Summary: International trading of securities by U.S. and foreign investors increased dramatically during the 1980s. According to the Department of the Treasury, U.S. purchases and sales of foreign securities grew from about $53 billion in 1980 to about $707 billion in 1990. As international trading has increased, so too has concern about the risk to customers, firms, and markets resulting from differences in how various countries regulate their domestic securities markets. A primary protection has been the requirement that each institution buying and selling securities maintain enough excess assets, called capital, to satisfy claims by customers and creditors. International regulators are trying to "harmonize" capital standards; that is, establish an appropriate level of capital for securities firms and banks to maintain. This report (1) examines the status of current efforts to harmonize capital standards for securities activities and (2) identifies the implications of harmonization efforts for U.S. securities markets and the U.S. capital standard.
