How To Prevent Future Bcc Is

The spectacular collapse of the Luxembourg-based Bank of Credit & Commerce International offers one clear lesson: The explosive growth of global banking requires greater coordinated international oversight.

With $20 billion in assets, BCCI thrived as a haven for drug dealers, money launderers, and Third World strongmen by dividing its operations--and its books--among 70 countries. In so doing, it prevented any one country's regulators from gauging the scope of its worldwide activities. It wasn't until a tipster and an auditor's report revealed widespread abuses at BCCI's London offices that regulators around the globe were finally convinced to shut the bank down.

Banking authorities in the U. S. and other leading nations have already taken steps to insure the banking system's health by setting stiff capital standards for international banks. They are also studying ways to fortify them further against swings in financial markets. But the best way to prevent another BCCI-type disaster seems to be recently proposed legislation by the Federal Reserve.

The Fed would force foreign banks to disclose more information to U. S. authorities and refuse them entry to America if they aren't subject to strict and comprehensive global oversight by their home country. It also wants authority to call for coordinated worldwide bank examinations. Such steps, if adopted here and overseas, could go a long way toward curbing BCCI-style abuse and fraud.

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