NEW HAVEN, Conn. Nov 28 The Federal Reserve's
top regulation official on Wednesday called for broad new
liquidity and capital rules for the U.S. operations of large
foreign banks, which would align them with that of American
banks and protect the financial system.
Fed Governor Daniel Tarullo, who oversees the so-called bank
stress tests, outlined a three-pronged approach that includes
forcing the largest U.S. operations of foreign banks to
establish a "top-tier U.S. intermediate holding company," or
IHC, over all subsidiaries.
The plan would also apply to the IHCs the same capital rules
applicable to U.S. banks, and make liquidity standards "broadly
consistent" with domestic rules.
"By imposing a more standardized regulatory structure on the
U.S. operations of foreign banks, we can ensure that enhanced
prudential standards are applied consistently across foreign
banks and in comparable ways between U.S. banking organizations
and foreign banking organizations," Tarullo said in prepared
remarks to a Yale School of Management forum.
"As with domestic firms subject to enhanced prudential
standards, the Federal Reserve would work to ensure that the new
regime is minimally disruptive, through transition periods and
Details of the new rules are now under discussion at the
Fed, Tarullo said, adding he expects the Fed board to issue a
more detailed notice of proposed rulemaking in coming weeks.