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 other means."
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.