Regulation of U.S. Operations of Non-U.S. Banks: Federal Reserve Governor Tarullo Previews Proposals for Major Revisions to the Regulation of U.S. Operations of Non-U.S. Banks

Sullivan & Cromwell - November 30, 2012

As we noted in our brief Client Memorandum of November 28, 2012, Federal Reserve Board Governor Daniel Tarullo announced, in a speech at the Yale School of Management, that the Board of Governors of the Federal Reserve System (the “Board”) will issue in the “coming weeks” a proposed rule that, if adopted, would significantly alter the regulation of the U.S. operations of foreign banking organizations (“FBOs”).

As described by Governor Tarullo, the proposed rule is likely to include “targeted adjustments” to the existing regulatory regime that incorporate five basic proposals. The basic proposals raise a number of issues that relate to both the breadth and application of the proposed rule, and the resolution of these issues could have significant consequences for FBOs with U.S. operations, including tougher capital, liquidity and other supervisory requirements, as well as increased costs and reduced flexibility.