Fed to Change Procedures for Foreign Banks’ Access to Intraday Credit

The Federal Reserve will change its procedures for how U.S. branches and agencies of foreign banking organizations access intraday credit from the regional Fed banks. The Fed Board of Governors today issued a proposal that would eliminate the assessment of the foreign bank’s strength of support, known as SOSA. It also said it would no longer use the foreign banking organization’s status as a financial holding company as a factor in determining access to intraday credit.

Instead, the Fed proposed alternative methods for determining eligibility for intraday credit, the size of each foreign bank’s net debit cap and the process for obtaining streamlined approval for a max cap. These methods would align more closely with those for U.S.-based financial institutions and be based on the composite rating and prompt corrective action designation for the foreign bank’s U.S. operation.

“The decision to eliminate the use of the SOSA recognizes that Federal Reserve supervisory staff now have more timely access to a variety of resources for information on FBO parent banks, home country accounting practices and financial systems, and international supervisory and regulatory developments,” said Fed official Michael Gibson in a supervisory letter issued today. Comments on the change to the Fed’s Policy on Payment System Risk will be due 60 days after the proposal is published in the Federal Register. For more information, contact ABA’s Hu Benton.