Risk Management Manual of Examination Policies - FDIC

INTERNATIONAL BANKING Section 11.1
be redeposited with banks or lent to companies,
individuals, or governments outside the U.S.
Eurodollar Bond – A Eurobond denominated in U.S.
dollars.
European Central Bank (ECB) – The ECB is the central
bank of the 25-member European Union (EU). The
Eurosystem consists of each member’s national central
banks (NCBs) headed by the ECB. The function of the
Eurosystem is to maintain price stability while supporting
the general economic practices of the EU members.
Together the ECB and NCBs conduct monetary policy for
the Euro area (not all members of the EU have opted for
monetary integration), to conduct foreign exchange
operations, and to maintain the EU payment systems. The
ECB is headed by the Governing Council (composed of the
Executive Board and the governors of each of the NCBs).
European Currency Unit (ECU) – A portfolio currency
used in the European Monetary System as a community
“average” exchange rate. It is also used in the private
market as a means of payment and as a currency of
denomination for lending, borrowing, and trade.
European Union (EU) – A free trade area consisting of 25
European nations with the ultimate goal of achieving
political and economic integration. The ECB is the central
bank of the EU. Effective January 2002, the euro is the
currency of the EU for those member nations that have
opted for the monetary union. The principal aspects of the
EU are to establish a European citizenship; to ensure a
common system of justice and security; to create a single
European market and currency and increase jobs; to
promote regional development; and to promote European
interests in the world. Member nations give up certain
aspects of their national sovereignty to institutions that
represent the entire EU. In return, EU members achieve
common law, freedom of movement, reduced barriers to
trade, and strengthened external security. The original
member countries are Belgium, Denmark, Germany,
Greece, Spain, France, Ireland, Italy, Luxembourg, the
Netherlands, Austria, Portugal, Finland, Sweden, and the
United Kingdom. In May 1, 2004, Cyprus, Czech
Republic, Estonia, Hungary, Latvia, Lithuania, Malta,
Poland, Slovakia, and Slovenia joined the EU.
Exchange Contracts – Documents issued by foreign
exchange dealers, by banks dealing in foreign exchange,
and by foreign exchange brokers confirming foreign
exchange transactions.
Exchange Control or Restrictions – Limits on free
dealings in foreign exchange or of free transfers of funds
into other currencies and other countries.
Exchange Control Risk – The possibility of defaults on
obligations by the imposition of exchange control or
restrictions.
Exchange Rates – The price of a currency in terms of
another.
Exchange Reserves – The total amount of Greeley
convertible foreign currencies held by a country’s central
bank.
Exchange Risk – The risk of market fluctuation of an asset
or liability denominated in a foreign currency, such as the
ownership of a currency (spot or forward) or trade
accounts payable in foreign currency.
Export Credit Insurance – A system to insure the
collection of credits extended by exporters against various
contingencies. In some countries only noncommercial
risks can be insured.
Export-Import Bank of the United States (Ex-Im Bank)
– Established in 1934 as an independent Federal agency,
Ex-Im Bank provides intermediate and long-term nonrecourse
financing for U.S. exports when such facilities are
not available from commercial banks. Ex-Im Bank
guarantees working capital and other loans for U.S.
exporters. Ex-Im Bank also offers a number of other
useful programs such as export credit insurance. Further
details about the Ex-Im Bank and their programs can be
found at http://www.exim.gov.
Export Management Company – A domestic firm that
provides marketing, distributing, and other international
business services for exporters in overseas markets through
established networks or contacts in the targeted country.
Export Trading Company (ETC) – A company
organized under the Export Trading Company Act of 1982
that facilitates U.S. exports. An ETC may be an affiliate of
a bank holding company. Subpart C of Regulation K of
the Federal Reserve provides guidance and restrictions for
these companies.
Financial Action Task Force (FATF) – Task Force on
Money Laundering created by the leaders of the G-7
countries and the President of the European Communities
in 1989. The FATF is overseeing international efforts to
combat money laundering and terrorist financing. The
FATF presently has 28 member countries. The FATF also
supports the activities of other international organizations
that share the same goals (i.e., the Asia/Pacific Group,
Caribbean Financial Action Task Force, the Egmont Group
of Financial Intelligence Units, and the Wolfsberg Group
DSC Risk Management Manual of Examination Policies 11.1-37 International Banking (12-04)
Federal Deposit Insurance Corporation