U.S. bank regulators proposed rules on Tuesday clarifying that deposits in foreign branches of U.S. banks are not eligible for U.S. deposit insurance, in an effort to resolve confusion over recent proposals from financial officials in the United Kingdom. The directors of the Federal Deposit Insurance Corp voted unanimously to propose the clarification. The confusion stems from laws in some countries, including the United States, that give depositors preference over general creditors when a bank fails. In the United States, foreign deposits have not historically fallen under that definition. The UK's Financial Services Authority last year proposed requiring non-European banks to ensure that UK depositors would be treated no worse than domestic depositors if the bank failed, or else to stop accepting deposits at their UK branches. The FSA said banks could change deposit agreements so that deposits in UK branches of U.S. banks would be payable in both countries or restructure branches
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