Federal Reserve Board Governor Robert Heller is urging U.S. banks to reverse a trend of shrinking their activities in international markets.
The declining presence of U.S. banks abroad is a worrisome trend, Heller said in remarks prepared for the Financial Analysts Federation annual conference in San Francisco this week."U.S. banks are no longer aggressively pursuing international lending business," Heller said.
At the same time, foreign banks have substantially increased their share of the U.S. commercial lending market, he said.
He attributed the decline by U.S. banks in world markets to differences in regulations that hinder American banks and to the debt problems of less developed countries.
Restrictions on interstate banking and the types of products U.S. banks can offer must be eased, Heller said.
In addition, a new, risk-based approach to regulating banks' capital is aimed at harmonizing regulations around the world to eliminate competitive inequalities, Heller said.
The proposed capital regulation for banks was developed by regulators of 12 nations who met in Basel, Switzerland.
"This international framework for evaluating capital adequacy will provide the same definition of capital, the same risk classes and the same leverage ratios for all internationally active banks," Heller said.
While international banking carries risks, it also offers U.S. banks important opportunities for profit and diversification that can strengthen institutions during troubled economic times, Heller said.