Enhanced Prudential Standards for Foreign Banking Organizations – A Guide for Each FBO Type
Download PDF
- 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.