Regulation K

Regulation K is one of the regulations set forth by the Federal Reserve Board (FRB). It provides governance on the international banking front, offering guidelines for bank holding companies that engage in international trade and also foreign banks located domestically. It limits the kinds of business and financial practices and transactions that bank holding companies and foreign banks located domestically can participate in.

Regulation K is one of a handful of Federal Reserve Regulations. The Federal Reserve Regulations are rules put in place to regulate the practices of banking and lending institutions. The primary purpose of most regulations is to protect individual consumers against financial practices that are deceptive, potentially financially harmful and/or violate individual privacy rights. 

According to the Board of Governors of the Federal Reserve System, Regulation K governs "the international banking operations of U.S. banking organizations and operations of foreign banks in the United States." 

Regulation K allows corporations that qualify under the Edge Act to participate in a wide variety of global banking practices. It also allows domestic banks to own entire nonfinancial foreign business entities. Reserve requirements are also imposed on Edge Act corporations under this statute.

According to the site AdvisoryHQ, Regulation K comes in four parts: 

Part I addresses international operations of US banking entities, defining what activities and investments are permissible, setting lending limits and capital requirements, and creating rules for supervision and reporting. 

Part II addresses the operations of foreign banks conducting business within the United States, including what activities these banks are permitted to engage in, disclosure, and rules of evaluation.

Part III addresses export trading companies (ETC), regulating investments, credit lines and disclosure. 

Part IV addresses international lending, governing credit lines extended internationally, as well as disclosure.