Regulation of U.S. Operations of Non-U.S. Banks: Federal Reserve Issues Proposed Rules That Would Fundamentally Revise the Regulation and Structure of the U.S. Operations of Foreign Banking Organizations

Sullivan & Cromwell LLP - December 16, 2012

On December 14, 2012, the Board of Governors of the Federal Reserve System (the “FRB”) issued for public comment a notice (the “Notice”) of proposed rulemaking (the “Proposed FBO Rules”) that would implement the enhanced prudential standards and early remediation requirements mandated by Sections 165 and 166 of the Dodd-Frank Wall Street Reform and Consumer Protection Act for foreign banking organizations (“FBOs”) and systemically important foreign nonbank financial companies designated by the Financial Stability Oversight Council for FRB supervision. The Notice is 304 pages and poses 103 specific questions; comments are due by March 31, 2013. The Proposed FBO Rules follow in many respects, both conceptually and as to their details, the approach taken by the FRB in the proposed rules it issued in December 2011 to implement the Dodd-Frank Act Section 165 enhanced prudential standards for U.S. bank holding companies with total consolidated assets of $50 billion or more and systemically important U.S. nonbank financial companies designated by the Council for FRB supervision. If implemented in their current form, the Proposed FBO Rules would represent a fundamental revision and restructuring of the regulatory regime for FBOs operating in the United States.