Summary of Final Rule Imposing Enhanced Prudential Standards on FBOs

Last week, the Federal Reserve Board (the “Board”) issued its long-awaited final enhanced prudential rule (Regulation YY) under Section 165 of the Dodd-Frank Act (the “Final Rule”) for bank holding companies and foreign banking organizations (“FBOs”) with global consolidated assets of $50 billion or more (“covered FBOs”). This brief overview focuses on the applicability of the Final Rule on FBOs. The Board expects that approximately 100 FBOs will be subject to enhanced prudential standards under the Final Rule. In addition, the Final Rule imposes stress testing on FBOs with total consolidated assets of $10 billion or more, and requires U.S. risk committees for FBOs with total consolidated assets of $10 billion that are publicly traded.

The Final Rule is responsive, in some respects, to objections raised by home-country regulators and foreign banking organizations to the rule proposed in December 2012 (the “Proposed Rule”). To some degree, consideration appears to have been given, as required by Section 165, to a more tailored application of the enhanced prudential requirements and differentiation among companies. In presenting the Final Rule to the Board for consideration, Governor Tarullo, a principal author of the Final Rule, characterized the Final Rule as taking the middle road between the vulnerabilities of the status quo and the subsidiarization of U.S. operations of foreign banks. Nonetheless, the overall approach of the Proposed Rule has been maintained, and the Board reserves its authority to impose additional prudential standards that it deems necessary to carry out its authority under Title I of the Dodd-Frank Act (and not just Section 165), and/or to take supervisory or enforcement action.

Please see full alert below for more information.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP | Attorney Advertising

Written by:


Morrison & Foerster LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.