Daily News: December 17, 2012

Fed Proposes Stricter Rules for Foreign Banks in U.S.


The Federal Reserve Board has proposed rules to strengthen the oversight of U.S. operations of foreign banks.

The proposal would require foreign banking organizations with a significant U.S. presence to create an intermediate holding company over their U.S. subsidiaries, which would help facilitate consistent and enhanced supervision and regulation of the U.S. operations of these foreign banks. Foreign banks would also be required to maintain stronger capital and liquidity positions in the United States, helping to increase the resiliency of their U.S. operations.

“The proposed rulemaking is another important step toward strengthening our regulatory framework to address the risks that large, interconnected financial institutions pose to U.S. financial stability,” Federal Reserve chairman Ben S. Bernanke said.

The proposal implements provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act in a manner that addresses the risks associated with the increased complexity, interconnectedness, and concentration of the U.S. operations of foreign banking organizations.

“Applicable regulations have changed relatively little in the last decade, despite a significant and rapid transformation in the U.S. activities of foreign banks, many of which moved beyond their traditional lending activities to engage in substantial, and often complex, capital market activities,” Governor Daniel K. Tarullo said. “The crisis revealed the resulting risks to U.S. financial stability.”

The proposal generally applies to foreign banking organizations with a U.S. banking presence and total global consolidated assets of $50 billion or more. More stringent standards are proposed for foreign banking organizations with combined U.S. assets of $50 billion or more.

To read the Fed’s full news release, click here.