Magazine article American Banker

Fed Offers More Time to Weigh Foreign Bank Rule

Magazine article American Banker

Fed Offers More Time to Weigh Foreign Bank Rule

Article excerpt

Byline: Donna Borak

WASHINGTON -- The Federal Reserve Board said Friday it will give stakeholders more time to comment on a proposal that would overhaul the way the U.S. central bank supervises foreign banks operating in the U.S.

The original deadline had been March 31, but the Board said it "extended the comment period to allow interested persons more time to analyze the issues and prepare their comments," in a press release.

The Fed released its plan in late November, which represents a shift in the way the central bank plans to oversee foreign bank operations by imposing the same set of requirements that U.S. bank holding companies face.

The shift in supervisory approach has long been expected since the financial crisis revealed significant flaws in the current regulatory process. Many had been expecting such changes given the failure of Lehman Brothers, which had a substantial broker-dealer subsidiary in the U.K., and severe distress at certain foreign banks with operations in the U.S.

Congress required regulators under the Dodd-Frank Act to reform the way they supervise foreign bank operations with $50 billion or more of globally consolidated assets and a presence in the U.S. A provision in the reform law by Sen. Susan Collins, R-Maine, also calls for large foreign banks to restructure their U.S. operations.

In its approach, the Fed avoided choosing either of two extremes -- a full subsidiarization where all branches and entities are placed below the holding company and maintaining the status quo -- instead seeking a way to allow foreign banks' branches and agencies to stand alone. …

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