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U.S. Fed to Beef up Supervision over Foreign Banks' Operations

Industry News 09:01:20AM Dec 17, 2012 Source:SMM

WASHINGTON, Dec. 17 -- The U.S. Federal Reserve on Friday announced a string of new rules to strengthen its supervision over foreign banks' operations in the United States and reduce their potential risks.

The measures would require foreign banking organizations with a significant U.S. presence to set up U.S. subsidiary holding companies, which would help facilitate consistent and enhanced supervision and regulation of their operations, the central bank said in a statement.

The U.S. operations of large foreign banking organizations would be required to meet stricter liquidity risk-management standards and conduct liquidity stress tests like U.S. banks so as to make them more resilient to funding shocks during times of market stress, added the Fed.

Foreign banking organizations with global consolidated assets of 50 billion U.S. dollars or more on July 1, 2014, would be required to meet the new standards on July 1, 2015, said the central bank.

"The proposed rule-making is another important step toward strengthening our regulatory framework to address the risks that large, interconnected financial institutions pose to U.S. financial stability," said U.S. Fed Chairman Ben Bernanke.

U.S. Fed Board Governor Daniel Tarullo noted that 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 the banks have "moved beyond their traditional lending activities to engage in substantial, and often complex, capital market activities," he said.

 

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U.S. Fed to Beef up Supervision over Foreign Banks' Operations

Industry News 09:01:20AM Dec 17, 2012 Source:SMM

WASHINGTON, Dec. 17 -- The U.S. Federal Reserve on Friday announced a string of new rules to strengthen its supervision over foreign banks' operations in the United States and reduce their potential risks.

The measures would require foreign banking organizations with a significant U.S. presence to set up U.S. subsidiary holding companies, which would help facilitate consistent and enhanced supervision and regulation of their operations, the central bank said in a statement.

The U.S. operations of large foreign banking organizations would be required to meet stricter liquidity risk-management standards and conduct liquidity stress tests like U.S. banks so as to make them more resilient to funding shocks during times of market stress, added the Fed.

Foreign banking organizations with global consolidated assets of 50 billion U.S. dollars or more on July 1, 2014, would be required to meet the new standards on July 1, 2015, said the central bank.

"The proposed rule-making is another important step toward strengthening our regulatory framework to address the risks that large, interconnected financial institutions pose to U.S. financial stability," said U.S. Fed Chairman Ben Bernanke.

U.S. Fed Board Governor Daniel Tarullo noted that 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 the banks have "moved beyond their traditional lending activities to engage in substantial, and often complex, capital market activities," he said.