.

Special thanks are due to many persons for their assistance and encouragement of thecompletion of this new edition. Dean Elizabeth Rindskopf Parker and Associate Deans JohnSprankling and Claude Rohwer have been generous in their support and understanding of theburdens that preparation of even a second edition of a casebook places on an author. I amparticularly thankful for the resources that the law school has made available to me, not onlyfor the direct work on this edition but also for the many opportunities that I have been givento participate in U.S. and international conferences and speaking engagements. Theseopportunities allowed me to air my views on many current developments in internationalfinancial services regulation for further discussion and refinement. I also must acknowledgeMs. Sally Snyder, Supervisor of the Faculty Secretaries’ Office, and Ms. Denai Burbank andthe rest of the Faculty Secretaries for their singular efforts in keeping administrative burdensfrom my door while I worked on this project. My student research assistants, Ms. SuzanneUzelac of the University of the Pacific Class of 1998, Ms. Lotte Colbert of the Class of 1999,

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xxxiv INTERNATIONAL BANKING

and Mr. David Richards of the University of the Pacific Class of 2004 provided invaluable,and invariably thorough, assistance.

Finally, the original project and the renewed effort of a second edition would have beenpersonally worthless without the encouragement, inspiration, and devoted editorial assistanceof my wife, Susie A. Malloy. As a relentless editor and boon companion, she makes mebetter than I am.

–– Michael P Malloy London April 2004

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PREFACE TO THE FIRST EDITION

The regulation of financial services enterprises involved in the international market isof increasing importance. This area raises a wide variety of regulatory concerns–competitiveequality among enterprises, coordination of the supervisory efforts of different nationalregulators, the growing need for multilateral rules for transborder activities. This casebooktries to draw together these and other regulatory issues in a way that will present themcoherently.

The casebook focuses primarily on U.S. regulation of international banking at the federallevel, but with extensive international and comparative materials as well. U.S. practice in thisregard is viewed simply as a convenient point of departure for study of international banking.The U.S. market is an active and immense one, and so regulatory developrnents there havea tendency to influence multilateral and other national regulatory regimes.

It cannot he emphasized enough that international banking is an area of intense practice,as well as a conceptually challenging area of intellectual study. Hence, the problems andnotes that appear throughout the text are intended to provide a concrete context within whichto understand many of the concepts and rules embodied in the excerpted readings from casesand secondary material.

Special thanks are due to several persons for their assistance and encouragement of thecompletion of this book. Dean Gerald Caplan and Associate Dean Kathleen M. Kelly ofMcGeorge School of Law, University of the Pacific, have provided both moral and materialsupport for this project. My colleague Claude Rohwer has on more than one occasion liftedburdens so that I could concentrate on the work at hand. My student research assistants, Ms.Suzanne Uzelac of the University of the Pacific Class of 1998 and Ms. Lotte Colbert of theClass of 1999, have provided invaluable, and invariably thorough, assistance. Finally, thisproject would have been impossible to finish and of little personal interest without thedevoted assistance and encouragement of my wife, Susie A. Malloy.

–– Michael P Malloy Vienna July 1998

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ACKNOWLEDGMENTS

The author gratefully acknowledges the permission granted. to reprint excerpts from thefollowing:

AMERICAN LAW INSTITUTE, RESTATEMENT OF FOREIGN RELATIONS LAW OF THE UNITEDSTATES (3d) §§ 403, 414; Copyright 1988 by the American Law Institute. Reprinted withpermission.

Haley & Seligman The Development of International Banking by the United States, in,BAUGHN & MANDICH (eds.), THE INTERNATIONAL BANKING HANDBOOK (1983). Reprintedwith permission of McGraw-Hill Enterprises.

Honegger, Demystification of the Swiss Banking Secrecy and Illumination of the UnitedStates-Swiss Memorandum of Understanding, 9 N.C. J. INT’L L. & COM. REG. 1 (1983).Reprinted with permission of the North Carolina Journal of International Law andCommercial Regulation.

Kahale, Does a Choice-of-Law Clause Waive Immunity?, INT’L. FIN. L. REV. 28 (July1988). Reprinted with kind permission of the International Financial Law Review,http://www.lawmoney.com/.

Korsvik, Legal and Regulatory Constraints within Other Countries, in BAUGHN &MANDICH (eds.), THE INTERNATIONAL BANKING HANDBOOK (1983). Reprinted withpermission of McGraw-Hill Enterprises.

MALLOY, BANKING LAW AND REGULATION (3 vols., Aspen Law & Business, 1994);reprinted with permission of the copyright holder.

Michael P. Malloy, Capital Adequacy and Regulatory Objectives, 25 SUFFOLKTRANSNAT’L L. REV. 299 (2002). Reprinted with permission of the copyright holder.

Malloy, Financial Services Regulation After NAFTA, in, KEVIN KENNEDY (ed.), THEFIRST DECADE OF NAFTA: THE FUTURE OF FREE TRADE IN NORTH AMERICA (2004).Reprinted with permission of the copyright holder.

MALLOY, PRINCIPLES OF BANK REGULATION (Thomson-West, Concise Hornbook Series,2d ed. 2003). Reprinted with permission of the copyright holder.

Stern Rebuke: In A Signal to Japan, U.S. Bars Daiwa Bank and Indicts Institution,WALL ST. J., Nov. 3, 1995, at Al.

Taylor, Islamic Banking–The Feasibility of Establishing an Islamic Bank in the UnitedStates, 40 AM. BUS. L.J. 385 (2003). Reprinted with permission of the American BusinessLaw Journal, an official publication of the Academy of Legal Studies in Business.

Todd, A Brief History of International Lending, From A Regional Banker�s Perspective,11 GEO. MASON U. L. REV. 1 (1989). Reprinted with permission of the George MasonUniversity Law Review.

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