By Douwe Miedema
WASHINGTON Feb 18 The U.S. Federal Reserve on
Tuesday adopted the final version of tight new capital rules for
foreign banks, giving them a year longer to meet the standard
and applying it to fewer banks than in a first draft.
The reform is designed to address concerns that U.S.
taxpayers will need to foot the bill if European and Asian
regulators treat U.S. subsidiaries with low priority when
rescuing one of their banks.
The largest foreign banks, with $50 billion or more in U.S.
assets, will need to set up an intermediate holding company and
be subject to the same capital, risk management and liquidity
standards as U.S. banks, the Fed staff said.
The Fed estimated that between 15 and 20 foreign banks would
come under the requirement, which was eased from when the rule
was first proposed in December 2012, when the cutoff was $10
billion in U.S. assets.
Foreign banks with sizeable operations on Wall Street such
as Deutsche Bank and Barclays have pushed
back hard against the plan because it means they will need to
transfer costly capital from Europe.
"The most important contribution we can make to the global
financial system is to ensure the stability of the U.S.
financial system," Fed Governor Dan Tarullo, in charge of
financial regulation, said in a speech.
Europe has warned of tit-for-tat action, with European Union
financial services commissioner Michel Barnier saying in October
that the bloc would draw up similar measures if the Fed pushed
ahead with its plans.
The Fed's board voted to formally adopt the rule in a public
meeting on Tuesday afternoon.
The Fed also gave foreign banks a year longer to meet the
requirement to set up the new structure, with the new deadline
set as July 1, 2016. Both changes had been widely expected in
The new structure gives banks less flexibility to move money
around than under the current rules, which allow banks to use
capital legally allocated in their home country. In some cases,
the U.S. rules are tougher than elsewhere.
The rule also subjects foreign banks with global assets of
$10 billion or more to stress tests that rely on the
home-country stress tests standards, the Fed staff said.