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Enhanced Prudential Standards for Foreign Banking Organizations – A Guide for Each FBO Type
27 February 2014
On Tuesday, February 18, 2014, the Federal Reserve adopted a final rule (the “Final Rule”) implementing the enhanced prudential standards of Section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act for U.S. bank holding companies and foreign banking organizations (“FBOs”) with a U.S. banking presence. The Final Rule applies enhanced prudential standards to four categories of FBOs with a U.S. banking presence: (i) FBOs with greater than $10 billion but less than $50 billion in global consolidated assets, (ii) publicly-traded FBOs with $10 billion or more but less than $50 billion in global consolidated assets, (iii) FBOs with $50 billion or more in global consolidated assets but less than $50 billion in U.S. assets, and (iv) FBOs with $50 billion or more in global consolidated assets and $50 billion or more in U.S. assets.
Under the Final Rule, FBOs with $50 billion or more in global consolidated assets that have combined non-branch U.S. assets of $50 billion or more must reorganize their U.S. subsidiaries (but not branch and agency offices) under an intermediate holding company that is essentially regulated like a U.S. bank holding company. The $50 billion non-branch U.S. assets threshold for the IHC requirement is an important change from the proposed rule, which would have used a $10 billion threshold for the intermediate holding company requirement.
This Client Update describes the enhanced prudential requirements of the Final Rule applicable to the four categories of FBOs, including requirements applicable to an intermediate holding company.
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