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Friday 29 August 2014

Fed proposes bank cushion changes

Published 14/12/2012 | 20:54

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The Federal Reserve wants large foreign banks to keep a bigger financial cushion against unexpected losses for their US affiliates

The Federal Reserve is proposing that large foreign banks keep a bigger financial cushion against unexpected losses for their US affiliates.

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The rules proposed on Friday are aimed at preventing another financial crisis.

They were mandated by the 2010 financial overhaul and would apply to those foreign banks with 50 billion US dollars (£30 billion) in worldwide assets that operate in the US.

That means their US affiliates would be subjected to the same capital reserve requirements as US banks. The US operations would have to take the form of a bank holding company, putting them under the Fed's oversight.

The rules would not take effect until July 2015. The Fed estimates that about 107 foreign banks would be affected.

Rules proposed previously for US banks would require them to hold capital worth at least 6% of the value of their assets, in line with international standards being phased in.

The Fed's proposal would apply to 23 foreign banks that have both worldwide assets and assets in the US of at least 50 billion US dollars each. Banks in that category include British bank HSBC, Germany's Deutsche Bank, Canada's TD Bank and Dutch bank ING.

A less strict level would apply to 84 foreign banks with 50 billion US dollars or more in worldwide assets but less than 50 billion dollars in US assets.

The proposal would be opened to public comment for 90 days and could be formally adopted by the Fed after that.

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