ABA Raises Concern About Tailoring Proposal for Foreign Banking Organizations

The American Bankers Association today submitted feedback to the federal regulatory agencies on a recent proposal to tailor prudential regulations for foreign banking organizations, as required by the S. 2155 regulatory reform law. The proposal would extend the treatment put forth in the fall of 2018 for large domestic firms to FBOs. The agencies also proposed to apply new liquidity requirements to branches of foreign banks.

The association raised several concerns about the proposals, and noted that in their current form, they “do not create an appropriately tailored regulatory framework for FBOs.” ABA urged the agencies to base their application of liquidity and enhanced prudential standards solely on the characteristics of the FBO’s intermediate holding company characteristics rather than its combined U.S. operations.

In addition, ABA called on the agencies to improve the risk indicators included in the framework to better reflect the U.S. risk profiles of FBOs, and urged them to not impose standardized liquidity requirements on FBOs’ U.S. branch and agency networks, since those institutions are already subject to such requirements in their home countries.

ABA echoed these comments in a separate comment letter submitted jointly with the Bank Policy Institute.