Risk Management Manual of Examination Policies - FDIC

INTERNATIONAL BANKING Section 11.1
of Banks). As an international policy-making body, the
FATF reviews country compliance with its Forty
Recommendations: A Global Framework for Combating
Money Laundering. Those countries determined to be
noncooperative in the fight against money laundering are
blacklisted. In the U.S., FinCEN advises banks to closely
scrutinize any transaction with these noncooperative
countries by their customers.
Financial Intelligence Unit (FIU) – FIUs are central
repositories and clearing houses for reports of financial
crimes to be used for disseminating information to law
enforcement and regulatory agencies. FIUs also provide a
country gateway for information sharing and international
cooperation with the law enforcement and regulatory
agencies in other countries. The FATF in its Forty
Recommendations: A Global Approach for Combating
Money Laundering encourages every country to establish a
FIU. The Financial Crimes Enforcement Network
(FinCEN) is the FIU for the U.S.
Fixed Exchange Rate System – A system in which the
exchange rate of a country’s currency is tied to one major
currency, such as the U.S. dollar.
Fixed Rate of Exchange – A rate of exchange set by a
foreign government relative to the dollar, gold, another
currency, or perhaps Special Drawing Rights (SDRs). It
remains in effect as long as that government is willing
and/or able to buy or sell exchange at the set rates.
Flexible Rate of Exchange – A rate of exchange subject
to relatively frequent changes. It is determined by market
forces but subject to various floors or ceilings relative to
the dollar, gold, SDR's or another currency when the rate
fluctuates beyond certain parameters.
Floating Exchange Rate System – A system in which the
values of the currencies of various countries relative to
each other are established by supply and demand forces in
the market without government intervention.
Floating Rate – A rate of exchange that is determined
completely by market forces with no floor ceiling vis-a-vis
the dollar, gold, SDR's or any other currency.
Force Majeure – A standard insurance clause in a marine
contract that relieves the parties from nonfulfillment of
their obligations due to circumstances beyond their control
such as earthquakes, floods, or war.
Foreign Bank Supervision Enhancement Act (FBSEA)
– Part of the FDIC Improvement Act of 1991, FBSEA
mandated oversight of FBOs by the Federal Reserve. The
Federal Reserve Board coordinates the examinations of
FBOs with the other Federal agencies and with the various
State banking authorities.
Foreign Bonds – Bonds issued by nonresidents but
underwritten primarily by banks registered in the country
where the issue is made.
Foreign Deposits – Those deposits that are payable at a
financial institution outside the jurisdiction of the U.S.
government and in the currency of the country in which the
depository is located. See also Nostro Account.
Foreign Draft – An official bank order drawn on a foreign
correspondent bank to pay on demand to a designated
payee a specific sum of foreign money or U.S. dollars at
the drawee’s buying rate.
Foreign Exchange – The trading or exchange of a foreign
currency in relation to another currency.
Foreign Exchange Market – Communications between
dealers and brokers to transact wholesale business in
foreign exchange and Eurocurrencies.
Foreign Exchange Rationing – A government
requirement that all holders of bills of exchange relinquish
them at a stipulated rate.
Foreign Exchange Reserves – The reserves maintained by
a central bank which usually include gold and easily traded
currencies of major industrial nations.
Foreign Exchange Risk – The risk associated with
exposure to fluctuation in spot exchange rates.
Foreign Investment Advisory Service (FIAS) –
Established in 1986, FIAS counsels developing countries
on attracting foreign capital. FIAS operates under the
aegis of the World Bank and its affiliates the International
Finance Corporation and the Multilateral Investment
Guarantee Agency.
Foreign Trade Zone – An area where goods may be
received and stored without entering a country’s customs
jurisdiction and without paying duty. Sometimes called a
“free trade zone.”
Forward Book – The aggregated of all forward contracts
for a given currency or all currencies.
Forward Exchange – Foreign currency traded for
settlement beyond two working or business days from
today.
International Banking (12-04) 11.1-38 DSC Risk Management Manual of Examination Policies
Federal Deposit Insurance Corporation