Federal Reserve

Fed to vote on new standards for banks, including foreign ones, in US

PUBLISHED : Wednesday, 12 February, 2014, 11:40am
UPDATED : Monday, 30 May, 2016, 2:05pm

The Federal Reserve plans to vote next week on new standards for banks operating in the United States, including a proposal for foreign banks that has been heavily criticised by their home regulators.

The Fed’s board will consider on Tuesday finalising rules that require foreign banks with big US operations to group all their subsidiaries under a single holding company, according to a notice on its website.

Those intermediate holding companies would have to meet the same capital standards as US banks.

Some foreign bank regulators complained that the 2012 proposal would disadvantage foreign banks, such as Deutsche Bank and Barclays, and could cause other jurisdictions to retaliate with tougher standards for some firms.

The board will also take up a 2011 proposal for tougher standards for domestic banks. The proposal included requirements for banks’ risk management and other rules that tied into the Fed’s existing supervision of big banks.

It also included limits on banks’ credit exposure to any single counterparty, part of an effort to reduce the risks posed by highly interconnected banks. Fed governor Daniel Tarullo told a congressional panel in July that this section would not be finalised with the rest of the standards.

He said at the time that the Fed had decided to study the impact of credit limits and would co-ordinate its rule making with a global group that was also considering cracking down on banks’ exposure to counterparties.