The U.S. Federal Reserve Board Friday proposed new rules to strengthen the oversight of U.S. operations of foreign banks.
The Fed’s 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 oversight of the U.S. operations of these foreign banks. Additionally, foreign banks would be required to maintain stronger capital and liquidity positions in the U.S., and to conduct liquidity stress tests, to help increase the resiliency of their U.S. operations.
The proposal, which generally applies to foreign banking organizations with a U.S. banking presence and total global consolidated assets of $50 billion or more, also includes measures regarding capital stress tests, single-counterparty credit limits, overall risk management, and early remediation.
The Fed is proposing a substantial phase-in period to give foreign banking organizations time to adjust to the new rules. It says banks with global consolidated assets of $50 billion as of July 1, 2014, would be required to meet the new standards on July 1, 2015. Comments will be accepted through March 31, 2013.
“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,” said Fed chairman, Ben Bernanke.