Summary: Only about 130 of the 14,000 U.S. banks had overseas branches and/or foreign subsidiaries at the end of 1975, and most of these are either national banks supervised by the Comptroller of the Currency or State member banks supervised by the Federal Reserve. GAO reviewed the bank examination reports on 18 national banks and 12 State member banks having substantial international operations. The most prevalent problems in international operations found by examiners were: a high percentage of classified assets; inadequate controls over foreign exchange operations; and inadequate overall internal controls. The Federal Reserve Board of Governors and the Comptroller of the Currency need to use all available information to develop and use a single approach for classifying loans subject to "country risk." Procedures should be implemented to examine (where permitted by the country involved) major foreign branches and subsidiaries onsite. They should be examined periodically and whenever adequate information about their activities is not available at the home office. The Federal Reserve Board of Governors and the Comptroller of the Currency should utilize each other's examiners to cut expenses for foreign examinations. Some clarifying legislation on the interagency use of examiners might be necessary.
