Fed sets tough new rules for foreign banks
THE FEDERAL Reserve has voted through tough new rules for foreign banks which will require them to adhere to more stringent capital and liquidity standards.
The rules, which already apply to US bank holding companies, will hit around 100 foreign banks with at least $50bn in assets. Between 15 and 20 of those 100 banks will also be required to set up an intermediate holding company for US subsidiaries.
In her opening statement, Fed chairwoman Janet Yellen said the new rules would help the US to be more financially secure. The changes come after it emerged that some foreign banks had been taking advantage of favourable lending conditions in the US during the financial crisis.
“The traditional framework for supervising and regulating major financial institutions and assessing risks contained material weaknesses. The final rule would help address these sources of vulnerability,” Yellen said last night.
Despite strong lobbying against the changes from non-US banks, the rules remain largely as they were first proposed.
Yet there have been some changes to the deadlines which foreign banks will have to stick to; many have been pushed back to allow institutions to meet the new requirements.