ABA and other trade groups urged the Federal Reserve to reconsider, or at a minimum delay, new rules on the supervision of foreign banking organizations. Under the Dodd-Frank Act, the Fed has proposed to require foreign banks with significant U.S. operations to create intermediate holding companies for their U.S. subsidiaries, meet higher capital requirements and maintain stronger liquidity positions.
The groups argued that international bank regulation should be based on cooperation, and that the Fed’s “ring-fenced, balkanized approach . . . could both impair economic recovery and growth and increase, rather than decrease, systemic risk.”
They added that such ring-fencing -- especially if mandated reciprocally by other countries’ regulators -- might limit swift movement of capital in crises and create crippling layers of capital and liquidity burdens. The Fed’s proposal also jeopardizes progress on the development of international regulatory standards, they said.
Read the comment letter.