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Clifford Chance

Clifford Chance

Briefings

Federal Reserve Board Governor Describes Significant Changes to be Proposed for the US Operations of Non-US Banks

30 November 2012

On November 28, 2012, Federal Reserve Board Governor Daniel Tarullo provided a preliminary glimpse at new requirements to be imposed on non-US banks that have US banking operations.  A proposed rule to be published by the Federal Reserve within weeks will include the most significant changes in over a decade to the way that the Federal Reserve regulates the operations of non-US banks.

Governor Tarullo's speech focused on three specific items to be included in the proposal, but he made clear that the Federal Reserve would be taking a "new approach" to the regulation of non-US banks.  Tarullo asserted that this new approach was made necessary not only by the terms of the Dodd-Frank Act, but also by the major shift that has occurred in the US operations of non-US banks.  Governor Tarullo explained that the US operations of non-US banks have moved from primarily using parent bank capital for traditional lending to relying on short-term wholesale funding for a much wider range of activities and to upstream funds to the parent bank.  He also noted that while the proportionate share of non-US banking assets to total US banking assets has remained static, the "concentration and complexity of those [non-US bank] assets have changed noticeably."

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